Enterprising Developments

IT: Manage Thyself

Joe McKendrick
Insurance Experts' Forum, October 27, 2011

Over the years, and especially in recent years, carriers have turned to their information technology departments to achieve impressive efficiencies—to the point where companies have been accelerating their businesses while barely hiring any new workers.

This speaks a lot to the productivity IT is delivering to carriers' organizations. However, there is one area of the business that isn't benefiting from these productivity gains – the IT department itself.

To that end, Gartner recently published some management tips for IT departments to get their own houses in order. As Gartner analyst Jo Ann Rosenberger explains it, organizations may be targeting IT to identify cost savings and cost-reduction opportunities, “but often IT doesn't have effective processes in place to manage spending and identify, analyze and report budget variances.”

Rosenberger provides some finance-savvy advice for IT executives:

Promote collaboration between departments: For example, Rosenberger illustrates, “if an unplanned/unbudgeted server upgrade involved trading in an old model as part of the new server purchase contract, IT would be aware of how this server replacement would affect all the interrelated assets/accounts (hardware, software and maintenance) and could communicate this to IT finance and departmental managers to prepare for the impact this would have on the budget.”

Recognize the need for detailed expense tracking: “Without detailed expense-tracking processes, IT financial staff and CIOs can misunderstand and report variances inaccurately. This can lead to inappropriate spending and forecasting decisions.”

Implement an expense-tracking mechanism to manage spending: Such an effort “enables CIOs to compare actual-to-budget expenses effectively, identify and report variances, project the impact of these variances on the remaining year, and develop and analyze 'what if' scenarios to determine the impact of operational changes on expenses.”

Use detailed expense reports for planning and forecasting: Since IT budgets are constantly changing, “IT financial staff need to develop processes to manage and report budget changes properly. This requires staff to evaluate and select suitable expense reporting options, such as automating processes, customized interfaces to the corporate accounting system or purchasing financial tools.”

Closely manage IT finance's plans to implement processes: “Processes are most effective when they deliver accurate decision-making data to CIOs and report the right information accurately at the appropriate level of detail. CIOs should be engaged in discussions about these processes before development begins.”

Joe McKendrick is an author, consultant, blogger and frequent INN contributor specializing in information technology.

Readers are encouraged to respond to Joe using the “Add Your Comments” box below. He can also be reached at joe@mckendrickresearch.com.

This blog was exclusively written for Insurance Networking News. It may not be reposted or reused without permission from Insurance Networking News.

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

Comments (1)

Joe, I may be preaching to the choir here, but it seems to me that IT could help itself, not just by managing itself, but by insisting on being allowed in the initial discussion in which productivity enhancements are called for. It's the old business/IT alignment issue, right? The IT exec is called on to know the insurance business, and from our experience in speaking with our readers, they do. But without a seat at the business strategy table, too often, the IT department is considered only a service center, which hampers its leader to execute in such a way as to build IT costs in from the beginning.

Posted by: patricia.speer | October 28, 2011 9:41 AM

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