Celent Says

Is the Death of the Insurance CIO Around the Corner?

Catherine Stagg-Macey
Insurance Experts' Forum, October 20, 2010

It was during a conversation over a year ago that someone raised the possibility of the “best-before-date” of a CIO. He made the point that in 10 years time, IT would be a commoditized service consumed as and when it suited the business. He was really pushing the envelope—he meant all of IT from infrastructure services through to core insurance applications. I nodded sagely, as analysts do, and agreed with him in the principle, but not on the timeframe. 10 years … surely not.

The conversation was with a UK CIO of a mid-sized P&C operation, and it’s been replaying on my mind recently. Against the backdrop of increasingly meaningful conversations about cloud, the idea of an IT organization being commoditized to the point of removing the necessity of a IT management structure suddenly seems real.

There are two interesting case studies. Firstly, the UK Royal Mail moved from an internally managed mail system for 37,000 users, to an external public cloud by moving all the users to the Microsoft cloud. That’s a significant and meaningful change in strategy for a large organization such as Royal Mail. The CIO said it was driven mostly by a need for agility rather than cost-savings. The Royal Mail had decided to focus on delivering parcels and letters, and let an external supplier deliver internal e-mail via the cloud.

The second is an insurance-specific test case: A UK insurer is testing a policy administration system in the cloud. This in itself is significant—this is a large insurer testing out the idea of a core system in the public cloud. It’s still under test, but the insurer is excited about what this could mean for their agility in IT delivery.

With the growth of traditional sourcing models, it’s easy to accept that infrastructure could be moved from a private cloud with a traditional hosting company into a public cloud. What’s much harder to get agreement on is a vision of the world where core systems live in a public cloud. And there is good reason for this. Regulators, customers and insurers alike will have concerns over security and data privacy. There will be concerns about being tied to a large cloud provider with little interest in commercial issues. There will be (and have been in the cases above) some hand wringing over the gap in SLA’s delivered in the cloud versus what traditional sourcing models might offer.

The examples suggest an inexorable move toward the commoditization of IT. It may well be too early to talk of the death of the CIO, but there is little doubt that the responsibilities of a CIO could shift toward supplier management as cloud offerings mature and become a viable solution to new outsourcing models.

 

This blog has been reprinted with permission from Celent.

Catherine Stagg-Macey is a senior analyst in Celent's insurance practice, and can be reached at cstagg-macey@celent.com.

Readers are encouraged to respond to Catherine using the “Add Your Comments” box below.

The opinions of bloggers on www.insurancenetworking.com do not necessarily reflect those of Insurance Networking News.

Comments (1)

Very interesting topic of discussion. It seems similar to thoughts about outsourcing several years ago when some predicted the death of all in-house IT jobs that could be replicated by an outsource firm.
I don't believe it will happen too soon...more for political and business reasons of corporate comfort than technological ones. Insurance has never been at the bleeding edge of technology!
When the outsourcing discussions were taking place a few years ago, the way to avoid having your job outsourced was engage in something that wouldn't be comoditized. Translation: don't handle hardware, learn the business and provide services that are unique to the business and can't be found easily elsewhere. Know how to integrate specific corporate needs with technology...get a seat at corporate planning sessions so you are an integral part of the future solutions the company will use.
Remember in the 90's when all the futurists were predicting the disintermediation of agents? Never happened...then prediction were made about all firms moving to outsourcing...some did, most didn't. Now the insurance CIO is going away in 10 years? Not if the CIO offers a business benefit his company that can't be bought from a cloud!

Posted by: Bob P | October 22, 2010 11:06 AM

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