Off-the-shelf tech solutions offer maximum flexibility

KISSIMMEE, Fla.—In approaching major information technology projects, companies must recognize that "there's no sustainable advantage in technology," according to one insurance company IT executive who oversaw transforming his company's legacy system.

Speaking about leveraging technology and upgrading infrastructure at the annual ISOTech conference in November in Kissimmee, Fla., Arne Herenstein, vp information technology at Boston-based OneBeacon Insurance Group, defended his assertion by arguing that good technology can be purchased.

Further, good IT ideas are quickly adapted, modified and improved by "the next smart guy," he said, with that improved technology becoming the new baseline.

Keeping up with competitors' IT changes can be costly, Mr. Herenstein said. "You can't get hung up in keeping up with technology," he said. Instead, it's essential that companies view technology as providing the framework to enable constant change and reduced cost, he said.

Staying standard

At OneBeacon, such a perspective had several implications for the shape of the legacy system transformation project.

"We tried to make as much of it shareable as possible," Mr. Herenstein said. "We made a minimum use of proprietary technology. We try to not write things ourselves. If we write them ourselves, we try to keep it open architecture." And, he said, "We clearly try to stay with industry standard practices."

In changing from legacy systems to today's IT universe, "which is basically half in the legacy universe," OneBeacon's success had more to do with the methods and procedures used than the hardware it chose, Mr. Herenstein said.

"The technology is important, but it's a factor, not the whole thing," he said, suggesting there are three pieces to any major IT project: technology, people and processes.

The "technology evolution imperatives" that guided OneBeacon's legacy system transformation included protecting and reusing existing assets, providing a nondisruptive evolutionary path to new technology and function, improving flexibility for future system enhancements, minimizing the time to production and improving the ease of IT installation and deployment, he said.

OneBeacon's legacy transformation effort began after White Mountains Insurance Group purchased CGU Insurance Group in mid-2001 and renamed the company OneBeacon Insurance Group.

At the time OneBeacon began operations in June 2001, the successor to CGU was losing $50 million a month, Mr. Herenstein said. Key support roles such as IT were not aligned with business goals, and an earlier three-year, $100 million attempt to consolidate multiple policy administration engines had been abandoned.

Once OneBeacon began operations, business strategies and goals were revised and operating principles—"the first one was underwriting comes first," Mr. Herenstein said—and business unit goals were developed and communicated throughout the company. Support organizations within the company, including IT, continued only with work that would support those goals.

"Our applications were aging, but they were functional," Mr. Herenstein said. "Our technology, however, could not support the new goals."

The company built applications where it needed to build them and bought applications where it could buy them. "What we wanted to do was create a technical platform that is flexible so it is changeable over time," Mr. Herenstein said.

Management on Board

For such a project to succeed, Mr. Herenstein said the project must have senior management acceptance. In addition, regular meetings should be held with key stakeholders for communication and decision-making, and all changes that have an impact on time or cost should be reviewed by the group, he said. In addition, business strategy must define projects and projects should be joint ventures between the business side of the company and IT.

"Everything is a joint venture," Mr. Herenstein said. "There is very little that we would do on our own."

And in approaching projects, the company's IT department likes to take a customer service focus, Mr. Herenstein said.

"We tend to think of ourselves as an independent business, because by doing that, we tend to think of serving the business 'client' who hired us," he said. "We aren't doing IT projects, we're doing business initiatives."

As evidence of the transformation project's success, Mr. Herenstein points to OneBeacon's scheduled retirement of seven legacy policy systems, the fact that the cycle time from identifying an opportunity to deploying a solution continues to decrease and that the company's IT expenses went from $184 million in 2001 to a budgeted $85 million in 2006.

Meanwhile, he said, OneBeacon's combined ratio fell to 98% in 2005 from a figure "well into the 120s" before the transformation was undertaken.