Where have all the IT workers gone? That's one of the majorconcerns that surfaced in our annual Town Hall meeting on insuranceand IT issues. Four top IT executives addressed the state of the ITlabor force, and to no one's surprise, the issue is a big worry forthem as we close out 2007 and look ahead to 2008.

If the industry could ever rid itself of the legacy technologyit has been married to for decades, attracting the best and thebrightest from American universities might not be so difficult, butthe insurance industry's ability to do that remains in doubt. Asone IT leader explained, "Most [entry-level workers] never workedon a mainframe platform and have no desire to learn oldtechnologies such as COBOL."

Tech Decisions questioned John Chu, senior vice president ofe-business and technology with The Hartford; Bill Jenkins, CIO ofPenn National Insurance; Craig W. Forrester, senior vice presidentof information technology with The Cincinnati Insurance Companies;and Brian Ness, second vice president of information technology atthe Principal Financial Group. They responded with thoughtful viewsfrom the front lines on a variety of topics that will impactinsurance IT in the coming year and beyond.

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Is there a knowledge gap between young people who are enteringthe IT world today and the skills insurance carriers need for theirIT shops?

Jenkins: Yes and no. Young people entering the IT world aresignificantly more "tech savvy" than those of previous generations.This generation, however, seldom has the technical skills needed tobe immediately productive working on the legacy systems mostinsurance carriers possess. Most never have worked on a mainframeplatform and have no desire to learn old technologies such asCOBOL. These skills are increasingly difficult to find. There alsois the need for carriers to spend the time to educate these newemployees about the business of insurance. For many of them,insurance is a "foreign language" to which they have not gottenmuch exposure. But they have the skills using newer technologiesthat our experienced staff often lacks. They are very productive onnewer platforms and are creative and ambitious.

Chu: There always is some gap between what people learn incollege and the actual experiences they will have in the workingenvironment. This is primarily due to the fact that at work it israre we are starting with a "green field," a new application orbusiness area that supports a full methodology or life cyclewithout having to deal with some legacy application or previous setof decisions/assumptions. Today's IT college graduates want to workon new technologies and take on leadership roles quickly. Weabsolutely need this type of skill and ambition, but given theamount of legacy remediation and application extension that isongoing, these resources often lack the technology (think COBOL,VSAM, Smalltalk, etc.) and execution (regression testing,performance testing, and reverse engineering of requirements)skills. We continue to make good progress in developing trainingand on-the-job aides to assist in the former gaps, too.

Ness: The skills IT workers need today and in the futurecontinue to evolve. For example, The Principal is placing a higherpriority on design skills today than we have historically.Fortunately, The Principal has been able to find very qualified newIT talent both domestically and internationally. The challenge isin the constrained pool of candidates due to the relatively lownumber of students pursuing IT-related degrees in the U.S. ThePrincipal is working with many educational and government groups toassist with this challenge.

Forrester: Yes. First, there is a shortage of young people whoare entering the IT field. Second, our needs extend beyond just thetechnology skills. We look for young people having atechnology-oriented education or background and good communicationskills. We then can teach them insurance through our in-houseeducation and training resources. A solid mix of technical skillsand insurance knowledge works well for us.

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What part does service-oriented architecture play in theoperation of your IT department?

Jenkins: Penn National Insurance is using a service-orientedarchitecture as the underpinning of our legacy system modernizationeffort currently under way. We have begun to develop theseservices, and they are being used in these development efforts. Thekey to the successful use and application of SOA is accurate andstandardized data. This is the DNA of SOA. As part of our overalldata integration/conversion efforts, data management and dataquality are viewed as key to our SOA efforts and our legacymodernization efforts.

Chu: SOA is a strategic direction for our organization. Today,we have the infrastructure in place to take advantage of enterpriseservices (design principles, standards, service governance), agroup of developers who have experience developing services, and anapproach for maintaining services. We have created many localservices and have begun to develop services that can be used at anenterprise level.

Ness: The Principal Financial Group has a long history ofintegrated business processes and IT solutions. Service-orientedarchitecture presents us with an opportunity to extend our internalbusiness integration in a secure way that gives us more agilitywith our IT solutions and resources. The Principal also isleveraging SOA to extend additional business capabilities tointermediaries and customers.

Forrester: SOA is first and foremost about the design of yourbusiness, not the technology. It is a guiding principle in our ITdepartment. We adopt SOA incrementally as business needs arise. Asa department we aim to be responsive to customer needs, just as ourcompany is responsive to the needs of the local independent agentswho represent us.

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Has the relationship between business and IT reached a level ofmaturity, or will this continue to be an issue for each side?

Chu: This relationship will continue to evolve, but it is clearIT has learned it must better understand the business, its drivers,and its demands. The days of both sides being satisfied with an"over-the-wall" approach are long gone. The relationship maturityhas progressed to the point where IT is starting to participate inbusiness visioning and strategy. This enables the business toincorporate technology capabilities into its early strategy goalsand also benefits IT as it helps create the business requirements,not just ask to have them repeated during the project designphase.

Ness: Information technology and business alignment has been acritical focus area for The Principal for quite some time. As aresult, the business and information technology leaders at ThePrincipal place a priority on the relationship between IT andbusiness and have reached a solid maturity level. As with anyrelationship, there needs to be continuous attention paid tocontinue to progress and evolve as the business needs change.

Forrester: We are seeing more technology-savvy professionals inour business units. We are responding by increasing thebusiness-knowledge base in IT. We even are starting to see movementof business unit associates into IT and some IT associates movinginto business units. This has served to strengthen therelationships between IT and the business units we serve.

Jenkins: The IT/business relationship continues to evolve andimprove. We have worked hard at educating the business usingoutside speakers as to how the business can use technology in orderto compete and gain competitive advantage. We also try to expose[the business] to best-of-breed use of technology at otherorganizations (inside and external to the insurance industry). Thisobviously can be a double-edged sword, having the business ask formore than the IT department can deliver. In furtherance of thisrelationship, we have put into place strong governance processes toensure the business is setting IT priorities and that all ITprojects add business value. Reinforcing this governance process isthe organization's use of project management and the role of ITbusiness relationship management. Senior management from thebusiness acts as the senior sponsor of all IT projects, and clientstaff are integral members of project teams. There is an awarenessbetween both sides of the need for a strong relationship.

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How do you conduct strategic planning?

Jenkins: Top down. Strategic planning begins with a corporatestrategic plan. Executive management meets on an annual basis toexamine the threats, opportunities, and weaknesses of the company.From this exercise, a five-year corporate strategic plan isdeveloped. On a quarterly basis, this executive management teammeets to review the progress being made on the plan as well as todetermine whether adjustments/changes to the plan are necessarygiven current market conditions, organizational changes, etc. Eachdepartment develops its own strategic plan to support the corporateplan.

Chu: Strategic planning is an ongoing process that is conductedin partnership with the business customers. Over the past few yearswe have worked with each of our business segments to define keycapabilities it wants to develop. Once defined, we createtechnology road maps that allow us to map our current state againstthe desired one and determine the application impacts (newdevelopment, retain, or sunset). We ensure all activity maps [to]this road map to make certain our invest agenda furthers ourstrategic direction. Given the changing market and continuouslyshifting demand, we revisit the road map yearly and also use ajoint business/IT governance process that ensures senior IT andbusiness leaders keep the dialogue and decisions moving.

Forrester: Our company's strategic planning process has maturedover the past several years. It has gone from an annual event to aprocess that is ingrained in our day-to-day activities. We relyheavily on input solicited from our associates and our independentagencies. As you would expect, IT is woven throughout our corporateplan, and IT is a full participant in the strategic planningprocess.

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What advice has best served you in managing outsourcing?

Jenkins: Two critical issues need to be considered beforeoutsourcing. First, know what you are outsourcing. In other words,you need to have specific measures/metrics on thefunction/operation to be outsourced. This includes what it iscosting you to perform this function or run this operation. Knowingthis information allows you to manage the outsourcing arrangementand assess its success. Too often functions are outsourced and theoutsourcing costs are more than the costs were for you initially torun/operate these functions. The second issue is process an exitstrategy for what is outsourced. In other words, have a plan tobring the outsourced function/operation back in-house in the eventthe outsourcing relationship is not working out.

Forrester: We have taken a conservative approach to outsourcing.There always are some functions we do not have enough demand for tostaff internally. But we do not subscribe to an outsourcingphilosophy. And given the mixed results the industry has seen inoutsourcing, we don't expect to follow this path in the nearfuture.

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How has your IT department helped establish a brand image foryour company?

Jenkins: There have been several ways we have been able toaccomplish this. In part, agents know the company based on thesystems they use. Agents decide how easy it is to do business withPenn National, in large part, based on the systems they use. Wealso strive to provide our customers (internal and external) andstaff state-of-the-art, best-of-breed solutions and services. Inthis vein, we have received a number of technology awards thatexhibit the company's commitment to providing high-quality ITsolutions and service that excels.

Chu: Our brand influence through IT is entirely through?how wellour technology supports our customer (CSRs, agents, etc.).?I'vegotten feedback the quality of our users' interaction with oursystems often establishes how they view The Hartford.

Ness: The Principal worksite solution is a terrific example ofIT partnering with our business experts to deliver a solution thatsupports our brand. The worksite solution enables representativesof The Principal to work via mobile applications with planparticipants at the worksite to understand the participants'individual financial situation and help them find solutions to meettheir financial goals. This solution reinforces The Principal brandby working with the participants on their terms to achievefinancial security.

Forrester: Cincinnati Insurance Companies differentiateourselves in the marketplace through our strong relationships withour independent agencies, local decision-making, and superiorclaims service. Our technology solutions and business processimprovements are designed to leverage those core strengths.

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In what ways have global information systems helped yourcompany, and do you see other areas where advancements can bemade?

Jenkins: Penn National developed and implemented a global(geographic) mapping system several years ago. The system has savedsignificant time and money in managing the aggregation of risks ofthe company from an underwriting standpoint. In turn, it hasbenefited the company in modeling its cat exposures, e.g., coastalrisks as well as in the plotting of losses during thosecatastrophes, so the needed manpower to adjust losses can beefficiently employed. This technology can be broadened toincorporate many types of perils and provide "what if" scenariosalong with detailed drill-down capabilities.

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Which concerns you the most–the short-term challenges of yourbusiness or the long-term challenges?

Forrester: The long-term challenges concern me the most. We havevery participative business units that diligently work through theshort-term challenges. They help us understand the business issuesand focus on creating solutions. The key difference between findingsolutions and finding the right solutions will be how effective thesolution is in advancing long-term business objectives andsurviving technology shifts.

Jenkins: In my opinion, it's the long-term challenges. As anation, we are good at dealing with short-term issues andchallenges. We identify an issue, decide how to tackle it, andcharge ahead. It is harder to step back, reflect, andidentify/address longer-term issues. Many organizations have notlooked at issues as to their longer-term impact. This is true forthe insurance industry, as well. How will globalization, changingdemographics, regulatory changes, environmental pressures, generaleconomic trends, and changing technologies impact the industry?What will customers look like, and what will they demand from usfive to 10 years from today? IT departments need to think in theseterms and factor these trends/issues into their plans. Thesechanging trends/factors require IT departments to be agile andbuild solutions that are agile, flexible, and allow forfast-to-market delivery and be able to react to the changingbusiness environment.

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What factors do companies need to consider when looking at theever-expanding amount of data insurers have to deal with?

Jenkins: Storage, backup, and disaster recovery issues alongwith data warehouse and business intelligence systems. How do wecollect good, clean data? How do we aggregate, store, and managethe data? How do we efficiently mine and retrieve the data? Whatare the right BI tools to use, and how do we plug those tools intodaily business processes to recognize business value? All of theabove, along with the use of metadata repositories, rule modelers,and event-driven sensor systems, are all in the equation forinsurance carriers as they relate to the management and use ofdata.

Forrester: Companies must adopt solutions that maintain theconfidentiality of customer data, the integrity of storeddocuments, and the retrieval of the data for authorized purposes.Companies must choose the appropriate data storage and backupsolutions.

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What are the two biggest challenges you see for the next year?For the next five years?

Jenkins: In the immediate future, for midsize carriers, it iskeeping pace with the bar large carriers have set in terms ofservice and sophistication without spending more than the companycan support. We see the need to gain control and better manage thedata we collect and use to run the business. The volume of data wecollect doubles every 12 months, so there is an acute need tocontrol this data and provide it to the company's decision-makersas the information they need to make decisions. In the long term,it's adapting the business to changing demographic needs/pressuresof both customers and the work force.

Forrester: Recruitment and retention of qualified IT associatesis first. Managing the demand for our IT services is a closesecond.

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Are there or will there be initiatives to connect existing silosof information?

Jenkins: Our enterprise data warehousing and dataintegration/conversion efforts, including the back-end systemdisplacement projects, will bring operational data from a myriad ofsources together and provide a single corporate data repositorythat will be used as the "one version of the truth" for allcorporate reporting systems.

Chu: About a year ago, The Hartford launched a data managementoptimization program that focused on improving the way informationis managed within the company. There were elements that touched onconnecting existing silos of information, but the bigger key issueis to create a single, authoritative "gold copy" of data as theinitial phase. Once that was created, the authoritative data thencan be delivered in large batch mode for analytic decisions or inreal time as operational data within processes.

Ness: The Principal continually is working to leverageinformation across the company to make effective businessdecisions. As an example, The Principal has had an enterprise datawarehouse in place for many years now. This solution continuouslyis evolving to meet new business needs. There currently is aproject under way to store additional data in the warehouse toenable additional product bundling analytics.

Forrester: Yes, definitely. We have initiatives to leveragecompany data as an asset, improve accuracy of reporting, andadvance predictive modeling and forecasting. Past barrierspreventing the integration are fading fast. Technology hasimproved, and there are BI tools capable of extracting andintegrating data from all sorts of sources and turning it intooperational intelligence on which to base forward-lookingstrategy.

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Which area of your business operation will benefit most fromtechnology in the next five years?

Jenkins: Underwriting predictive modeling will lead to moreprecise pricing, reduction of underwriting leakage, and theretention of profitable business. As we modify or replace systemsto handle new scoring and rating algorithms, we also will look forways to increase operational efficiency by improving levels ofstraight-through processing. Finally, as agency systems arereplaced, we will enjoy the opportunity to increase agencyacceptance and ease-of-doing-business perceptions.

Chu: The Hartford's focus is on improving the user experiencefor all of our end users. Everyone who interacts with ourtechnology "on the glass" will greatly benefit from technologyimprovements.

Forrester: Our technology solutions and business processimprovements center on increasing the ease of doing business andspeed of service we provide to our independent agency customers aswell as streamlining our internal operations anddecision-making.