Mr Simon MacCormac of CSC talks about the new paradigm set to save money, enforce centralised corporate control over information assets, and also deliver on critical business imperatives for insurers.
Once again, IT stands at a point of inflection: the future is therefore impossible to predict from the trends of the past.
Today, we stare into what we see as “IT’s Fourth Wave”, presenting the opportunity to utilise public, community and private clouds across and between enterprises, to dynamically enable firms and individuals through a multitude of personally owned, wearable and embedded devices. (The Fourth Wave follows the previous three waves, which might be termed: Mainframe Era; Client-server Era; and Age of Institutionalised PCs, respectively).
Business agility with strict regulatory compliance and confidentiality
This new paradigm, which we label “The Cloud Empowered Enterprise”, has the potential not just to save money and enforce centralised corporate control over information assets, but also to deliver on today’s critical business imperatives for insurers. These include:
• enhancing the speed at which new products, applications and enhancements are introduced through agile provisioning and DevOps automation;
• improving the means of interacting with customers, channels and partners;
• facilitating new socially oriented, mobile-driven and ecosystem-based business models;
• increasing the ability to securely leverage external sources of data and innovation to create actionable insights and enhance enterprise value; and
• transforming the ways in which applications are provisioned via service catalogues and “apps malls”, and paid for through utility-based consumption models.
We already see insurers using private clouds to deliver business agility whilst maintaining strict regulatory compliance and confidentiality. However, over time, we believe that many more will move to hybrid clouds – harnessing two or more private, community, or public clouds – in order to provision infrastructure, computing platforms, or software applications “as a service” across an enterprise.
Customers are active participants today
We believe that hybrid clouds will be a key driver of 21st century competition not only in insurance, but also many other industries. Indeed, some – like telecoms, healthcare institutions and automotive manufacturing, for emerging Telemedicine and Usage Based Insurance businesses, for example – seem likely to become increasingly linked to insurance providers as new business models develop and mature.
Throughout the economy, managers must cope with several new dynamics, including: customer-centricity, community content, real-time analytics, ecosystem innovation, open collaboration, digital leadership, crowdsourcing, co-creation, and collaborative commerce.
Taken together, these new dynamics are transforming the role of the customer. Insurance customers of the past were passive buyers; but today, they are active participants.
They rate and review insurance products on social media. They offer product support and self-help to others. And they demand new levels of access on mobile devices, DIY websites or social media.
Hybrid clouds – Key driver of 21st century competition
This shift in customer power also requires a response from insurers. The old company-centric way of doing business is becoming obsolete. A new mindset is emerging, one that is focused on the customer.
Insurers also need to develop and adopt new agile operating models that will prepare them for whatever new opportunities and challenges emerge in the future, and to be able to access information from multiple public and private sources. All of which point to a future world harnessing applications, data and information from multiple sources, brought together on a hybrid cloud.
The hybrid cloud has, as its core, an integrated platform of application services – information and technology components requiring both development and runtime execution control, each with its own service, cost and performance levels, and each orchestrated, by policy controls, upon a particular cloud.
We believe that the ability to aggregate and manage the delivery of IT across multiple clouds – in different combinations of connectivity, consumption method and rate of service – will enable enterprises to continuously keep pace with both challenges and changing conditions.
Silos lack the ability to accommodate new requirements
Historically however, IT departments have adopted a “siloed”, hard-wired approach to applications, data, workflow, policy, systems operations and resource allocation, all operating within back office environments.
Insurers’ back offices are further siloed by their large and growing inventories of legacy systems. That is because insurers have traditionally installed new hardware systems each time they introduced a new insurance product, in part because many of the industry’s products – such as life insurance – are such long-term offerings.
Silos appear in development environments and proliferate through production runtime. However, they lack the service orientation and orchestration abilities to accommodate emerging regulatory, quality and class of service requirements. They cannot manage and orchestrate service execution in a fluid and dynamic manner that mirrors business behaviour within the dynamic context of organisations today.
The Cloud Empowered Enterprise presents an opportunity to change the silo model to an integrated business and IT operation, providing self-service, dynamic assembly of application services, information and capacity, orchestrated according to business needs, when and how needed.
Benefits of a cloud-based application service delivery platform
In the face of economic uncertainty, shareholder demands for capital preservation and relentless change, insurance CIOs face budget constraints and greater scrutiny of the quality of their service delivery for each dollar invested.
As well as reducing IT costs, digital-savvy CXOs are increasingly tasking CIOs with achieving greater agility and economies of scale to support their users’ operations. Firms also demand consistent digital process flows that they can deploy effectively and efficiently, accommodating business priorities along with compliance and regulatory rules.
IT departments are thus turning to a cloud-based application service delivery platform that removes the barriers of time, cost or inflexibility. Such a platform provides dynamically tiered and policy enforced servicing of applications, ranging from application development to expense management, cash management, back-office functions to customer engagement, customer profiling, automated transaction processing, client self-service convenience and functionality. It is characterised by:
• A software defined system fabric, providing execution and governance control including the assembly, distribution, coordination and service orchestration of the necessary components to fulfil business execution requirements: business rules; applications; information; content; and infrastructure.
• A platform that enables the business to operate with agility, capacity, and services provisioned on demand with self-service to exact business needs. It does so by dynamically matching resources to the required service characteristics of performance, cost, compliance rules, resiliency and efficiency.
• Operating in a “lights-out” mode, dynamically adjusting services and capacity on the fly, based on business and compliance policy adherence at runtime. This ensures that authorised users securely access the appropriate applications, data and resources.
Execution risks to look out for
To avoid the execution pitfalls that have trapped enterprise IT organisations on their journey to the Cloud Empowered Enterprise, we have identified three key areas of execution risk that need to be managed closely by the CIO:
1. Orientation
A classic trap of IT is to orient from the bottom-up in terms of how it views delivery of IT to the business. In particular, the focus is on resources and automation as the only asset in the value chain of application service execution. It is logical to orient in this manner because it maps to span of control. However, this approach creates a disconnection between how the business consumes services and how IT delivers.
To successfully realise the Cloud Empowered Enterprise that senses and responds to business-IT execution as needed, the CIO and team must integrate the design, deployment and management approach with business processes, application assembly processes and governance model. This should operate as a dynamic supply chain, adjusting application service delivery in support of daily business behaviour whilst enforcing policies for service level, governance and exception processing.
2. Capability model
The next barrier is the approach to the capability model. This becomes another trap of convenience or comfort level – IT focusing on capabilities that address only resource pooling and virtualisation. The Cloud Empowered Enterprise must include application service delivery capabilities that can accommodate constantly adjusting business and governance requirements, as well as fulfilling demands for user experience.
3. Investment
Another trap is the way in which firms approach investment and procurement in the traditional, capital-heavy “per-seat” or “per-core” manner. The unit of value that intersects business and IT is the workload. When workloads execute correctly, and accommodate business fluctuation without additional time, delay or investment, maximum IT business value is realised. If business consumption is dynamic, then why can’t IT delivery execution be procured and operated in this manner? There is no need to burden business with large capital out-lays, drag out time to value in exhaustive and dated procurement processes, or tax the business for months to years before net incremental value to the bottom line is realised.
Each of these risks is an example of IT failing to make the shift from “Inside-Out” thinking, fixating on current capabilities and assets, to an “Outside-In” approach that addresses and embraces the magnitude of technology transformation happening around us.
Conclusion
The insurance industry is being disrupted. Insurers therefore seek flexibility within their core and contingent strategies. Firms therefore demand IT that is able to rapidly respond to changes in strategy, and strategy, quite simply, is the backing of successful experiments: investing in those resources that gain value through change.
As insurers seek to get closer to their customers, harness the power of ecosystems, empower front-line employees with the latest mobile-based applications (which work on any platform, anywhere and at anytime) and securely leverage data across multiple private and public sources, they will be driven more and more towards a consumption-based model operating across a hybrid cloud.
Thinking Outside-In and having a resilient strategy for enabling the Cloud Empowered Enterprise will become essential, as will the selection of appropriate partners which are able to help leverage the power of the cloud to support evolving business models and new service demands.
Mr Simon MacCormac is the Senior Managing Partner for CSC.