The current economic climate, with its increased level of competition, market consolidations, offshoring, and outsourcing landscape shifts, as well as disruptive technologies and increased regulations, is imposing enormous pressure on insurance firms.
Now more than ever, the insurance business demands major cost reductions, increased speed to market and the need to mitigate delivery risk
The Globally Integrated Enterprise and the Insurance Factory Model
1. IBM Global Business Services Financial Services
Executive Brief
Real world solutions for
Global Insurance Delivery:
The Globally Integrated Enterprise and
the Insurance Factory Model
2.
3. IBM Global Business Services 3
The current economic climate, with its increased level of Getting Started: The Assessment
competition, market consolidations, offshoring, and As with any other major initiative, firms should begin the
outsourcing landscape shifts, as well as disruptive technologies journey toward global integration with assessing where you are
and increased regulations, is imposing enormous pressure on today. Even firms that have already achieved notable success by
insurance firms.1 moving work offshore will find many opportunities to squeeze
out additional cost savings and efficiencies via a thorough
Now more than ever, the insurance business demands major consideration of all the capabilities necessary to become a
cost reductions, increased speed to market and the need to globally integrated enterprise.
mitigate delivery risk. To accomplish all these, Insurance
Executives, and not just ones doing business globally, need to
Manage Value in
understand and manage a Globally Integrated Enterprise – an Ecosystem of
right now.2 Global integration requires the insurance Increasingly
Specialized
enterprise of the future to optimize information technology to Leverage Entities Build a
prudently support the mix of local and global talent; it also Global Specialized
Assets Enterprise
involves vendor management with the global management of
resources needed for profitable operations. Globally
Integrated
According to a recent survey of CEOs across the globe, firms Serve Enterprise
Distinct Enable
adopting approaches to global integration that are more Global Collaboration
focused on embracing change are more likely to outperform Markets
their competition.3 Address
Shared Risk
and Control
Most major insurance firms we have worked with have either
undertaken, or are considering global integration to reduce
costs. Cost reduction has been the immediate reality for all Figure 1 - Suite of Six Capabilities
firms – going global provides labor arbitrage that lightens the For instance, a thorough assessment can lead to new
balance sheet and allows firms to focus resources on strategic considerations for business design and operating models.
work. But beyond those savings, how can companies turn Taking a diversified approach from a global delivery
global integration into an engine to fuel long-term efficiency, 4
perspective with more than just another “BRIC” in the wall
differentiation, speed and growth for the enterprise? approach can lead to a sub-division of work by geography
and this allotment can aid in role definition and reduce
function overlap.
4. 4 The Globally Integrated Enterprise and the Insurance Factory Model
Business Case
Project Change
Definition Communication Management
Management Hardware
Defect
Risk Management
Human Resource
Management Management Connectivity
Global Integration Exit & Entry
Roadmap Criteria
and Plan
Critical Success
Factors Quality
Management Physical
Deliverable
Space
Readiness
Project Infrastructure
Management Set-up Logistics &
Methodology Taxes
Adoption Requirements
Management
Resource Software
Procurement Management
Management Design
Governance Unit & String
Contract Testing
Knowledge Management
Code
Transfer
UAT
One-Time
Education Test
Integration
Management Functional
On Boarding Execution
Architecture
Cost & Time
Management System
Release Package
& Planning
Performance
Indicates Key Components that need to be in
s before effectively starting other streams.
Deployment
Figure 2 - Mind Map — Global Integration Critical Success Factors
Using techniques such as a mind map exercise can help teams Once firms have a thorough understanding of where they are
identify critical success factors and interdependencies among in their global integration journey – as well as the specific areas
all the critical components used in global delivery, or refine where focus will improve efficiency and results – they must
existing delivery processes. adopt a global integration framework that enables full
advantage of the opportunities.
5. IBM Global Business Services 5
The Global Insurance Factory Model 4. Governance. Establish sponsorship and align the organization
Insurance Executives need to understand and manage the to a common set of management standards.
Globally Integrated Enterprise using concepts, principles and 5. People. Implement programs to assess skills, define roles and
7
disciplines similar to those manufacturers have been employing career paths.
for years. To be successful and meet the challenges facing the 6. Quality. Provide capabilities to identify defects earlier in the
insurance industry, companies must deal with globalization – development process and reduce the overall number of
leveraging a repeatable factory approach to insurance product product’s software defects released.
development, and application development to improve speed 7. Standardization. Leverage best practice methods to drive
to market while reducing total cost of development – whether consistency across portfolios.
it be maintenance or new development.
For many insurance carriers, the capacity to quickly make new We applied this model to help a major US P&C insurer solve a
and differentiating products has become a key element in growth problem in a services industry.
long-term strategies for success. With that in mind, industry
leaders are taking advantage of the value of a factory model for • Challenge: By the end of 2006, growth had become the
faster development of product and process applications to help primary challenge for the company. Revenue grew less than
deliver speed and efficiency across the enterprise. five percent CAGR in the period from 2002 to 2006, and
barely two percent from 2004 to 2006.
One major US Property and Casualty insurer used the • Solution Approach: Self service quote-and-buy insurance
9
concept of the factory and organizational construct to application built for agility.
transform their Application Development area. They changed • Results to Date: Built a strong foundation for expansion – the
from a silo-based, legacy driven organization to a release-based company tripled monthly new business applications and
and portfolio driven firm in order to deliver an additional purchase percentage, meeting the business case. From a
15 percent increase in product projects per year.
5
human capital perspective, the group was able to also free up
key US resources to focus on other strategic aspects of the
The factory model is an organizational and technological customer-facing web application systems. The balanced
framework that utilizes modular teams, mixing and matching globally sourced solution resulted in the reduction of a third
resources to quickly and efficiently produce a variety of of the original planned expenditures.
applications designed to meet the fluctuating requirements of
insurance customers. Leaders who leverage this model, With another US P&C insurer, we applied the factory model
creating a repeatable process to more quickly and efficiently to help solve a challenge with their overall IT portfolio
deliver insurance products and functionality to market, will management and effectiveness.
create a competitive differentiation for their firms. Keys to the
Factory Model include: • Challenge: Funding for IT projects and programs were
varying by as much as 25 percent year to year in response to
1. Automation and Technology. Develop one standard approach changes in the business environment and strategy. Program
6
to defining a strategy to leverage common tools. priorities also were being adjusted as the company worked to
2. Consolidation. Balance resources across portfolios increasing be more responsive to market opportunities and customer
the overall flexibility of the resource pool. demands.
3. Global Development. Utilize global capabilities to provide
planning and execution activities in lower cost locations.
6. 6 The Globally Integrated Enterprise and the Insurance Factory Model
• Solution Approach: We led the implementation of a co- • Sourcing Oversight. Providing Balanced Oversight over your
sourced software factory, leveraging the both company and Global Delivery Program is critical – it is a supply chain
external IT resources in two locations - at the company’s site similar to that of any manufacturing company – all parties and
for local support and at an offsite Delivery Center to provide variables must be proactively and carefully managed.
flexible capacity at lower costs. The company uses their IT • Resource Diversification. Do not put all your eggs in one
resources and a portion of the external staff to establish a basket – it could be the wrong one. Multiple geographies are
consistent base of project capacity, skills, and experience at a advised to enable delivery to “follow the sun.” Where possible,
minimum level of funding. The capacity of the local and leverage a geographic core competency such as housing
global resources are adjusted as needed to quickly and testing in Brazil, development in India and design in China.
efficiently align to changes in workload, funding, or skill This subdivision of work by geography can aid in role
requirements. definition and reduce function overlap. That said, when
• Results to Date: The consistent leveraging of methodology picking a partner it is imperative to ensure longevity in the
and processes, combined with groups focused on specific tools chosen locale and in global integration experience, as well as
and technologies has enabled the company’s IT organization inscrutable business practices. As evidenced by the recent troubles
to respond more efficiently and cost effectively to the evolving and reorganization of Satyam, careful scrutiny and selection of a
business demands. trusted global partner are table stakes to successful global
11
integration. Some firms may be cheaper in the short term, but
Set up for success from the start: cost insurers more in time and money in the long term.
Right Technology and Skills
The application platform used to deliver products to agents, The insurance factory model is competency-based, with an
call center personal and consumers needs to be flexible enough emphasis on core skills, consistency, repeatability, optimized
to enable speed to market. Equally important is a low cost, productivity, estimating, scheduling accuracy and asset re-use.
highly skilled pool of resources that can implement and test a Communities of individuals with similar but varying skills are
high volume of change within the flexible applications. gathered into competency pools with the object of making
quick work of application development. This allows for deeper
Firms must achieve an appropriate mix of local and remote knowledge transfer to occur across like skills, broadening
resources through a well thought-out sourcing model. capabilities of the delivery organization. Additionally, a factory
Shifting from labor-based thinking to services-based positions model can help position an insurer for a transition to a more
allow companies to compete more effectively in the marketplace efficient and flexible delivery model (figure 3).
by increasing productivity and minimizing cost, risk and
10
time-to-market.
7. IBM Global Business Services 7
Release Monitoring and Control
Release Initiation Release Planning Release Execution Release Rollout Release Closeout
PM PM AN C/I QC PM AN PM AN PM
Requirements Technical Build Test
& Functional
Manager Design
Design 1
Toolsmith
AN AD C/I AN AD C/I AD C/I AR AD C/I AR
QC AR AR QC QC QC
Factory Roles
Project Manager Analysts Application Configuration / Architecture Quality Control
Developer Infrastructure
- Release Manager - Business Analyst - Legacy Systems - Environment - Quality Control -Information
Information
- Project Management - Systems Analyst - N Generation Specialist Analyst Architect
Architect
- Associate - Designers - Database - Network Specialist - Test Executor -Application
Application
- SOA Project - Process Flow - Security - Source Code - Load & Architect
Architect
Manager1 - Designers1 - Service Developer1 Manager Performance Test Domain Architect
- Domain Architect
- UDDI Designer - Toolsmith1 - Script Automation -Package Architect
Package Architect
Specialist -Network Architect
Network Architect
1 Emerging roles in SOA projects and definitions from (Service-Oriented Architecture (SOA) Compass: Business Value, Planning, and Enterprise Roadmap)
Figure 3 - The Factory Model: Execution View • Methodology adoption in all geographies. Developing clear
documentation and traceability for Insurance Product
Focus on the Fundamentals: Consistent
Specifications within your home-office based product teams
Governance and Standards enables fast and efficient development, testing and delivery
In a globally integrated enterprise, the fundamentals of best back for product sale.
execution do not change. No technology solution, group of • High-quality project managers to oversee/manage complex
resources or cost savings precludes the need for consistent projects. CMMI level appraisal in delivery sites worldwide
governance, project management and standards across the promotes consistent, replicable and effective processes,
enterprise – in fact having these is fundamental to creating a helping to allow global teams to identify and resolve issues
globally integrated enterprise. Key factors for success include: faster. Security-enhanced worldwide infrastructure protects
intellectual property and sensitive data.
8. 8 The Globally Integrated Enterprise and the Insurance Factory Model
• Monitoring progress and costs. Metrics should be assessed The on-site lead should be able to function well in all
against a clear baseline to capture the total benefits of the cultures across the relationship, and be granted decision-
approach, and allow for rapid identification and reinvestment making status, to be able to address these communication
of cost savings. In addition, firms must weigh their budget differences and ensure that avoidable misperceptions and
choices carefully. While on-site management, communications miscommunications do not derail delivery. The lead can be the
and a minimal number of bench resources may seem like conduit for other details of the global relationship that may be
unnecessary costs, failure to retain any of these could result in overlooked – such as cultural holidays and customs that must
reduced efficiency and/or delivery delays. be planned for in advance to keep delivery running smoothly.
In addition, keeping a consistent team for the life of the project
Creating collaboration: The unique needs with a single point of contact in each remote delivery location
of a global team will create consistency in the global relationship as well as
Lastly, managing a global team involves intricacies often not results, and help with managing the interdependencies of
present in non-global relationships – some which are expected multiple projects.
(language and time gaps) and some which are not (manage-
ment hierarchies and unique cultural customs). A 2008 All resources should be prepared to operate in a global
Forrester Research report states that a successful transition to environment in order to fulfill the needs of a globally
a managed outcome relationship typically yields an additional integrated effort. Depending on the need, resources may be
20 to 30 percent savings improvement beyond the benefit of required to deliver on foreign soil. Global delivery depends
labor arbitrage.
12 on avenues of communication and effort that flow in
multiple directions.
Approaches for improving communications, and working
around time zones and language gaps are widely published.
However, none of these reports can provide as much value as
an experienced on-site representative of the vendor company
and culture with a high emotional quotient.
For instance, Westerners working with global counterparts
may perceive that their teammates seem indecisive, say yes
when they mean no, or are reluctant to escalate issues. In
reality, these perceptions stem from core differences in the
13
way cultures communicate.
9. IBM Global Business Services 9
Conclusion To learn more about how you can avoid the many potholes in
The emerging global economy introduces a vast and complex the flat world through the creation of a repeatable, insurance
new competitive landscape. There are multiple new focused, software factory model, and how IBM has helped
opportunities and pressures that all organizations – large and companies in the Insurance and other industries navigate
small, private and public – must deal with to survive and succeed the global stage, contact Patricia M. Hamilton at
in the new global marketplace. patricia.hamilton@us.ibm.com or Tom Duffy at
thomas.duffy@us.ibm.com
While there is no one formula for success, all organizations
must embrace and in effect, become integrated into the fabric To read more about how IBM is helping leading Insurers
of the new global economy to understand and leverage the win, go to
economic value and innovation possibilities it offers. The
opportunities are there and available for the taking in the ibm.com/insurance.
following areas:
Criteria Results
Business Partner Satisfaction 30 to 90 percent improvement
Severity 1 Defect Rates 58 to 82 percent reduction
On – Budget 27 to 41 percent improvement
On – Schedule 20 to 41 percent improvement
14
ROI 3.6 to 9 times
Source: IBM Research
10. 10 The Globally Integrated Enterprise and the Insurance Factory Model
About the authors Contributions by
Sumesh Jose is a Delivery Leader based Bill Busby
out of India and part of IBM’s Global Partner, Insurance Industry
Business Services Insurance practice. He can IBM Global Business Services
be reached at jsumesh@in.ibm.com. Bruce F. Broussard
Associate Partner, Insurance Industry
IBM Global Business Services
Luke Kelleher is a Project Executive and David Notestein
Senior Managing Consultant with IBM’s Executive, Insurance Industry
Global Business Services Insurance practice. IBM Institute for Business Value
His specialties include complex systems
Dipanjan Ghanti
integration, project management, data
IT Specialist, India Insurance Practice
conversion and object-based project
IBM Global Business Services
methodologies. He can be reached at
luke.kelleher@us.ibm.com Gordana Radmilovic
Consultant Americas Insurance Leader
David Lipien, PMP is a Senior Managing IBM Global Business Services
Consultant with IBM’s Global Business Heather Higgins
Services Insurance practice. His specialties Consultant Americas Insurance Leader
include complex systems integration, release IBM Global Business Services
management, internet-based technologies,
Jeff Kelly
wireless technologies and object-based Partner, Americas Strategy and Change
project methodologies. He can be reached at IBM Global Business Services
lipien@us.ibm.com
Justin Ryan
Consultant Americas Insurance Leader
IBM Global Business Services
Nick Concha
Architect Custom Development, Thailand
IBM Global Business Services
11. IBM Global Business Services 11
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10
Services account for more than 50 percent of the economies in
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11
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13
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14
Scientists at the IBM T.J. Watson Research Center measured the
business impact of infrastructure outsourcing on 56 public companies
over a five-year period. Their analysis revealed that companies engaged
in major IT outsourcing deals achieved better long-term improvements
in business performance than their peers. These companies realized
lower selling, general and administrative (SG&A) expenses, higher return
on assets (ROA) and higher growth in earnings before interest and taxes
(EBIT).