In my opinion: Aligning IT and business

Paul-Camille Bentz, Strategic Advisor to the Board for AGF Group – part of €98 billion European insurance colossus Allianz – on aligning business with IT, cost savings, C-level buy-in and the importance of quality.

IT expenses and savings
Our IT expenses were close to €3 billion a few years ago. Just by implementing a certain number of initiatives, particularly on the procurement side, we cut this down to €$2.5 billion. But it’s still not enough when comparing best of class in our kind of business. We believe that if we want to save a further €350 million, we have to change the governance and become much more coherent in our strategy so that our employees are following the same progress path. Earlier this year, we introduced a strategy to regroup a certain number of initiatives, particularly on the infrastructure side, so we can operate out of a fewer number of leader centres – at the moment we have one per operating entity in the group. The second part is to look for best of class processing models and target the operating models and sustainability programmes in IT terms, converging on the application portfolio. We are still in the early stages, so it will take a few years to see significant savings.

We realised at least €130 million could be saved on infrastructure and the rest on the application landscape. We operated on hundreds of applications – way too many! The other key issue is to improve the quality and the productivity of our development process, whether through outsourcing or through performance measurements in our own development teams, or a combination of both. The first thing was to adapt the governance of the IT expenditure. If you don’t have a global view or discipline, you won’t get results. We wanted a more structured planning process with a closer association with the IT budgeting process, the operating entity and global business planning. For example, every year we would have a planning process with each operating entity in the group, which would not specifically concentrate on IT. Instead, we would have a consolidation of IT expenditure later in the year. Now, we are synchronising the two so that there is no dissociation any more between what you discuss on the IT forum and what you have committed to in the business forum. It is very new for our organisation but key.

C-level buy-in
The involvement of C-level executives is different in each project: if we talk about software quality and software development improvement; that is down to the CIO and the IT department. They have to manage their own shop and be accountable for their performance.

If you look at application portfolio optimisation or simplification, this is obviously something you have to deal with throughout the business because the company has to adapt when you want to change it or adopt another application. Consequently, because of the huge costs in doing this, the CFO will be involved. But you also need other business executives to be involved who may have different views about it, and this often calls for a referee – the CEO. So, everybody is involved in it one way or another.

Because of the costs and changes involved, the balance is always difficult to strike. It’s down to dialogue. You don’t want IT to take too much precedence over business or vice-versa. You have to have a very balanced relationship and the best way to achieve this is to have objective measurements and have good parameters put on the table in a very honest way. It is difficult. For example, if you have to convince the board that you have to change all your PCs to Microsoft XP and it is a €25 million project, you have to justify the value of the IT to the business.

Measuring ROI
After running new software on a relatively small scale [we saw] around 10 percent improvement in productivity. That already accounts for a lot of money that can be transformed into a benchmark, and you have to incorporate these new measurements into your project evaluation. For example, realising that before we had the software a given task would take 100 staff days to complete the task and now you only need 90 days.

It may not sound a lot but you have to get your managers to commit to smaller estimates to realise the benefits. It is something that requires some tactful management.

People don’t like to think they are running big risks so any developer has a contingency in his estimates, and we don’t necessarily want the contingency to go away. We just want them to embark on a new measurement scale where they take into account the fact that they now have a tool to measure exactly what their staff are doing. They should have the capability to see and ensure quality and benefits from the start.

Quality, quality, quality
The top priority [behind any implementation] is always quality – and quality means better and cheaper development that takes less time to achieve. At a later stage you can examine the existing portfolio of applications to detect improvement areas or to assess duplications. But what you want to achieve from the off is a basic saving and quality improvement on a process which has always been improvable and under managed.

Paul-Camille Bentz has just completed six years leading the technology operations at AGF Group, where at the end of 2005 he moved from his position as CIO to become a strategic advisor to the board.