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IBM Global Business Services             Financial Services
Executive Brief




Real world solutions for
Global Insurance Delivery:
The Globally Integrated Enterprise and
the Insurance Factory Model
The Globally Integrated Enterprise and the Insurance Factory Model
IBM Global Business Services   3




The current economic climate, with its increased level of          Getting Started: The Assessment
competition, market consolidations, offshoring, and                As with any other major initiative, firms should begin the
outsourcing landscape shifts, as well as disruptive technologies   journey toward global integration with assessing where you are
and increased regulations, is imposing enormous pressure on        today. Even firms that have already achieved notable success by
insurance firms.1                                                  moving work offshore will find many opportunities to squeeze
                                                                   out additional cost savings and efficiencies via a thorough
Now more than ever, the insurance business demands major           consideration of all the capabilities necessary to become a
cost reductions, increased speed to market and the need to         globally integrated enterprise.
mitigate delivery risk. To accomplish all these, Insurance
Executives, and not just ones doing business globally, need to
                                                                                             Manage Value in
understand and manage a Globally Integrated Enterprise –                                     an Ecosystem of
right now.2 Global integration requires the insurance                                          Increasingly
                                                                                               Specialized
enterprise of the future to optimize information technology to                   Leverage        Entities         Build a
prudently support the mix of local and global talent; it also                     Global                        Specialized
                                                                                  Assets                        Enterprise
involves vendor management with the global management of
resources needed for profitable operations.                                                      Globally
                                                                                                Integrated
According to a recent survey of CEOs across the globe, firms                       Serve        Enterprise
                                                                                  Distinct                        Enable
adopting approaches to global integration that are more                           Global                       Collaboration
focused on embracing change are more likely to outperform                         Markets
their competition.3                                                                               Address
                                                                                                Shared Risk
                                                                                                and Control
Most major insurance firms we have worked with have either
undertaken, or are considering global integration to reduce
costs. Cost reduction has been the immediate reality for all       Figure 1 - Suite of Six Capabilities
firms – going global provides labor arbitrage that lightens the    For instance, a thorough assessment can lead to new
balance 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 delivery
global integration into an engine to fuel long-term efficiency,                                                      4
                                                                   perspective with more than just another “BRIC” in the wall
differentiation, 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.
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.
                                                                                                                     Deployment



Figure 2 - Mind Map — Global Integration Critical Success Factors

Using techniques such as a mind map exercise can help teams                                  Once firms have a thorough understanding of where they are
identify critical success factors and interdependencies among                                in their global integration journey – as well as the specific areas
all the critical components used in global delivery, or refine                               where focus will improve efficiency and results – they must
existing delivery processes.                                                                 adopt a global integration framework that enables full
                                                                                             advantage of the opportunities.
IBM Global Business Services   5




The Global Insurance Factory Model                                  4.	 Governance. Establish sponsorship and align the organization
Insurance 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
                                                                                     7
disciplines 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 the
insurance industry, companies must deal with globalization –            development process and reduce the overall number of
leveraging 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 drive
to 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 a
and differentiating products has become a key element in            growth problem in a services industry.
long-term strategies for success. With that in mind, industry
leaders are taking advantage of the value of a factory model for    •	 Challenge: By the end of 2006, growth had become the
faster development of product and process applications to help         primary challenge for the company. Revenue grew less than
deliver 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
                                                                                                     9
concept 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 – the
from a silo-based, legacy driven organization to a release-based       company tripled monthly new business applications and
and portfolio driven firm in order to deliver an additional            purchase percentage, meeting the business case. From a
15 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 the
The factory model is an organizational and technological               customer-facing web application systems. The balanced
framework that utilizes modular teams, mixing and matching             globally sourced solution resulted in the reduction of a third
resources to quickly and efficiently produce a variety of              of the original planned expenditures.
applications designed to meet the fluctuating requirements of
insurance customers. Leaders who leverage this model,               With another US P&C insurer, we applied the factory model
creating a repeatable process to more quickly and efficiently       to help solve a challenge with their overall IT portfolio
deliver insurance products and functionality to market, will        management and effectiveness.
create a competitive differentiation for their firms. Keys to the
Factory Model include:                                              •	 Challenge: Funding for IT projects and programs were
                                                                       varying by as much as 25 percent year to year in response to
1.	 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 to
2.	 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.
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, but
Set up for success from the start:                                          cost insurers more in time and money in the long term.
Right Technology and Skills
The application platform used to deliver products to agents,             The insurance factory model is competency-based, with an
call center personal and consumers needs to be flexible enough           emphasis on core skills, consistency, repeatability, optimized
to 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 are
high volume of change within the flexible applications.                  gathered into competency pools with the object of making
                                                                         quick work of application development. This allows for deeper
Firms must achieve an appropriate mix of local and remote                knowledge transfer to occur across like skills, broadening
resources through a well thought-out sourcing model.                     capabilities of the delivery organization. Additionally, a factory
Shifting from labor-based thinking to services-based positions           model can help position an insurer for a transition to a more
allow companies to compete more effectively in the marketplace           efficient and flexible delivery model (figure 3).
by increasing productivity and minimizing cost, risk and
                10
time-to-market.
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 Product
Focus on the Fundamentals: Consistent
                                                                                              Specifications within your home-office based product teams
Governance and Standards                                                                      enables fast and efficient development, testing and delivery
In 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 complex
resources or cost savings precludes the need for consistent                                   projects. CMMI level appraisal in delivery sites worldwide
governance, 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 issues
globally integrated enterprise. Key factors for success include:                              faster. Security-enhanced worldwide infrastructure protects
                                                                                              intellectual property and sensitive data.
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 project
Creating collaboration: The unique needs                                 with a single point of contact in each remote delivery location
of a global team                                                         will create consistency in the global relationship as well as
Lastly, managing a global team involves intricacies often not            results, and help with managing the interdependencies of
present 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 global
Forrester Research report states that a successful transition to         environment in order to fulfill the needs of a globally
a managed outcome relationship typically yields an additional            integrated effort. Depending on the need, resources may be
20 to 30 percent savings improvement beyond the benefit of               required to deliver on foreign soil. Global delivery depends
labor arbitrage.
                12                                                       on avenues of communication and effort that flow in
                                                                         multiple directions.
Approaches for improving communications, and working
around time zones and language gaps are widely published.
However, none of these reports can provide as much value as
an experienced on-site representative of the vendor company
and culture with a high emotional quotient.

For instance, Westerners working with global counterparts
may perceive that their teammates seem indecisive, say yes
when they mean no, or are reluctant to escalate issues. In
reality, these perceptions stem from core differences in the
                             13
way cultures communicate.
IBM Global Business Services   9




Conclusion                                                          To learn more about how you can avoid the many potholes in
The emerging global economy introduces a vast and complex           the flat world through the creation of a repeatable, insurance
new competitive landscape. There are multiple new                   focused, software factory model, and how IBM has helped
opportunities and pressures that all organizations – large and      companies in the Insurance and other industries navigate
small, private and public – must deal with to survive and succeed   the global stage, contact Patricia M. Hamilton at
in the new global marketplace.                                      patricia.hamilton@us.ibm.com or Tom Duffy at
                                                                    thomas.duffy@us.ibm.com
While there is no one formula for success, all organizations
must embrace and in effect, become integrated into the fabric       To read more about how IBM is helping leading Insurers
of the new global economy to understand and leverage the            win, go to
economic value and innovation possibilities it offers. The
opportunities are there and available for the taking in the         ibm.com/insurance.
following areas:

Criteria	                         Results
Business Partner Satisfaction	    30 to 90 percent improvement
Severity 1 Defect Rates	          58 to 82 percent reduction
On – Budget	                      27 to 41 percent improvement
On – Schedule	                    20 to 41 percent improvement
    14
ROI 	                             3.6 to 9 times
Source: IBM Research
10   The Globally Integrated Enterprise and the Insurance Factory Model




About 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
IBM Global Business Services   11




1
 Spang, S. “Five trends that will shape business technology in 2009; The
year 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 Affairs
Magazine. 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 China
5
 Lipien, David, and Kelly, Jeff. How a factory development model can
help insurers gear up for success. 2007. IBM POV. <GBW03001-
USEN-00.pdf>.
6
 Gan, P., D. Lipien, and Haines J. Enterprise Software Release
Management. 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 Janice
I. 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 in
countries such as Brazil, Germany, Japan, Russia, and the UK.
11
  “The New York Times.” The New York Times - Breaking News, World
News & Multimedia. 17 June 2009 <http://www.nytimes.
com/2009/01/11/business/worldbusiness/11satyam.html>.

 “From FTEs To Results: Going Beyond Labor Arbitrage To Managed
12

Outcome Relationships.” Forrester Research (2008).

 Brett, Jeanne, Kristin Behfar, and Mary C. Kern. Managing
13

Multicultural Teams. HBR. <www.hbr.org>.
14
  Scientists at the IBM T.J. Watson Research Center measured the
business impact of infrastructure outsourcing on 56 public companies
over a five-year period. Their analysis revealed that companies engaged
in major IT outsourcing deals achieved better long-term improvements
in business performance than their peers. These companies realized
lower selling, general and administrative (SG&A) expenses, higher return
on assets (ROA) and higher growth in earnings before interest and taxes
(EBIT).
© Copyright IBM Corporation 2009

IBM Global Services
Route 100
Somers, NY 10589
U.S.A.

Produced in the United States of America
August 2009
All Rights Reserved

IBM, the IBM logo and ibm.com are trademarks or registered trademarks
of International Business Machines Corporation in the United States, other
countries, or both. If these and other IBM trademarked terms are marked on
their first occurrence in this information with a trademark symbol (® or ™),
these symbols indicate U.S. registered or common law trademarks owned by
IBM at the time this information was published. Such trademarks may also
be registered or common law trademarks in other countries. A current list of
IBM trademarks is available on the Web at “Copyright and trademark
information” at ibm.com/legal/copytrade.shtml Other company, product
and service names may be trademarks or service marks of others.

References in this publication to IBM products and services do not
imply that IBM intends to make them available in all countries in which
IBM operates.


         Please Recycle




                                                     GBW03087-USEN-00

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The Globally Integrated Enterprise and the Insurance Factory Model

  • 1. IBM Global Business Services Financial Services Executive Brief Real world solutions for Global Insurance Delivery: The Globally Integrated Enterprise and the Insurance Factory Model
  • 3. IBM Global Business Services 3 The current economic climate, with its increased level of Getting Started: The Assessment competition, market consolidations, offshoring, and As with any other major initiative, firms should begin the outsourcing landscape shifts, as well as disruptive technologies journey toward global integration with assessing where you are and increased regulations, is imposing enormous pressure on today. Even firms that have already achieved notable success by insurance firms.1 moving work offshore will find many opportunities to squeeze out additional cost savings and efficiencies via a thorough Now more than ever, the insurance business demands major consideration of all the capabilities necessary to become a cost reductions, increased speed to market and the need to globally integrated enterprise. mitigate delivery risk. To accomplish all these, Insurance Executives, and not just ones doing business globally, need to Manage Value in understand and manage a Globally Integrated Enterprise – an Ecosystem of right now.2 Global integration requires the insurance Increasingly Specialized enterprise of the future to optimize information technology to Leverage Entities Build a prudently support the mix of local and global talent; it also Global Specialized Assets Enterprise involves vendor management with the global management of resources needed for profitable operations. Globally Integrated According to a recent survey of CEOs across the globe, firms Serve Enterprise Distinct Enable adopting approaches to global integration that are more Global Collaboration focused on embracing change are more likely to outperform Markets their competition.3 Address Shared Risk and Control Most major insurance firms we have worked with have either undertaken, or are considering global integration to reduce costs. Cost reduction has been the immediate reality for all Figure 1 - Suite of Six Capabilities firms – going global provides labor arbitrage that lightens the For instance, a thorough assessment can lead to new balance 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 delivery global integration into an engine to fuel long-term efficiency, 4 perspective with more than just another “BRIC” in the wall differentiation, 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.
  • 4. 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. Deployment Figure 2 - Mind Map — Global Integration Critical Success Factors Using techniques such as a mind map exercise can help teams Once firms have a thorough understanding of where they are identify critical success factors and interdependencies among in their global integration journey – as well as the specific areas all the critical components used in global delivery, or refine where focus will improve efficiency and results – they must existing delivery processes. adopt a global integration framework that enables full advantage of the opportunities.
  • 5. IBM Global Business Services 5 The Global Insurance Factory Model 4. Governance. Establish sponsorship and align the organization Insurance 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 7 disciplines 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 the insurance industry, companies must deal with globalization – development process and reduce the overall number of leveraging 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 drive to 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 a and differentiating products has become a key element in growth problem in a services industry. long-term strategies for success. With that in mind, industry leaders are taking advantage of the value of a factory model for • Challenge: By the end of 2006, growth had become the faster development of product and process applications to help primary challenge for the company. Revenue grew less than deliver 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 9 concept 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 – the from a silo-based, legacy driven organization to a release-based company tripled monthly new business applications and and portfolio driven firm in order to deliver an additional purchase percentage, meeting the business case. From a 15 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 the The factory model is an organizational and technological customer-facing web application systems. The balanced framework that utilizes modular teams, mixing and matching globally sourced solution resulted in the reduction of a third resources to quickly and efficiently produce a variety of of the original planned expenditures. applications designed to meet the fluctuating requirements of insurance customers. Leaders who leverage this model, With another US P&C insurer, we applied the factory model creating a repeatable process to more quickly and efficiently to help solve a challenge with their overall IT portfolio deliver insurance products and functionality to market, will management and effectiveness. create a competitive differentiation for their firms. Keys to the Factory Model include: • Challenge: Funding for IT projects and programs were varying by as much as 25 percent year to year in response to 1. 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 to 2. 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.
  • 6. 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, but Set up for success from the start: cost insurers more in time and money in the long term. Right Technology and Skills The application platform used to deliver products to agents, The insurance factory model is competency-based, with an call center personal and consumers needs to be flexible enough emphasis on core skills, consistency, repeatability, optimized to 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 are high volume of change within the flexible applications. gathered into competency pools with the object of making quick work of application development. This allows for deeper Firms must achieve an appropriate mix of local and remote knowledge transfer to occur across like skills, broadening resources through a well thought-out sourcing model. capabilities of the delivery organization. Additionally, a factory Shifting from labor-based thinking to services-based positions model can help position an insurer for a transition to a more allow companies to compete more effectively in the marketplace efficient and flexible delivery model (figure 3). by increasing productivity and minimizing cost, risk and 10 time-to-market.
  • 7. 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 Product Focus on the Fundamentals: Consistent Specifications within your home-office based product teams Governance and Standards enables fast and efficient development, testing and delivery In 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 complex resources or cost savings precludes the need for consistent projects. CMMI level appraisal in delivery sites worldwide governance, 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 issues globally integrated enterprise. Key factors for success include: faster. Security-enhanced worldwide infrastructure protects intellectual property and sensitive data.
  • 8. 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 project Creating collaboration: The unique needs with a single point of contact in each remote delivery location of a global team will create consistency in the global relationship as well as Lastly, managing a global team involves intricacies often not results, and help with managing the interdependencies of present 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 global Forrester Research report states that a successful transition to environment in order to fulfill the needs of a globally a managed outcome relationship typically yields an additional integrated effort. Depending on the need, resources may be 20 to 30 percent savings improvement beyond the benefit of required to deliver on foreign soil. Global delivery depends labor arbitrage. 12 on avenues of communication and effort that flow in multiple directions. Approaches for improving communications, and working around time zones and language gaps are widely published. However, none of these reports can provide as much value as an experienced on-site representative of the vendor company and culture with a high emotional quotient. For instance, Westerners working with global counterparts may perceive that their teammates seem indecisive, say yes when they mean no, or are reluctant to escalate issues. In reality, these perceptions stem from core differences in the 13 way cultures communicate.
  • 9. IBM Global Business Services 9 Conclusion To learn more about how you can avoid the many potholes in The emerging global economy introduces a vast and complex the flat world through the creation of a repeatable, insurance new competitive landscape. There are multiple new focused, software factory model, and how IBM has helped opportunities and pressures that all organizations – large and companies in the Insurance and other industries navigate small, private and public – must deal with to survive and succeed the global stage, contact Patricia M. Hamilton at in the new global marketplace. patricia.hamilton@us.ibm.com or Tom Duffy at thomas.duffy@us.ibm.com While there is no one formula for success, all organizations must embrace and in effect, become integrated into the fabric To read more about how IBM is helping leading Insurers of the new global economy to understand and leverage the win, go to economic value and innovation possibilities it offers. The opportunities are there and available for the taking in the ibm.com/insurance. following areas: Criteria Results Business Partner Satisfaction 30 to 90 percent improvement Severity 1 Defect Rates 58 to 82 percent reduction On – Budget 27 to 41 percent improvement On – Schedule 20 to 41 percent improvement 14 ROI 3.6 to 9 times Source: IBM Research
  • 10. 10 The Globally Integrated Enterprise and the Insurance Factory Model About 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
  • 11. IBM Global Business Services 11 1 Spang, S. “Five trends that will shape business technology in 2009; The year 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 Affairs Magazine. 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 China 5 Lipien, David, and Kelly, Jeff. How a factory development model can help insurers gear up for success. 2007. IBM POV. <GBW03001- USEN-00.pdf>. 6 Gan, P., D. Lipien, and Haines J. Enterprise Software Release Management. 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 Janice I. 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 in countries such as Brazil, Germany, Japan, Russia, and the UK. 11 “The New York Times.” The New York Times - Breaking News, World News & Multimedia. 17 June 2009 <http://www.nytimes. com/2009/01/11/business/worldbusiness/11satyam.html>. “From FTEs To Results: Going Beyond Labor Arbitrage To Managed 12 Outcome Relationships.” Forrester Research (2008). Brett, Jeanne, Kristin Behfar, and Mary C. Kern. Managing 13 Multicultural Teams. HBR. <www.hbr.org>. 14 Scientists at the IBM T.J. Watson Research Center measured the business impact of infrastructure outsourcing on 56 public companies over a five-year period. Their analysis revealed that companies engaged in major IT outsourcing deals achieved better long-term improvements in business performance than their peers. These companies realized lower selling, general and administrative (SG&A) expenses, higher return on assets (ROA) and higher growth in earnings before interest and taxes (EBIT).
  • 12. © Copyright IBM Corporation 2009 IBM Global Services Route 100 Somers, NY 10589 U.S.A. Produced in the United States of America August 2009 All Rights Reserved IBM, the IBM logo and ibm.com are trademarks or registered trademarks of International Business Machines Corporation in the United States, other countries, or both. If these and other IBM trademarked terms are marked on their first occurrence in this information with a trademark symbol (® or ™), these symbols indicate U.S. registered or common law trademarks owned by IBM at the time this information was published. Such trademarks may also be registered or common law trademarks in other countries. A current list of IBM trademarks is available on the Web at “Copyright and trademark information” at ibm.com/legal/copytrade.shtml Other company, product and service names may be trademarks or service marks of others. References in this publication to IBM products and services do not imply that IBM intends to make them available in all countries in which IBM operates. Please Recycle GBW03087-USEN-00