Mar 23, 2003 (07:03 PM EST)
Ensuring A Less-Complex Future

Read the Original Article at InformationWeek

When Continental Assurance Co. of North America began charging Michigan railroad workers $1 a month for health insurance more than 100 years ago, the only interconnectivity strategy the insurer had was the door that joined the office's two rooms.

Continental grew into the CNA insurance companies, which, with $62 billion in assets, can't turn back the clock to that kind of simplicity, but it has embarked on a mission to scale down its IT environment. CIO John Golden led a consolidation of applications and centralization of 20 IT groups into one.

"IT needed to achieve cheaper maintenance so that we could apply new applications," Golden says. CNA has eliminated 17% of its applications. Before this effort, development teams spent 62% of their time on maintenance and 38% on new projects. "One year later, we've flipped these numbers, and 63% of time is spent on new projects," he says. CNA now puts $200 million--almost 40% of its IT budget--toward new initiatives.

This kind of move to improve operating efficiency and consolidate is being replayed in companies around the country. It's the result of tighter IT budgets, but it's also a sign of IT's maturity. Just keeping the lights on is taken for granted, so IT is expected to also run ever-more efficiently. "CNA insurance companies will spend $1.5 billion on technology in the next three years," Golden says. "If IT doesn't develop a much better business environment over those three years, IT will have failed because it will have just kept things running."

Now that the IT team has trimmed the systems-maintenance fat, it's working to keep it off while still adding muscle for business units. So Golden established a strategy with five key steps: choosing the right business partners; doing proper program management; using more comprehensive solutions; making more use of portfolio management of technology and applications; and sticking to a comprehensive delivery framework.

CNA is in the middle of a three-year project designed to identify common features among business processes so the related IT systems can be shared. The business goals of the plan include launching more profitable products, understanding risk better, and watching claims overpayment more closely. Golden also wants to develop companywide IT security and a common customer database.

CNA has also started considering perpetual maintenance costs up front. Business managers used to focus only on the need for a quick solution, so IT would solve one problem, then "move on to putting out the next fire," Golden says. CNA's new commitment to get things done right the first time, at the right price, works because business managers also are considering those costs, he says.

The in-house development of the company's Merlin tool shows cooperation of business-unit and IT managers. Merlin is an executive dashboard used in the property and casualty insurance unit to measure and manage results. The tool not only provides better analytics, it let IT staff reduce the number of databases that CNA maintains. CNA chairman Steven Lilienthal played a pivotal role in establishing the consistency of data required for the project's success, Golden says. Lilienthal identified his "landing lights"--the numbers that he needed to manage the business--and then Maggie Westdale, senior financial officer, took the requirements to business units to drive standardization of how those numbers are attained. Now Merlin can tell how much business a specific branch agent is bringing in or how a certain product is selling.

Another consolidation move involved creating a common desktop infrastructure. Moving the PCs from Windows 95 or 98 and IBM's OS/2 was like "Y2K all over again," Golden says. CNA had to test all applications to see if they worked with XP and, if they didn't, whether it made sense to fix them or junk them. The company found that shutting down one out of five apps made the most sense.