Balancing Act

I learned about the importance of balance the hard way when I was fairly young and the training wheels were taken off my bicycle. I was doing OK until I turned a corner, lost my balance, somersaulted, bike and all, into the street, and ended up with a pain-fully scraped-up face. Its a lesson that lingered: When you lose your balance, bad things happen.

Its a lesson with wide application, too. Munich-based Allianz also is trying to regain equilibrium. In December it was reported the insurers chief executive, Henning Schulte-Noelle, announced hed be exiting in April. Apparently after purchasing Dresdner Bank in 2001, a move seemingly meant to capitalize on cross-selling banking and insurance customers, the groups fortunes spiraled downward. And the less-than-stellar result of the Allianz venture isnt alone. Case in point: Citigroup and Travelers P&C.

Its highly unlikely technology could be considered a culprit in these cases. But since growth strategies do shake up the status quowhether pursuing mergers and acquisitions to annex other branches of financial services or implementing plans for globalization (and often one of these can drive the other)its a necessity to figure out in advance how all the pieces fit and what tools are required to keep everything upright and moving forward (see IT = International Technology, p. 10, for how insurers are accomplishing this).

Studies show M&As in general frequently disappoint. Perhaps one key to success is balancing a desire for globalization with the need for centralization, a penchant for expansion with the necessity of maintaining control. Admittedly, I may be less than objective about it, but what better way to achieve these goals than with the help of technology?

What are the most significant technologies and strategies in these scenarios?

Data management. An insurer and an acquired company must leverage their knowledge if they want to cross-sell, for example, or handle claims using one discipline world- wide. The ideal is for all information to be available anywhere, anytime.

System compatibility. The challenge is to modify the systems on both sides to derive the anticipated benefits of a deal. The technology can be as basic as, say, implementing groupshare systems to replace systems developed in various locations.

Security. In any merger, privacy is a concern, and with the ever-present threat of cyber terror, that concern is intensified (for the latest on security threats and solutions, see Catch Me If You Can, p. 13, and Personal and Confidential, p. 17).

The corporate role. Given cultural or regulatory issues, the expanded organization has to decide how large the corporate overlay should be.

Convergence and globalization both are moving forward slower than many industry experts envisioned, but they are moving forward. Sometimes opportunities are made, and sometimes they knock unexpectedly. And market forces may drive certain strategies, ready or not. The key is knowing how to handle that unexpected turn. CIOs can help in the process, so that their companies stand a better chance of, unlike my early biking experience, reaching their destination unscathed.

Sharon S. Schwartzman
Editor-in-Chief