A holistic approach

With David Hynam, COO of AXA

Like most industries, the financial sector invests considerable sums in its back and front office IT to improve business performance and customer experience. At leading insurance firm AXA, IT is having a real impact on all aspects of global operation.

FST. How would you describe AXA’s approach to technology? Does the group prefer to buy in or build its own infrastructure?
DH. For our major systems we have an organisation called AXA Tech, which I am Director of, and which provides our global infrastructure and core systems. Although the UK is one of the biggest users of AXA Tech, we take a very much in-house approach across all of the global AXA companies. Also, we have a very close relationship with AXA Tech; its members sit on my management team and are an integral part of our technology family as our back office. In terms of specific business applications, we have bought in some end-to-end application services, including hosting, for some of our smaller businesses. We have been flexible in that and haven’t always insisted that we use the in-house route. We do work with a small group of preferred suppliers on some of our legacy technology, but in the main we have a split between Axa Tech as our infrastructure provider and a series of smaller arrangements. I would also like to add that with our suppliers we always keep control of intellectual assets and our key knowledge. So we have taken the approach that for some services we need others to support us but, in the main, we would look to make use of Axa Tech where we can.

FST. Risk management for financial institutions has come to the fore in recent months like never before. How does IT tie in with this critical area for AXA?
DH. I’ve got an operational background having been a head of operations and a COO for quite a long time, so I’m very alert to the consequences of what I call poorly managed risk within IT. I think that we probably have underestimated, in the past, the significance of it to the organization but we got to recognize that our job involves managing risk and not avoiding it completely. Otherwise, we would never implement any change and we would probably not take the businesses as far forward as we could do.

So it’s the approach to risk management, which interests me most. The way in which we have to think about it in terms of how important is it, is that our IT setup is a critical component of almost all of our core business processes. And we have to recognize that if there’s a failure to deliver service or projects, the consequences can be very significant. So we take a very holistic view here in terms of how we oversee risk for service, and to some degree for project risk and control. We are just in process of setting up a strong central project governance team, which will give us tighter, corporate level governance over some of our change programmes.

FST. What about from an operational level?
DH. The IT team needs to continue to manage the service delivery risks very overtly to make sure we got the right levels of service ability, information security, disaster recovery and so on. So it is absolutely crucial to manage it and give it good strong visibility. I think you can tell a lot about an organization from the way in which it manages its operational risk.

FST. How do you see this intensifying in the coming years?
DH. Going forward, I think the challenge that we’ve got is not so much about whether we can implement a change, but rather whether we can implement a change at a rate that the business can accommodate – and get good value from it. Also, a core part of that is whether we can manage the risks that are associated with either new product development, new infrastructure change, or in some cases, the decommissioning of legacy, which brings some different operational risks with it.

FST. The group has also made acquisitions down the years. How do you strive to manage IT integration as quickly and as smoothly as possible?
DH. The key is to have a very clear position as early as you can in the integration process about what your target architecture looks like. And it almost doesn’t matter at the speed at which you move towards that architecture. However, it is important that everybody shares the understanding; I’ve seen this work well, and I’ve seen it work badly in different parts of the business. Where it typically works less well is where we constantly reopen that architecture and those decisions at varying points in the process. But where it’s worked most successfully is where we’ve had a very clear picture, which may not be 100 percent right – it could be 95 percent – but it’s a clear statement of what platform system combinations and what process combinations we’re going to use. And also over what timeframe, broadly, we want to get there. So I would be much less worried about the speed at which you move – I would be much more concerned at the speed at which you design that original architecture.

FST. What key IT projects are you are focused on at the moment how are these efforts progressing?
DH. The first would come under infrastructure, which is absolutely crucial for us because it includes mainframes, server estates, security and asset refresh. Having a regularised process for ensuring that infrastructure can be accommodated within a development schedule is absolutely critical. One of the things that we have got wrong in places where I have worked before is that we ended up with great big infrastructure change programmes that dominated the development agenda for 12 or 18 months. This blocks out the opportunity for business managers to have product and proposition launches.

This is the time when IT gets a bad name because people say, ‘Well, we can’t do this or do that because IT is behind in arrears’.

Here, we have a very major programme underway to move our mainframe to a state-of-the-art centre in Switzerland. We are doing that pretty much in the background with relatively low business impact because it’s being planned over the long term and scheduled in. So for us, I think infrastructure programs are absolutely core to getting our job done.

Our other focus is the development projects, which are at the more sexier and exciting end of what we do – and where we spend most of our money. For example, our wrap platform, called Elevate, has a whole new suite of technology being deployed in new premises with a new management team with a different operating environment and culture. This is very technology-based in terms of both its spend pattern and its impact on the business. And so far, it’s been very successful, but we have got a lot more still to do. But that’s one of many big developments we have going on, on the proposition side.

The third area is enhancements, which is about providing new functionality for existing propositions and mandatory change. We’ve had a pretty successful run at making changes in all of our operating companies this year at different levels to keep our development schedule on track. Overall, we are in a pretty healthy place in terms of our schedules and planning cycle and I would say we should never underestimate how challenging infrastructure projects can be or how complex they are. The trick for us is to regulate the spend and minimise the number of big one-off programmes, which can be very disruptive.

FST. How can IT improve business processes and customer service in general?
DH. I think IT change without business process change is a pretty fruitless activity, quite honestly, and the two have to go hand in hand. I’ve seen some great examples of changes we’ve pushed through in IT where we didn’t make the corresponding business changes and you just don’t reap the benefits that you should do. So I think a holistic approach to business and IT change management is critical. I think for us, we recognize that the local businesses that we support are very diverse. We have a healthcare business, a general insurance business in Ireland, a wealth management business, a life company and so on.

So we need to have specific tools to do the job locally, and we have to be quite bold sometimes in saying that one size doesn’t fit all. We don’t have a single platform across all those businesses because the nature of their products is very, very different, however, you can develop some business processes and IT processes which are harmonised across the whole range. And we have some of those so that’s probably where we can add the most value. I also think it’s about taking a two-prong attack. First, by recognizing that you have to have a very strong local connection between your IT team and your customer service teams. And secondly, making sure that where you can harmonised process across a number of different businesses and business processes because that’s where you can achieve some real differentiation.

FST. The financial services industry is clearly going through a difficult time at the moment. What role can technology play in rebuilding confidence amongst customers?
DH. I think we have to appreciate that the industry moves in cycles. At different points in that cycle, technology plays a different role. So there will always be times in which the markets are buoyant, and there will always be times in that cycle when the market is low. That’s just the nature of what we do and it’s the nature of the industry we’re in. We have the benefit here that we’re spread across a number of different sub-segments of the market so we don’t swallow those points at the same time. Others don’t always have that advantage. So I think in terms of how can technology play a role in the difficult times, we have to recognise that cost reduction and cost management probably becomes more under the microscope when people and earnings are under pressure.

So, for example, process automation, new front ends, use of simple technologies to take cost out of admin processes, is potentially more impactful now than it would have been 18 months ago when people were feeling more comfortable around their cost base. For us, being able to very quickly, and this applies to probably all financial service companies, divert your attention, if you needed to, to start to take cost out of your businesses is very important. The flexibility in your IT resource – to be able to move them from what might be quite progressive externally facing initiatives one minute to quite quickly becoming quite profit-enhancing initiatives the next – can be important, but you have to keep those in check and not move 100% from one to the other.

I think the key point is to try and find the processes where customers place a value on the technology tools to some degree in their own right and not just where it helps the back office reduce costs. If we think about where the technology teams play, sometimes consumers actually buy and prefer services because of the technology itself. So if you think about online bidding tools and things like that, people want those because they’re excited by them and interested in them. It may not be that they save money but because they are quite exciting. So there has to be a value in the technology itself.

FST. What’s on your plate in the next 12-18 months?
DH. The number one priority for me is simplifying not complicating. I think it’s very easy to introduce new technology and it’s very difficult to get technology out. Investing properly in a simplification agenda isn’t always great business but unless you start thinking about your legacy and your unsupported systems and the low-usage components, you will never have an architecture where you can really make change happen quickly. So you have to be willing to invest adequately to simplify the business model from an IT perspective as much as you’re willing to do that in the more front-of-house services. So that for me is absolutely critical.

Secondly, driving down the cost of our IT service vision is always going to be important because we will always want more of everything. If you go out and talk to our business teams, very rarely do people say to you, ‘I don’t need all the technology I’ve got – feel free to take some away’. It doesn’t happen like that. People want more; they want more flexibility; they want more agility with their working tools; and they want more location-independent working.

To achieve this means you have to find cheaper ways of running your core services in order to pay for them because it’s never going to be the case that a business is willing to invest on a completely free-for-all basis. There has to be a payback. So you have to find the way to keep driving down those services and that’s got to be a constant programme. You have to have to have really strong sourcing agreements. You have to have very, very clear vendor management responsibilities. You have to have a really good procurement team who are getting you the best possible deals for your suppliers, and you have to work hard in investing in the relationship with suppliers to get the best possible arrangements you can. So driving down costs for me would definitely be the second challenge.

And probably the third would be ensuring that we take the security of our information seriously. And this isn’t the area that people perhaps spend their time thinking about in the planning cycle and getting excited about budgeting for, but it’s really important. However, the more the media makes an issue of it, the more it becomes an issue, and the more that people take information security seriously, the more we have to respond that as well. So general standards of information security still have some way to go but I think we’re pretty much at the front of that pack. I think we’re in a very good place, but we should never rest on our laurels. We’ve got a lot more still to do.

David Hynam, who was appointed to AXA’s group COO in June 2008, first arrived from Barclays seven years ago. Since joining AXA, Hynam’s roles have included Group Chief Information Office for AXA UK, Chief Operating Officer for AXA Life, Managing Director of Traditional Business and formerly Customer Service Director. He has been a director of AXA Sun Life Holdings & subsidiary companies, Winterthur UK, and AXA Portfolio Services & Suntrust. His key responsibilities have included leadership of IT and business change, group procurement, property and offshore development. Hynam is a member of the AXA Executive Committee.