IBM Global Business Services             Financial ServicesExecutive BriefReal world solutions forGlobal Insurance Deliver...
IBM Global Business Services   3The current economic climate, with its increased level of          Getting Started: The As...
4   The Globally Integrated Enterprise and the Insurance Factory Model                                         Business Ca...
IBM Global Business Services   5The Global Insurance Factory Model                                  4.	 Governance. Establ...
6   The Globally Integrated Enterprise and the Insurance Factory Model•	 Solution Approach: We led the implementation of a...
IBM Global Business Services   7                                                                      Release Monitoring a...
8   The Globally Integrated Enterprise and the Insurance Factory Model•	 Monitoring progress and costs. Metrics should be ...
IBM Global Business Services   9Conclusion                                                          To learn more about ho...
10   The Globally Integrated Enterprise and the Insurance Factory ModelAbout the authors                                  ...
IBM Global Business Services   111 Spang, S. “Five trends that will shape business technology in 2009; Theyear 2009 will b...
© Copyright IBM Corporation 2009IBM Global ServicesRoute 100Somers, NY 10589U.S.A.Produced in the United States of America...
The Globally Integrated Enterprise and the Insurance Factory Model
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The Globally Integrated Enterprise and the Insurance Factory Model

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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

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The Globally Integrated Enterprise and the Insurance Factory Model

  1. 1. IBM Global Business Services Financial ServicesExecutive BriefReal world solutions forGlobal Insurance Delivery:The Globally Integrated Enterprise andthe Insurance Factory Model
  2. 2. IBM Global Business Services 3The current economic climate, with its increased level of Getting Started: The Assessmentcompetition, market consolidations, offshoring, and As with any other major initiative, firms should begin theoutsourcing landscape shifts, as well as disruptive technologies journey toward global integration with assessing where you areand increased regulations, is imposing enormous pressure on today. Even firms that have already achieved notable success byinsurance firms.1 moving work offshore will find many opportunities to squeeze out additional cost savings and efficiencies via a thoroughNow more than ever, the insurance business demands major consideration of all the capabilities necessary to become acost reductions, increased speed to market and the need to globally integrated enterprise.mitigate delivery risk. To accomplish all these, InsuranceExecutives, and not just ones doing business globally, need to Manage Value inunderstand and manage a Globally Integrated Enterprise – an Ecosystem ofright now.2 Global integration requires the insurance Increasingly Specializedenterprise of the future to optimize information technology to Leverage Entities Build aprudently support the mix of local and global talent; it also Global Specialized Assets Enterpriseinvolves vendor management with the global management ofresources needed for profitable operations. Globally IntegratedAccording to a recent survey of CEOs across the globe, firms Serve Enterprise Distinct Enableadopting approaches to global integration that are more Global Collaborationfocused on embracing change are more likely to outperform Marketstheir competition.3 Address Shared Risk and ControlMost major insurance firms we have worked with have eitherundertaken, or are considering global integration to reducecosts. Cost reduction has been the immediate reality for all Figure 1 - Suite of Six Capabilitiesfirms – going global provides labor arbitrage that lightens the For instance, a thorough assessment can lead to newbalance 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 deliveryglobal integration into an engine to fuel long-term efficiency, 4 perspective with more than just another “BRIC” in the walldifferentiation, 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.
  3. 3. 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. DeploymentFigure 2 - Mind Map — Global Integration Critical Success FactorsUsing techniques such as a mind map exercise can help teams Once firms have a thorough understanding of where they areidentify critical success factors and interdependencies among in their global integration journey – as well as the specific areasall the critical components used in global delivery, or refine where focus will improve efficiency and results – they mustexisting delivery processes. adopt a global integration framework that enables full advantage of the opportunities.
  4. 4. IBM Global Business Services 5The Global Insurance Factory Model 4. Governance. Establish sponsorship and align the organizationInsurance 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 7disciplines 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 theinsurance industry, companies must deal with globalization – development process and reduce the overall number ofleveraging 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 driveto 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 aand differentiating products has become a key element in growth problem in a services industry.long-term strategies for success. With that in mind, industryleaders are taking advantage of the value of a factory model for • Challenge: By the end of 2006, growth had become thefaster development of product and process applications to help primary challenge for the company. Revenue grew less thandeliver 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 9concept 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 – thefrom a silo-based, legacy driven organization to a release-based company tripled monthly new business applications andand portfolio driven firm in order to deliver an additional purchase percentage, meeting the business case. From a15 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 theThe factory model is an organizational and technological customer-facing web application systems. The balancedframework that utilizes modular teams, mixing and matching globally sourced solution resulted in the reduction of a thirdresources to quickly and efficiently produce a variety of of the original planned expenditures.applications designed to meet the fluctuating requirements ofinsurance customers. Leaders who leverage this model, With another US P&C insurer, we applied the factory modelcreating a repeatable process to more quickly and efficiently to help solve a challenge with their overall IT portfoliodeliver insurance products and functionality to market, will management and effectiveness.create a competitive differentiation for their firms. Keys to theFactory Model include: • Challenge: Funding for IT projects and programs were varying by as much as 25 percent year to year in response to1. 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 to2. 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.
  5. 5. 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, butSet up for success from the start: cost insurers more in time and money in the long term.Right Technology and SkillsThe application platform used to deliver products to agents, The insurance factory model is competency-based, with ancall center personal and consumers needs to be flexible enough emphasis on core skills, consistency, repeatability, optimizedto 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 arehigh volume of change within the flexible applications. gathered into competency pools with the object of making quick work of application development. This allows for deeperFirms must achieve an appropriate mix of local and remote knowledge transfer to occur across like skills, broadeningresources through a well thought-out sourcing model. capabilities of the delivery organization. Additionally, a factoryShifting from labor-based thinking to services-based positions model can help position an insurer for a transition to a moreallow companies to compete more effectively in the marketplace efficient and flexible delivery model (figure 3).by increasing productivity and minimizing cost, risk and 10time-to-market.
  6. 6. 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 ProductFocus on the Fundamentals: Consistent Specifications within your home-office based product teamsGovernance and Standards enables fast and efficient development, testing and deliveryIn 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 complexresources or cost savings precludes the need for consistent projects. CMMI level appraisal in delivery sites worldwidegovernance, 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 issuesglobally integrated enterprise. Key factors for success include: faster. Security-enhanced worldwide infrastructure protects intellectual property and sensitive data.
  7. 7. 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 projectCreating collaboration: The unique needs with a single point of contact in each remote delivery locationof a global team will create consistency in the global relationship as well asLastly, managing a global team involves intricacies often not results, and help with managing the interdependencies ofpresent 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 globalForrester Research report states that a successful transition to environment in order to fulfill the needs of a globallya managed outcome relationship typically yields an additional integrated effort. Depending on the need, resources may be20 to 30 percent savings improvement beyond the benefit of required to deliver on foreign soil. Global delivery dependslabor arbitrage. 12 on avenues of communication and effort that flow in multiple directions.Approaches for improving communications, and workingaround time zones and language gaps are widely published.However, none of these reports can provide as much value asan experienced on-site representative of the vendor companyand culture with a high emotional quotient.For instance, Westerners working with global counterpartsmay perceive that their teammates seem indecisive, say yeswhen they mean no, or are reluctant to escalate issues. Inreality, these perceptions stem from core differences in the 13way cultures communicate.
  8. 8. IBM Global Business Services 9Conclusion To learn more about how you can avoid the many potholes inThe emerging global economy introduces a vast and complex the flat world through the creation of a repeatable, insurancenew competitive landscape. There are multiple new focused, software factory model, and how IBM has helpedopportunities and pressures that all organizations – large and companies in the Insurance and other industries navigatesmall, private and public – must deal with to survive and succeed the global stage, contact Patricia M. Hamilton atin the new global marketplace. patricia.hamilton@us.ibm.com or Tom Duffy at thomas.duffy@us.ibm.comWhile there is no one formula for success, all organizationsmust embrace and in effect, become integrated into the fabric To read more about how IBM is helping leading Insurersof the new global economy to understand and leverage the win, go toeconomic value and innovation possibilities it offers. Theopportunities are there and available for the taking in the ibm.com/insurance.following areas:Criteria ResultsBusiness Partner Satisfaction 30 to 90 percent improvementSeverity 1 Defect Rates 58 to 82 percent reductionOn – Budget 27 to 41 percent improvementOn – Schedule 20 to 41 percent improvement 14ROI 3.6 to 9 timesSource: IBM Research
  9. 9. 10 The Globally Integrated Enterprise and the Insurance Factory ModelAbout 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
  10. 10. IBM Global Business Services 111 Spang, S. “Five trends that will shape business technology in 2009; Theyear 2009 will be challenging for CIOs; Here’s how to play your hand.”McKinsey Quarterly. Mar. 2009. <http://www.mckinseyquarterly.com/Strategy/Strategic_Thinking/Five_trends_that_will_shape_business_technology_in_2009_2296>.2 Palmisano, Sam. “The Globally Integrated Enterprise.” Foreign AffairsMagazine. May-June 2006. <http://www.ibm.com/ibm/ideasfromibm/us/integration/010607/images/leaf1/The_Globally_Integrated_Enterprise.pdf?sa_campaign=message/ideas/landingpage/section1/1/newglobal>.3 IBM Global CEO Study 2008; IBM CEO Survey. <http://www-935.ibm.com/services/us/gbs/bus/pdf/ceo-study-executive-summary.pdf>.4 BRIC – Brazil, Russia, India and China5 Lipien, David, and Kelly, Jeff. How a factory development model canhelp insurers gear up for success. 2007. IBM POV. <GBW03001-USEN-00.pdf>.6 Gan, P., D. Lipien, and Haines J. Enterprise Software ReleaseManagement. 2006. IBM developerworks. <http://www.ibm.com/developerworks/rational/library/06/0925_>.7 IBM Creating an adaptable workforce: important implications for CIOs(2008).8 Barrett, Michael, Elizabeth Davidson, Catherine Middleton, and JaniceI. DeGross. Federation for Information Processing. 2008.9 Kelleher, Luke, and Lipien, David. The Online Insurance Imperative:Driving Growth by Expanding Your Online Presence. 2008. <ftp://ftp.software.ibm.com/common/ssi/sa/wh/n/gbw03067usen/GBW03067USEN.PDF>.10 Services account for more than 50 percent of the economies incountries such as Brazil, Germany, Japan, Russia, and the UK.11 “The New York Times.” The New York Times - Breaking News, WorldNews & Multimedia. 17 June 2009 <http://www.nytimes.com/2009/01/11/business/worldbusiness/11satyam.html>. “From FTEs To Results: Going Beyond Labor Arbitrage To Managed12Outcome Relationships.” Forrester Research (2008). Brett, Jeanne, Kristin Behfar, and Mary C. Kern. Managing13Multicultural Teams. HBR. <www.hbr.org>.14 Scientists at the IBM T.J. Watson Research Center measured thebusiness impact of infrastructure outsourcing on 56 public companiesover a five-year period. Their analysis revealed that companies engagedin major IT outsourcing deals achieved better long-term improvementsin business performance than their peers. These companies realizedlower selling, general and administrative (SG&A) expenses, higher returnon assets (ROA) and higher growth in earnings before interest and taxes(EBIT).
  11. 11. © Copyright IBM Corporation 2009IBM Global ServicesRoute 100Somers, NY 10589U.S.A.Produced in the United States of AmericaAugust 2009All Rights ReservedIBM, the IBM logo and ibm.com are trademarks or registered trademarksof International Business Machines Corporation in the United States, othercountries, or both. If these and other IBM trademarked terms are marked ontheir first occurrence in this information with a trademark symbol (® or ™),these symbols indicate U.S. registered or common law trademarks owned byIBM at the time this information was published. Such trademarks may alsobe registered or common law trademarks in other countries. A current list ofIBM trademarks is available on the Web at “Copyright and trademarkinformation” at ibm.com/legal/copytrade.shtml Other company, productand service names may be trademarks or service marks of others.References in this publication to IBM products and services do notimply that IBM intends to make them available in all countries in whichIBM operates. Please Recycle GBW03087-USEN-00

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