The Benefits of Running IT Like a Business
Insurance Experts' Forum, April 4, 2013
Can IT departments run as their own businesses, as a profit center and all? And is this even possible within the insurance industry?
The answer is “yes” to both questions, as borne out in a recent podcast discussion led by Dana Gardner, principle with Interarbor Solutions. Dana spoke with Richard Aarnink, leader in the IT Management Domain at Achmea Holding—one of the largest providers of financial services and insurance in the Netherlands.
Achmea's 2,000-person-strong IT department began its transformation from cost center to service-providing organization about a year ago, Aarnink relates. Essentially IT is a business within a business, serving and providing value to customers, be they inside or outside the organization. To that end, an organization would not be in business for long if it had to reinvent the wheel every time a new order came in, Aarnink explains. “We came to the conclusion that delivery of every request that we got was an intensive process for which we created projects. We looked at it and said, 'Well, it is actually like running a normal business, and therefore, why should we be different?'”
The secret to running IT as a business is to adopt standardization, repeatability and predictability across as many IT processes as possible, so that as the business changes or grows, these processes can be easily plugged into new services, or replicated. “You can easily unburden yourself from thinking about how you should go for this process, reinvent it, creating your own tool sets, interfaces with external companies,” Aarnink says. “That can all be centralized, it can all be standardized. It's not our business to create our own IT tools. It's the business of delivering policy management systems for our core industry, which is insurance.”
Centralization of IT resources was the key to Achmea's strategy, Aarnink adds. He calls the initiative his company undertook “ERP for IT.” Just as enterprise resource planning (ERP) systems in other industries bring a range of functions—from accounting to HR to production – into a single, highly integrated system, ERP for IT is intended to consolidate and standardize technology assets within a single integrated environment.
“First we looked at the IT projects and the portfolio,” he relates. “We looked at that and found out that we still had several departments running their own solutions in managing IT projects and also budgets. In the past, we had a mechanism of only controlling the budget for the different business units, but no centralized view on the IT portfolio, as a whole, for Achmea.
"We started in that area, looking at one system of record for IT projects and portfolio management, so we could steer what we wanted to develop and what we wanted to sunset."
While the notion of consolidating and standardizing an entire spectrum of IT systems sounds daunting, Aarnink says his company is undertaking the effort in “small steps.”
IT executives and analysts alike have long pondered the situations of most IT departments—often seen as a cost center to the business, and constantly under the budget knife. Being able to align IT as a business itself—delivering tangible value for which internal and external customers are willing to pay—may help change this equation.
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