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News
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Conflicting Challenges Make It Hard to Juggle IT Priorities
Analysts Panel |
CIOs Caught In Tug of War Over IT Budget for Operational Versus Strategic Objectives
The time has come for insurers to embrace industry standards and new technologies to strategically grow their business, but there are also a number of emerging operational challenges that can confound a company's chief information officer, industry analysts here warned.
Speaking at yesterday's Town Hall Meeting at the ACORD-LOMA Insurance Systems Forum here in Orlando, a panel of technology analysts said the new business landscape offers opportunities but also problems for CIOs. One factor that CIOs must deal with is the new regulatory environment, which offers opportunities to streamline business data management, but at the same time can drain resources that could go to broader and strategic information technology projects.
"Now, for example, mutual insurers have to respond much more like a publicly- traded company than in the past. Regulations are demanding it. If you can't get a view into your financials across your organization easily at any given time during the day, you know you will have some problems," said Matthew Josefowicz, manager of the insurance practice at Celent Communications. Kimberly Harris-Ferrante, vice president and research director at Gartner, Inc., also noted that the reason insurers are still coping with inefficiencies such as duplicate data entries is that "application systems and developments of standards like those from ACORD have all been works in progress in the last few years." However, she noted, the industry is just at the point where standards initiatives are coming together.
"This gives us an opportunity to put the systems together and have the data flow seamlessly through the organization, and to have it in a common standardized format," she said. "So I think we are just now at the turning point where we can start tackling this head on." Cynthia Saccocia, research director for insurance at TowerGroup, also observed that when she talks to insurer CIOs, she notices they are starting to incorporate more language similar to that heard in the manufacturing sector- such as comparing their processes to a conveyor belt-and as a result to embrace more efficient data-management systems.
"They are talking about moving data and information on the conveyor belt and moving away from double-data entry and get away from separate silos," she said.
Still, despite the opportunities the new business environment presents, there are also new and existing problems as well as cultural inertia at work to confound those seeking greater efficiencies, the analysts pointed out. In the insurance industry, Ms. Harris-Ferrante noted, there have been a lot of companies that think "if it isn't broken, let's not worry about fixing it," especially when it comes to replacing older legacy systems.
In regard to discretionary IT spending, she said, "we've heard many companies complain about the new [governance] regulations and regarding compliance reporting, and how they had to decrease their discretionary [technology] spending because some of the money they were going to spend on more core activities has been diverted into compliance initiatives."
Additionally, when analysts ask CIOs where they are investing their tech budgets, "we are finding that CIO priorities are not in line with CEO objectives. CIOs tell us that their major issues are privacy, security breaches, regulatory compliance and how to deal with business disruptions," said Ms. Harris-Ferrante, while CEOs cite retaining customers and growing revenues. "That's like number seven [for CIOs] compared to all the operational areas they are focusing on."
The problem today, she said, is that "we can talk about great deeds, looking at new customers and growing market share, but the reality is we are spending more time on operations. That's where our technology money is going." When it comes to the IT budget, the challenge is to realign the percentage of spending for maintenance with investments in transformation projects that can grow the business long term, noted Todd Eyler, vice president of financial strategies for Gartner, Inc. "When you look at a typical IT budget, a big chunk is dedicated to just keeping the lights on," he said.
Re-Published from the ACORD LOMA ISF Show Daily with the permission of National Underwriter Company.
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