The insurance industry is grappling with the realization that to succeed in today's diverse and dynamic marketplace, existing business practices must be revisited and in some cases dramatically reworked to enable consistent business process change that is sustainable, incremental, and measurable from a return-on-investment and a return-on-equity perspective.

Moreover, success today often hinges on information technology's ability to be flexible and responsive to ever-changing business requirements dictated by the marketplace.

While it seems intuitive that business and IT would form a strong working partnership, in most cases, the relationship between them has not been formalized with clear expectations of each other throughout the corporation.

Traditional business and IT organizations are fragmented, organized around individual systems rather than the company's overall business goals. While IT organizations work feverishly to meet existing and new business priorities with antiquated or inflexible systems, business managers are increasingly being pushed to explore new markets and new offerings.

Therefore, as the business looks to expand and IT looks to re-architect, there are inherent competing priorities. IT strives to provide the stability that the business needs through solid architecture, process and rigor, while the business group seeks quick solutions from IT to satisfy its requirements. In short, the two models simply don't match.

Successful carriers have recognized the importance of creating a clear definition of their organization's overall objectives and operating from a holistic plan early on. The by-products of this strategic approach are a common view of data and business processes, both of which are enabled by a service-oriented architecture, or SOA.

SOA has become the industry-accepted basis for developing and adopting the business and technical architectures required to remain competitive. While sometimes perceived as a purely technical solution, SOA is not solely about technology or architecture.

When properly addressed from the business, IT and logical perspectives, SOA provides a way to unify business and IT by allowing the business to specify priorities and IT to incrementally serve those needs by leveraging existing assets and introducing appropriate technologies to enable the business requirements.

SOA allows carriers to deal with business issues at hand in an incremental and cost-effective way, while paving the way for system consolidation and operational savings through the introduction and use of common functionality within the organization (for example, rating, product definition, billing, etc.).

In short, SOA provides a uniform organizational, business and technology platform.

Instead of solving issues in the time-consuming sequential order most carriers operate in today, SOA allows for using a more expedient multidiscipline team approach where each affected area can begin work independently and in parallel with other areas.

As an example, the rapid introduction of new products is a common problem facing today's insurance carriers. Because they operate as distinct business units independent of each other, bringing new products to market can be a long and laborious process.

The different silos mean input and coordination across many departments (product management, underwriting, actuarial, print, finance, stats and reporting, etc.) are constantly required.

The resulting delay in getting the product out is usually realized in the coordination of efforts within each area in a specific time frame, and not necessarily in the actual work that must be done.

Coordination is often hindered and delayed by other day-to-day commitments each department must meet. SOA streamlines the definition and implementation process by making available a consistent set of business services and processes that treat the business initiative in a holistic way as opposed to a departmental hand-off process.

The team, not individual departments, is now accountable for success. This introduces a new paradigm where both business and IT are accountable for the delivery of the new product.

SOA empowers organizations to look at issues holistically and align the direction and use of technology to achieve common business goals. One of the key challenges it addresses is how to marry improved organizational and people skills with an IT infrastructure that enables flexibility and responsiveness.

A mature SOA helps eliminate the inherent silos of people, legacy systems, data and business objectives seen in many carrier organizations by bringing alignment and order to the organization.

Other benefits of addressing SOA from the business, logical and technical perspectives include:

o Ensuring that all internal organizations are working toward the same goals and are not sidetracked by competing agendas.

o Helping carriers identify business functionality that is replicated within existing systems, producing operational savings as opportunities for consolidation and identifying potential outsourcing of noncritical functions.

o Allowing business requirements to be more efficiently fulfilled by representing all business functionality in a consistent fashion, regardless of the system from which it is sourced.

o Lowering the “lights-on” operating costs of existing systems by allowing consolidation of data processing, leveraging existing systems that make financial sense, and gradually reducing the numbers and types of platforms/software to support.

o Providing the basis for truly understanding outside partners, vendors and customers, paving the way for new product offerings and more effective service level agreements.

The nature of an ever-changing technology landscape cannot deter the business from delivering solutions today. IT departments must continue to utilize their existing, proven technologies and skill sets while allowing for the incremental adoption of emerging technologies as they mature.

Business projects closely aligned with IT priorities and objectives have a far higher success rate, and IT investment in projects tied to key business priorities generate the most measurable paybacks. SOA is not a quick fix, but instead a strategic, long-term commitment that provides carriers with a consistent, repeatable and cost-effective way to achieve both immediate and long-term business goals.

Special Reports /

Service-Oriented Architecture Can Help Bridge Gap Between IT, Business Units

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