IT Project Management Keeps the Business on Track
Insurance Networking News, February 1, 2008
At AFLAC, Columbus, Ga., proposed IT projects need to meet certain criteria, such as surpassing a general cost threshold or number of hours required for completion, before it is elevated to official “project” status. “We size our initiatives before we take them to management,” explains Brian Abeyta, VP of AFLAC’s IT project management office. “Those initiatives that exceed or meet the size criteria, whether it is the number of hours, cost or, in some cases, visibility, we classify as a ‘project.’ If it doesn’t meet that threshold, like many of our routine software releases, it is handled at the operational level.”
Projects considered for project management status are subjected to a formal executive review, Abeyta continues. “Our largest projects go before a steering committee headed up by many of our senior C-level executives.” Typically, IT projects meriting this status at AFLAC are those exceeding $100,000 and 1,000 hours of development time, though most are far above these levels, he adds.
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By putting such pre-qualifiers in place, AFLAC is tackling a problem that vexes many organizations across insurance and other industries: how to deliver IT projects not only on time and within budget, but also in line with business requirements. Studies over the years confirm that IT projects often fall short on all three counts. The “Chaos” study, conducted by Standish Group, West Yarmouth, Mass., and regarded by many in IT project management circles as an annual wake-up call, finds that 46% of corporate application development projects fail to deliver results on time, within budget or in-scope.
Other surveys report similarly dismal findings. CA, Islandia, N.Y., recently commissioned a study of 100 companies within the U.K., and found that one-third of typical IT projects came in over budget, mainly due to “inaccurate scoping and forecasting.” Another survey of 800 executives released by Tata Consultancy Services (TCS), Mumbai, India, had even more downbeat results. The TCS survey found that two out of three executives said their IT projects routinely fail to perform against expectations. A majority, 62%, experienced IT projects that failed to meet their schedules, and 49% said they had projects that suffered from budget overruns. At least 41% say these projects failed to deliver the expected business value and ROI.
In companies where IT projects had run astray, the TCS survey finds that most top-level executives expect problems, but would continue to support the effort. Nevertheless, one out of five report that budgets were either reduced as a result, or that the failure made it more difficult to secure funding for new initiatives.
These IT project failures tend to be more common among larger, more complex IT projects, says Bob Sydow, practice leader of program advisory services with the insurance and financial services practice of Ernst & Young LLC. However, more IT projects are growing in complexity as they serve more needs across the enterprise. “We’re seeing projects that are a lot more complex in a sense that they are broader and deeper,” he says. “Many insurance companies are re-evaluating their portfolio of applications, and trying to consolidate claims and other systems.”
For example, there has been a growing number of carriers moving to upgrade, improve or replace many of the policy administration systems that form the core of carriers’ internal operations. Celent LLC, Boston, Mass., estimates that the policy administration system market has tripled in size over the past four years. Much of the emphasis of this work is on consolidation of multiple and disparate systems resulting from years of acquisitions, mergers and growth. “On the life side of the industry, 10 policy administration systems still running would not be an unusual number for a large company,” says Donald Light, senior analyst with Celent.
The scope of many IT projects now extends across the enterprise, resulting in “a lot of confusion about who’s really responsible for the program,” Sydow explains. “If it has a heavy technology element, there’s a bad habit of trying to make the IT group responsible for that project. But the project’s success is dependent much more on just the technology. It’s really dependent on getting the right processes and organizational changes done at the same time you’re introducing new technologies.”
MANAGEMENT CHALLENGES
The insurance industry also has its own unique challenges to project management as well. Large legacy systems ripe for upgrade, modernization or consolidation are more commonly seen among insurance companies. In addition, a more complex regulatory environment means more complex project management challenges as well. “There are more regulatory demands that are put on the insurance industry,” says Celent’s Light. “That applies directly to IT project management because nearly all regulatory changes are going to require IT to help implement them. That’s another level of strain and stress to insurance project management environments.”
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