IT Mattered for Helping CIO Devise Strategies for Integrating
Disparate Systems
IT mattered when it came to the merger of four insurance
companies–Colonial Life & Accident, Paul Revere, Providence,
and Unum to form UnumProvident, the world’s largest disability
insurance company with $40 billion in assets and 13,000 employees. The
company underwrites individual and group disability, long-term and short-term
group life, and long-term care insurance. In fact, Fortune magazine
has named UnumProvident one of the 10 top best insurance companies in
the U.S. Bob Best, the chief information officer for UnumProvident,
says, “Each company had a different piece of the marketplace,
different customers, and different product lines. Our strategy consisted
on integrating and consolidating about 30 different product-based systems
into two standard operating platforms, which could provide customers
with multiple offerings efficiently from one company.” Unlike
a lot of CIO’s at major companies, Best has to make sure that
1,000 of their employers receive exceptional customer service from more
than 3,500 call center employees. Best is also the senior vice president
for customer service. Best’s IT organization consists of 800 applications
developers, and 400 employees from IBM Global Services who manage the
network infrastructure.
Best recently took the time to answer questions about his IT organization’s
continuous drive to keep integrating and building systems to scale to
support growth and quality of service.
Q.
How does your company differ from other types of insurance companies?
UnumProvident is the result of the merger of four insurance
companies completed in 1999. Unlike many large companies, our IT initiatives
focus on customizing and integrating hardware and software from third-party
vendors, such as DB2 from IBM. Our human resources and benefits system
runs on PeopleSoft. We also develop many of our own tools, which explain
why we have so many developers. For example, we wrote all of the application
systems that support all of our underwriting areas, and our entire customer
interfacing. We built our data warehousing piece based on an NCR Terdata
system.
We’re not a typical life insurance company or
property or casualty company. Instead, by focusing successfully on one
line of business, we’ve become the market leader in disability
insurance. We built a lot of capabilities into our systems that have
enhanced the quality of service that our customers receive. Off the
shelf packages tend to fit well with how we want to interact with our
customers. However, we do use a lot of infrastructure packages to support
our custom processes. For example, a workflow-imaging product from StaffWare
has enabled us electronically to capture claims that are faxed to us.
Our CoreChange portal engine has enabled us to offer our customer immediate
access to all of their administrative information, such as forms. This
technology also enables our employees to have online access to any type
of training materials.
Q.
Tell me about some of the unique databases you have developed?
We have the world’s largest disability and return
to work databases in the world. Our large employers have helped us to
tailor their reporting, and in turn, we’ve developed specialized
services to help our customers with absence management, disease management,
and disability management.
Q.
Can you go into specifics about the role IT played in the merger of
the systems from the four companies?
Our tactical role consisted on bringing together all
of the different systems into two standard operating platforms–one
for traditional group business, and the other for individual and worksite
business.
Our strategic objective was to create more robust product
offerings and present them seamlessly to our customers. To accomplish
this, we had to bring together all the lines of business and customers.
We had to change our business model from being a product-oriented company
to being more focused with services our customers could benefit most
from. We had to make sure we had back-end services that worked efficiently.
Q.
What has the payback been for the consolidation?
Reducing overlaps and duplication has enabled us to
reduce our overhead significantly. I don’t want to give specific
figures. It was an interesting time to do a merger. The dot.com’s
had heated up the industry. Rather than get caught up in the dot.com
boom, we concentrated on merging and consolidating systems from the
three companies. We partnered with IBM Global Services to consolidate
14 data centers into one and to find the best operational practices
for managing this data center. IT is right up there with our key operating
areas.
Q.
What’s the company’s strategic vision?
It hinges on three areas—to bring integrated solutions
to our customers, to continue to develop, and to expand our market leadership
around return to work practices, and to bring more comprehensive solutions
around existing products and services, such as absence management.
Q.
How does the company measure the performance of IT?
Right after the merger, we develop an IT governance
board consisting of all the IT directors from the new operating areas.
We meet for about four hours each month to discuss key issues ranging
from pitfalls in service level agreements to new investments more than
$100,000 we want to make. Because of going through the merger, we also
discuss ways we can mitigate IT risks to the business areas. To this
end, we’ve developed a lot of expertise in planning strategies
which we deliver to senior management.
Q.
Does your IT organization operate as a shared service?
We have a decentralized and a centralized model that
operate concurrently. We like to leave discussions about investments
and resource allocation at the IT governance board meetings. We also
locate our IT developers with the business areas they support. Our frontline
IT managers and directors also sit with their business area. Some of
our IT staff has a dotted reporting line to a business line. We have
just completed a two-year reengineering effort in one of our largest
operating areas. Members of the IT staff worked with the business line
executives to develop processes. We’ve worked very hard to have
a strong collaborative effort between our business owners and our IT
owners.
Q.
Are you using best practices such as Six Sigma?
We’ve done some work around process control. IBM
uses a lot of those tools. We’ve a request for a proposal for
a third party to consolidate some of our change management practices.
We use a lot of best practices that focus on application
development. Our large project office handles all of the reporting,
metrics, and management techniques for each project as it moves through
its lifecycle.
Q.
Is your development effort similar to what you might see in the open
source community—everything is looked at, no one owns any code?
We’re working towards that goal. We still have
some pre-merger issues to work out. Right now, we spend more time managing
our business rather than developing more common software.
My budget is about $200 million. Outsourcing the infrastructure
to IBM for 10 years has helped us to cut operational expenses.
During the dot.com boom, some companies wall off their
developers so they could concentrate on building an ecommerce infrastructure
within record time. We didn’t do that. We started offering an
online service called ibilling. We’re still building the front-end
infrastructure to that service. By focusing on the merger, we wound
up a year behind where the rest of the market was. To this end, we were
able to understand our business, work on some problems, and than get
back to building our e-commerce infrastructure. One of our latest initiatives
will enable about 100,000 small to medium businesses to use Web-based
administrative services to access their employee benefit booklets, their
plan administrator guide, their contracts and billing history, and to
download forms, as well to make changes to employee information.
Q.
Did you read The Harvard Business Review article, “IT
Doesn’t Matter”?
I didn’t agree with it. First of all, I didn’t
grow up in IT. Instead, I started with the company in the mid 1980’s
as the chief operating office. IT has to provide a value to the company
by enabling the business. IT is too big a powerful weapon to standalone.
If you collaborate with the different business areas to make sure everything
runs efficiently, then IT can add tremendous value to the company. Some
innovative technology solutions didn’t work for us.
We created a portal so customers could file claims electronically.
Our larger customers didn’t find it efficient because of the signatures
required from so many different healthcare providers. It has been easier
for them to just fax all of the signed forms.
One of
the value-added services we offered following the merger consisted of
providing customers with access to clinical specialists rather than
a general claims representative with some knowledge of specific medical
conditions. Throughout the country, we have groups of medical professionals
— doctors and nurses — who specialize in areas such as Cardiovascular
or Orthopedics.
Q.
What are your manpower requirements for the next two years?
We’ve added personnel since the merger. However,
our manpower requirements for 2004 will remain flat. We don’t
hire based on specific plans. The needs of our business drive our personnel
needs in IT. Anyone we hire must have the capability to become stepped
in business process and work closely with our business lines.
Q.
What type of projects are you working on?
We
have about four re-engineering projects to support our different business
areas. We’re concentrating primarily on standardizing processing
by placing all of our different lines of business on the same front-end
interface. “We have the world’s largest disability and return
to work databases in the world.”
Interview with Bob Best, Chief Information Officer for UnumProvident
