Wheen a contentious relationship exists between business and IT,the latter constituency often gets the blame. Yet to be completelyfair, the cause of misalignment falls as much on business as itdoes on IT.

“Business often doesn't understand what's going on in IT, but itdoesn't take the time to learn,” says Miko Matsumura, vicepresident and chief strategist at Software AG, who has seen morethan a few dysfunctional business/IT relationships at insurers.“Business users come to IT when there are problems, but they don'twant to hear the answer because the answer is complicated.”

However, as a college professor of mine was wont to point out,“Life ain't fair–get used to it.” Even though a CIO is apt to findIT staff members more interested in building their fantasy footballteams than in finding ways to build better relationships with theircounterparts in other disciplines, it's up to IT to demonstrate itsvalue to business, not the other way around.

“IT is responsible for its own reputation within theorganization, and that's the CIO's role,” says Rod Travers, seniorvice president at Robert E. Nolan Company managementconsultants.

CIOs ignore this responsibility at their own peril. As AMRResearch pointed out in its report on “How Leading Companies UniteIT With the Business,” IT organizations that are viewed asexpensive technical support are prime targets for beingoutsourced.

“Isolation is dangerous for IT and the CIO. It opens the doorfor misconceptions. It opens up the risk of IT being perceived as acommodity. Isolation can lead to extinction,” Travers says.

MAKING PROGRESS

The challenge of achieving effective alignment between businessand IT certainly is not a new topic, but it's one that continues tobe top of mind for CIOs. In fact, an IDG Research study from late2008 found aligning business and IT goals was the number-onepriority for IT.

Encouragingly, business/IT alignment has improved in theinsurance space in recent times. “The trend is in the rightdirection,” says Travers. Part of the credit for that trend goes tothe CIO.

“The CIO role itself has evolved into truly an informationofficer as opposed to a technologist,” Travers observes. “CIOs havehad success in pushing the concept of their role in theorganization toward providing management support and automation toenable better business processes.”

Another factor has been competitive pressure. “When carrierslook at successful companies that have made a huge impact on theirperception in the marketplace by their successful implementation oftechnology, it creates parity pressure,” says Travers. “Business isasking, 'If other companies can make technology work to theirbusiness advantage, why can't we?'”

And finally, Donald Light, senior analyst at Celent, credits ashaky economy with improving alignment around shared business andIT objectives “The economic crisis has had a positive impact tosome degree,” says Light. “A lot of companies have looked for waysto tamp down expense growth. There is a natural opportunity, drivenby necessity, for the CIO to be engaged with his peers on thebusiness side around that issue.”

“The economic downturn has helped because decisions are simpleraround project prioritization,” Travers adds. “Discretionaryprojects aren't up for discussion. The focus is on compliance andcost savings. It's easy to align around those and have theopportunity to come out a hero.”

INTEGRATION OR ISOLATION?

It's difficult to build an effective business/IT team when teammembers operate in isolation, but that has been a traditionalorganizational structure of IT. “An IT department should not beisolated, yet interestingly enough, in some companies, IT has itsown department, its own building, and its own data center,” saysTravers. “Yes, protect your data center but promote yourpeople.”

Chubb believes in an integrated IT organization; in fact, thecompany's philosophy is illustrated by first letter of the acronymBASIC–Boundaryless, Agile, Strategic, Innovative, andCollaborative–which the P&C insurer uses to describe its ITstrategy. Chubb is achieving a boundaryless organization throughits federated IT structure and strong governance processes.

“Alignment definitely is easier in a federated model. Some wouldsuggest it's more costly, but the value it adds is greater than anyextra costs that arise,” says Jim Knight, Chubb's enterprise CIO.“Also because of our structure, IT knows the business well and viceversa.”

Within each business unit is a CIO who reports both to the unitleader and to Knight. Each unit has authority and responsibilityfor its own development within enterprise architectural guidelines.At an enterprise level, Chubb's core IT handles compliance and riskmanagement, infrastructure, and standards and manages sharedservices. Core IT also is responsible for managing “centers ofexcellence” that serve as a resource for cross-unitdevelopment.

In turn, this cross-unit development has helped Chubb target theA in BASIC. “We're going to be agile and not letdepartmental barriers get in the way,” Knight says. “Even though wehave alignment with and within individual business units, at thehighest level, we are one IT organization. We won't let the factdifferent business units have to get involved to make somethinghappen prevent a project from going forward.”

Because ownership of and accountability for IT assets rest withthe business units, crossing boundaries requires governance toestablish the authority for cross-unit team building and to ensureprojects are developed in alignment with business strategy. Chubb'sgovernance starts at the top and includes both an overall ITgovernance model as well as a combined business/IT governancemodel.

“Our business/IT governance is about making the right businessinvestment in IT, regardless of the IT unit,” Knight says. Hechairs the business/IT governance committee, which also includesthe company's top underwriting officer, chief admin officer, andchief field officer. Enterprise projects go through a three-stagevetting process, with approved projects sent to Chubb's executivecommittee for final review.

At IFG Companies, business and IT staff are integrated bothstrategically and physically. “There is not only an IT presence indifferent locations, but there is a rapport and respect built upbetween the business and IT. It's probably the best organizationI've been involved in,” says Mike Sciol?, IFG Companies' CIO.

IFG Companies has instantiated procedures into itsorganizational strategy and project governance that benefitbusiness/IT alignment. “Our projects are prioritized by an ITsteering committee. Those projects go into the budget. I go infront of the board and talk about strategy and budget. Everyproject has a business user group and a business executivesponsor,” Sciol? says.

“At the same time, there's a lot of communication back and forthwith my staff and the business,” he adds. “Therefore, everyone ison the same page, and there's a high level of visibility into painpoints and criticality and urgency of projects.”

Knight believes a centralized IT structure still can beeffectively aligned with business, but it requires additionallayers of governance.

“If every business unit has to make an appeal directly to theglobal IT organization, it gives that organization a lot morepower. It takes a strong governance process to focus on the trulyhigh-value projects and avoid 'politicking.' At the same time, it'smore difficult to hold business accountable without unit-levelintegration, so business takes a hands-off approach, particularlywhen things do go wrong,” he says.

CULTURE WARS

Organization and governance are important, but so is a company'sculture.

“There really is no substitute for a good culture and areliable, trustworthy atmosphere,” says Matsumura. “The industryhas learned over time mistrust is pretty expensive.”

Culture building starts at the top. “Leadership commitment isessential,” says Travers. “You can't just say, 'We're going toalign business and IT.' You need to have teeth behind it. Forexample, the CIO needs to understand products so he or she canorient information to support them. IT needs to be encouraged todevelop a deeper understanding of the business and the value'levers' that drive it so IT can initiate and maximizecontributions to the organization. The culture must enablethat.”

CIOs also have to “take a stand,” stresses Travers, and insistbusiness counterparts engage with IT. “CIOs take the heat forautomation or technology that isn't working, but often that'sbecause business simply dumps requirements on IT and doesn'tengage,” he says. “The CIO has to stand up and say, 'I'm notgetting engaged on this product until we get engaged around commonmeasures of success both sides can agree on.'”

Communication also is essential to build a culture that valuesteamwork. “Whether you are CIO, VP of application development, oreven a level down in the IT management structure, having regularconversations with your 'customers,' who are your business users,is essential. That could mean a formal feedback structure, havinglunch once a month, or simply popping your head in their office,”Light maintains.

However, communicating effectively can be a challenge. “A lot oftimes IT doesn't understand business nomenclature and vice versa,”admits Sciol?. “Having your IT staff gain a broad understanding ofhow the business works is important.”

Therefore, Sciol? established a program at IFG Companies totrain IT in how business works. He found business staff, includingpeople who taught CPCU and other insurance coursework, who werewilling to lead lunch-and-learn sessions with his staff.

“Over an eight-month period, we covered how underwriting works,what coverages and risks are, how claims flow, how losses areadjusted, and so on,” he says. “Not only did this familiarize mystaff with the business operations, but the more people are used toworking with each other through informal settings such as these,the faster things get done in an actual project.”

Sciol? would love to take business users through an “IT 101″course, as well. “I could find an architect who can put things intolayman's terms to explain at a high level what types of changes areeasy and what ones are hard, or the time and effort that goes intodeveloping a particular system feature,” he says.

However, establishing a formal training program for businessstaff would be impractical. “I do not want to take away front-linetime from the people,” he says. Instead, Sciol? expects his staffto take the lead on bridging with their business counterparts.

Similarly, Knight says the C in BASIC could stand forcommunication as well as collaboration.

“Our structure means IT folks are quite business-savvy in regardto the line of business they're associated with. Commercial linesfolks know commercial lines business. Personal lines folks knowpersonal lines. Claims knows claims. Importantly, by being familiarwith the whole process of that business, they can come up withbetter ideas for process improvement.”

Chubb does have collaborative technologies in place, including asocial networking application on the company's intranet where ideascan be presented and discussed. Recent topics have included ideasfor profitable growth, how to be more efficient in IT, and howefficiencies can be reinvested to make IT even more effective.Comments are opened to various constituencies based on how ideasimpact them.

“Ideas can be built upon, comments can be added, and topics thatrise to the top get attention,” Knight says. That attentionincludes a review by Chubb's internal venture capital team forfunding consideration.

Another element of building a culture that embraces teamwork ispromoting project success. “We see a lot of investments made and alot of projects get done where there isn't a demonstration ofresults,” says Travers. “Those results should be communicated andcelebrated throughout the organization. That is the extra effortthat should happen at the end of the project to promote teambuilding.”

Companies may tie compensation or bonuses to project success,but the devil is in the details of how success is defined. “Withoutsome sort of a reliable measurement and trustworthy atmosphere, youcan end up with people gaming the system, particularly as you comeup with bonuses,” says Matsumura. “One CIO told me after thecompany created an on-time delivery bonus, IT delivered moreprojects on time or ahead of time. However, the CIO did that byrescoping the definition of 'project.'”

“You have to have IT success measures that align with businessgoals,” says Travers. “It's not just about getting it done on time.Did you save money? Reduce cycle time? Improve customer service?What were the objectives we accomplished? You need to come up withthe most relevant measures that are the least subject tomanipulation and tie the compensation of both business and IT tothat. However, that's not something that a lot of companies aretruly comfortable with, particularly on the business side.”

In addition to metrics-based performance benefits, Chubb has an“Enterprise Rewards and Recognition” program that is open to bothbusiness and IT staff. “We identify those teams or people who trulycross boundaries to get something done for the enterprise,” Knightsays. Rewards include compensation bonuses, gift certificates,office parties, or extra days off.

But Chubb also holds business' feet to the fire for benefitsthat are projected when project proposals are approved. “Thebusiness sponsor is responsible for the benefits, which are trackedby our financial department. If business says a project will resultin a lower budget in a particular area in X years,financial lowers the budget accordingly in X years. Thatmeans only the truly high ROI or strategically important projectsmake it to the top.”

Chubb's metrics-based approach is growing beyond projectmanagement into overall IT operations. “We're starting to run ITlike a business–truly management by metrics,” Knight says. “It'snot about asking how much IT costs but how much value we provide.Are we investing our money in the right way? How much of our moneyis spent on strategy and innovation and not just keeping the lightson?”

ZEN AND THE ART OF
ARCHITECTURE

Technology cannot create alignment, but it can impede it.“Business asks for a change, and IT says it will take a lot of timeand money. The business folks are not happy. So, slow,unresponsive, inflexible IT systems make it difficult to alignbusiness and IT,” Light says.

“What frustrates business users is that a change sounds easy tothem, so what's the problem with getting it done? The issue is thatbusiness doesn't understand the complexity of some insurancesystems. Therefore, the right architecture can contribute toalignment by enabling flexibility, increasing understanding, andcreating intersection between business and IT ways of thinking,”Matsumura says. “Architecture can become the language forcollaboration.”

“One of the great selling points of newer systems that have beenbuilt or replatformed is greater flexibility,” says Light. “Theaverage time and average cost for the average request should be alot less than it has been with legacy systems.”

“Technological evolution, particularly SOA, has had a profoundinfluence on insurers' ability to get things done,” Sciol? says.“We have software development kits that are more and moresophisticated. There's been better logic put around XML schemas,marshalling data, where and how to store data elements. There's anoverall reduction of ETL processes. All of this makes us more agileas a whole, which improves our ability to deliver businessvalue.”

But architecture can be a tough sell. “For instance, if you'regetting a new admin system, you can talk about all types ofbenefits. If you're making an investment in SOA, other than somevery general statements, it's hard to say the benefits tounderwriting will be X, Y, and Z,” Lightexplains.

As anyone who has ever taken a writing course has heard, “Show,don't tell” is the objective. “We're demonstrating tons of valuefrom reuse, Web services, and BPM technologies. We've been able toshare knowledge and work across the IT organization so we can movequicker. We've shown the value of having enterprise tools such asour rules engine and document management platforms. As we learnmore about them and become more savvy in their use, we can respondmore rapidly to what business needs,” Knight says.
“We also have implemented an agile development center to inculcatethat into our culture, and so as the next year or so plays out, wereally can improve our ability to execute,” he adds.

Still, architectural change is a marathon, not a sprint, andKnight admits IT's ability to deliver everything a business wants,and to do it quickly, often is constrained by some legacy systeminflexibility.

“Business users are frustrated along with us, not at us,” Knightsays. “They know we have real challenges.”

GAME PLAN

Will alignment remain a top concern for CIOs in the comingmonths? Likely so, Light believes.

“It's a long slog. People change. Priorities change. Demands onthe business side are very dynamic. However, IT is resourceconstrained, and it should be by nature,” he says. “Also, there isan inherent tension between IT and business. The trick is torecognize it, manage it, and do what you can to make the workingenvironment as productive as possible.”

The primary responsibility for reaching across the aisle willfall to IT, and rightfully so, Sciol? maintains.

“At the end of the day, IT costs business money,” he says.“Therefore, the business needs to believe we are a true serviceprovider and an integral part of the business rather than acommodity.”

“We don't want to be order takers, we want to be solutionproviders,” Knight says. “We are making good progress in that area,but we always have room for improvement.” TD