Tuesday, March 19, 2013

ERP for IT Helps Dutch Insurance Giant Achmea to Reinvent IT Processes to Improve Business Performance Across the Board

Transcript of a BriefingsDirect podcast on how Achmea Holding has taken big strides to more successfully run their IT department like a business within the business.

Listen to the podcast. Find it on iTunes. Download the transcript. Sponsor: HP.

Dana Gardner: Hello, and welcome to the next edition of the HP Discover Performance Podcast Series. I'm Dana Gardner, Principal Analyst at Interarbor Solutions, your moderator for this ongoing discussion of IT innovation and how it’s making an impact on people’s lives.

Once again, we're focusing on how IT leaders are improving performance of their services to deliver better experiences and payoffs for businesses and end-users alike.

I am now joined by our co-host for this sponsored podcast, Georg Bock, Director of the Customer Success Group at HP Software, and he's based in Germany. Welcome, Georg. [Disclosure: HP is a sponsor of BriefingsDirect podcasts.]

Georg Bock: Thanks a lot. Welcome, everybody, to this podcast.

Gardner: Our discussion today will take a deep look at Achmea Holding, one of the largest providers of financial services and insurance in the Netherlands, and we'll examine how they've taken large strides to run their IT operations more like an efficient business.

We'll learn how Achmea has rearchitected its IT operations to both be more responsive to users and more manageable by the business, based on clear metrics.

To learn more about how they've succeeded in making IT governed and agile -- even to attain enterprise resource planning (ERP) for IT benefits -- please join me now in welcoming our special guest, Richard Aarnink, leader in the IT Management Domain at Achmea in the Netherlands. Welcome, Richard.

Richard Aarnink: Thank you very much and welcome, all, to this podcast as well.

Gardner: Let me begin with asking you, as an IT architect, why is running IT more as a business important? Why does this make sense now?

Aarnink: Over the last year, whenever a customer asked us questions, we delivered what he asked. We came to the conclusion that delivery of every request that we got was an intensive process for which we created projects.

It was very difficult to make sure that it was not a one-time hero effect, but that we could deliver to the customer what he asked every time, on scope, on specs, on budget, and on time. We looked at it and said, "Well, it is actually like running a normal business, and therefore why should we be different? We should be predictive as well."

Gardner: Georg Bock, this notion of running IT with the customer most in mind is different than say 10 or 15 years ago. Is this something you are seeing more and more of in the field?

Trend in the market

Bock: Yes, we definitely see this as a trend in the market, specifically with the customers that are a little more mature in their top-down strategic thinking. Let’s face it, running IT like a business is an end-to-end process that requires quite a bit of change across the organization -- not only technology, but also process and organization. Everyone has to work hand in hand to be, at the end of the day, predictable and repeatable in what they're doing, as Richard just explained.

That’s a huge change for most organizations. However, when it’s being done and when it has lived in the organization, there's a huge payback. It is not an easy thing to undertake but it’s inevitable, specifically when we look at the new trends around cloud multi-sourcing, mobility, etc., which brings new complexity to IT.

You'd better have your bread and butter business under control before moving into those areas. That’s why also the timing right now is very important and top of people’s minds.

Gardner: Before we learn more about what you have done with your IT operations, Richard, tell us a bit about Achmea, the size of your organization, what you do, and why IT is so fundamentally important to you?

Aarnink: As you already stated, Achmea is a large insurance provider in the Netherlands. We have around eight million customers in the Netherlands with 17,000 employees. We're a very old and cooperative organization, and we have had lots and lots of mergers and acquisitions in the last 20 years. So we had various sets of IT departments from all the other companies that we centralized over the past years.

If you look at insurance, it's actually having the trust that whenever something happens to a customer, he can rely on the insurer to help him out, and usually this means providing money. IT is necessary to ensure that we can deliver on those promises that we made to our customers. So it’s a tangible service that we deliver, it’s more like money, and it’s all about IT.

Gardner: Tell us a bit more about the scope of your IT department and how you're able to bring together a variety of different IT departments, given your mergers and acquisitions activity, just a bit more detail on your IT organization itself.

Aarnink: Of the 17,000 employees that we have in the Netherlands, about 1,800-2,000 employees work in the centralized IT department. Over the last year, we changed our target operating model to centralize the technologies in competence centers, as we call them, in the department that we call solution development.

We created a new department, IT Operations, and we created business-relationship departments that were merged with the business units that were asking or demanding functionality from our IT department. We changed our entire operating model to cope with that, but we still have a lot of homegrown applications that we have to deliver on a daily basis.

Changing the department and the organizational structure is one thing, and now we need to change the content and the applications we deliver.

Gardner: You are leading in the IT management domain area and you also have a strategy and governance department. How has that briefly allowed you to better manage all of the aspects of IT and make it align with the business? What organizational structure have you been able to benefit from here?

Strategy and governance

Aarnink: To answer that question I need to elaborate a little bit on the strategy and governance department, which is actually within the IT department. What we centralized there were project portfolio and project steering, and also the architectural capabilities.

We make sure that whatever solution we deliver is architectured from a single model that we manage centrally. That's a real benefit that we gained in centralizing this and making sure that we can, from both the architecture and project perspectives, govern the projects that we're going to deliver to our business units.

Gardner: Georg, this notion of a strategy and governance department that helps to standardize these processes, align for automation, and make visible what’s actually going on in IT in a common way, I suppose gets at that systems-of-record approach and even ERP for IT approach. Is this something Achmea is in a leadership position on? Do you see this as a model for others, or is this something that’s happening more generally in the market?

Bock: Absolutely, Achmea is a leader in that, and the structure that Richard described is inevitable to be successful. ERP for IT, or running IT as a business, the fundamental IT processes, is all about standardization, repeatability, and predictability, especially in situations where you have mergers and acquisitions. It’s always a disruption if you have to bring different IT departments together. If you have a standard that’s easy to replicate, that’s a no-brainer and winner from a business bottom-line perspective.

In order to achieve that, you have to have a team that has a horizontal unit and that can drive the standardization of the company. Richard and Achmea are not alone in that. Richard and I have quite a number of discussions with other companies from other industries, and we very much see that everyone has the same problem, and given those horizontal teams, primary enterprise architecture, chief technology officer (CTO) office, or whatever you like to call those departments, is definitely a trend in the industry and for those mature customers that want to take that perspective and drive it forward that way.
It’s not rocket science from an intellectual perspective, but we have to cut through the political difficulties.

But as I said, it’s all about standardization. It’s not rocket science from an intellectual perspective, but we have to cut through the political difficulties of driving the adoptions across the different organizations in the company.

Gardner: Let’s look a bit more deeply, or in a detailed way, at the journey that Achmea has taken. Richard, what sort of problems or issues did you need to resolve, what were some of the big early goals that you had in terms of changing things for the better?

Aarnink: We looked at the entire scope of implementing ERP for IT and first we looked at the IT projects and the portfolio. We looked at that and found out that we still had several departments running their own solutions in managing IT projects and also budgets. In the past, we had a mechanism of only controlling the budget for the different business units, but no centralized view on the IT portfolio, as a whole, for Achmea.

We started in that area, looking at one system of record for IT projects and portfolio management, so we could steer what we wanted to develop and what we wanted to sunset.

Next, we looked at application portfolio management and tried to look at the set of applications that we want to currently use and want to use in the future and the set of applications that we want to sunset in the next year and how that related to the IT project. So that was one big step that we made in the last two years. There's still a lot of work to be done in that area, but it was a big topic.

Service management

The second big topic was looking at service management. Due to all the mergers, we still had lots of variations on IT process. Incident management was covered in a whole different way, when you looked at several departments from the past.

We adopted service desks to cater to all those kind of deviations from the standard ITIL process. We looked at that and said that we had to centralize again and we had to make sure that we become more prescriptive in how these process will look and how we make sure that it's standardized.

That was the second area that we looked at. The third area was more on the application quality. How could we make sure that we got a better first-time-right score in delivering IT projects? How could we make sure that there is one system of record for requirements and one system of record for test results and defects. That’s three areas that we invested in in the first phase.

Gardner: One of the things I hear from organizations, Richard, is that some people fear that by going to standardized processes and rationalizing their portfolio, they will lose control over applications or they won’t be able to customize or change applications. I think, however, that that might be a false premise.

Is there something that you found in moving towards more standardized processes that allows you to be more responsive and agile with your applications? Has the ability to change applications been effective?

Aarnink: It’s still a little bit early to say, and your thoughts are right. There's always a discussion with the business units that in the past owned their own set of applications. They want to control that for being agile, but they also see that the cost of having all those applications is running up and up. We become less agile, because we have to solve many problems in all kinds of applications that they are currently running.
Something had to change, and the financial crisis that we've had from 2008 on emphasized that we need to lower the total cost of ownership (TCO) on IT.

Something had to change, and the financial crisis that we've had from 2008 on emphasized that we need to lower the total cost of ownership (TCO) on IT and we had to do something about it. So it was also a top-down statement that we had to do something about it. We changed the governance to enable us to control that and to make sure that we got the right mandate to enable us to drive application virtualization.

The other thing is that if you standardize your IT components and your IT applications, you also enable yourself to deliver faster. It was the first time that we succeeded in delivering a new policy, a new product, into the marketplace in six weeks, instead of having it in six months or so.

That's is the aim or the goal that we're after, but it’s still too early in the process to look at benefits in that area and to see the cultural change that this embraced, instead of rejected, from the business perspective.

Gardner: Well it certainly sounds like the progress that you’ve made so far has allowed you to increase the time to value, that is to say, make the ability to deliver apps and services to your end-users, to your customers, happen more rapidly. Is that something that we can attribute to the changes you’ve made or is it still too soon for that?

Change going on

Bock: If you ask our customers, they'll say it's still too soon, but we see that the changes in our internal IT organization are already going on. I expect that in 2013, we'll gain the first benefits from this.

Gardner: Georg. I’ve heard this notion of ERP for IT for some time, and I've also heard people be a bit cynical -- it’s a vision, it’s esoteric, or it maybe science fiction. What is it that you're hearing from Achmea and what have you have seen in the market that leads you to believe that ERP for IT is not a vision, but is, in fact, happening and that we're starting to see tangible benefit.

Bock: That’s a very good question. I hear that very, very often and across various distinct contingencies, but Richard very much nicely described real, practical results, rather than coming up with a dogmatic, philosophical process in the first place. I think it’s all about practical results and practical results need to be predictable and repeatable, otherwise it’s always the one-time hero effort that Richard brought up in the beginning, and that’s not scalable at all.

At some point you need process, but you shouldn’t try that dogmatically. I also hear about the Agile versus the waterfall, whatever is applicable to the problem is the right thing to do. Does that rule out process? No, not at all. You have to live the process in a little different way.
Technology always came first and now we look for the nail that you can use that hammer for. That’s not the right thing to do.

Everyone has to get-away from their dogmatic position and look at it in a little more relaxed way. We shouldn’t take our thoughts too seriously, but when we drive ERP for IT to apply some standard ways of doing things, we just make our life easier. It has nothing to do with esoteric vision, but it's something that is very achievable. It’s about getting a couple of people to agree on practical ways of getting it done.

Then, we can draw the technological consequences from it, rather than the other way around. That's been the problem in IT from my perspective for years. Technology always came first and now we look for the nail that you can use that hammer for. That’s not the right thing to do.

Gardner: Just to be clear, this isn’t something that’s specific to Achmea or a certain vertical industry. This is really across all industries in all regions. This is moving towards a more scientific and practical way of doing IT.

Bock: Absolutely. From my perspective, standardization is simply a necessary conclusion from some of the trial-and-error mistakes that have been made over the last 10-15 years, where people tried to customize the hell out of everything just to be in line with the specificity of how things are being done in their particular company. But nobody asked why it was that way.

If you ask that question, you very quickly get to the revelation. It’s not that different. Richard, if you recap some of the discussions we had with your architect colleagues in other companies, I think you might want to comment on that.

Aarnink: I completely agree. We had several discussions about how the incident process is being carried out, and it’s the same in every other company as well. Of course there are slight differences, but the fact is that an incident needs to be so resolved, and that’s the same within every company.

Best practice

You can easily create a best practice for that, adopt it within your own company, and unburden yourself from thinking about how you should go for this process, reinvent it, creating your own tool sets, interfaces with external companies. That can all be centralized, it can all be standardized.

It’s not our business to create our own IT tools. It’s the business of delivering policy management systems for our core industry, which is insurance. We don’t want all the IT that we need in order to just to keep the IT running. We want that standardized, so we can concentrate on delivering business value.

Gardner: Now that we've been calling this ERP for IT, I think it’s important to look back on where ERP as a concept came from and the fact that getting more data, more insight, repeatability, analyzing processes, determining best processes and methods and then instantiating them, is at the core of ERP. But when we try to do that with IT, how do we measure, what is the data, and what do we analyze?

Richard, at Achmea, are you looking at key performance indicators (KPIs) and are using project portfolio management maturity models? How is it that you're measuring this so that you can, in fact, do what ERP does best, make it repeatable, make it standardized?
The IT project is a vehicle helping you deliver the value that you need, and the processes underneath that actually do the work for you.

Aarnink: If you look from the budget perspective, we look at the budgets, the timeframes, and the scope of what we need to deliver and whether we deliver on time, on budget, and on specs, as I already said. So those are basically the KPIs that we're looking for when we deliver projects.

But also, if you look at the processes involved when you deliver a project, then you talk about requirements management. How quickly can you create a set of requirements and what is the reuse of requirements from the past. Those are the KPIs we're looking for in the specific processes when you deliver an IT project.

So the IT project is a vehicle helping you deliver the value that you need, and the processes underneath that actually do the work for you. At that level we try to standardize and we try to make KPIs in order to make sure that we use as much as possible, that we deliver quality, and we have the resources in place that we actually need to deliver those functionalities.

Gardner: I'm afraid that we're almost out of time but I wonder, Richard, if you wouldn’t mind putting yourself in the position of a master here and relating some of your experience for an organizations that may not have started down this path towards ERP for IT to the same degree. Now that you’ve done it and now that you’ve been involved with it, do you have any 20-20 hindsight or recommendations that you could provide from your position of experience to someone who’s just beginning?

Aarnink: It’s a difficult question. You need to look at small steps that can be taken in a couple of months’ time. So draw up a roadmap and enable yourself to deliver value every, let’s say 100 days. Make sure that every time you deliver functionality that’s actually used, and you can look at your roadmap and adjust it, so you enable yourself to be agile in that way as well.

The biggest thing that you need to do is take small steps. The other thing is to look at your maturity. We did a CMMi test review. We didn't do the entire CMMi accreditation, but only looked at the areas that we needed to invest in.

Getting advice

We looked at where we had standardized already and the areas that we needed to look at first. That can help you prioritize. Then, of course, look at companies in your network that actually did some steps in this and make sure that you get advice from them as well.

Gardner: Georg, just quickly, any thoughts on either affirming what Richard said or other ideas for organizations that are just beginning down the ERP for IT path?

Bock: I absolutely agree with what Richard said. If we're looking for some recipe for successes, you have to have a good balance of strategic goals and tactical steps towards that strategic goal. Those tactical step need to have a clear measure and a clear success criteria associated with them. Then you're on a good track.

I just want to come back to the notion of ERP for IT that you alluded to earlier, because that term can actually hurt the discussion quite a bit. If you think about ERP 20 years ago, it was a big animal. And we shouldn’t look at IT nowadays in the same manner as ERP was looked at 20 years ago. We don’t want to reinvent a big animal right now, but we have to have a strategic goal where we look at IT from an end-to-end perspective, and that’s the analogy that we want to draw.
If we're looking for some recipe for successes, you have to have a good balance of strategic goals and tactical steps towards that strategic goal.

ERP is something that has always been looked as an end-to-end process, and having a clear, common context associated from an end-to-end perspective, which is not the case in IT today. We should learn from those analogies that we shouldn’t try to implement ERP literally for IT, because that would take the whole thing in one step, where as Richard just said very nicely, you have to take it in digestible pieces, because we have to deal with a lot of technology there. You can't take that in one shot.

Gardner: Okay, very good. I am afraid we will have to leave it there. I want to thank our co-host, Georg Bock, Director of the Customer Success Group at HP Software. Thank you so much, Georg.

Bock: My pleasure. Thank you.

Gardner: And I'd also like to thank our supporter for this series, that is HP Software, and remind our audience to carry on the dialogue through Discover Performance Group on LinkedIn. You can also gain more insights and information on the best of IT Performance Management at www.hp.com/go/discoverperformance.

And you can always access this and other episodes in our HP Discover Performance Podcast Series on iTunes under BriefingsDirect.

And now, I'd like to thank our special guest, Richard Aarnink. He is the leader of the IT Management Domain at Achmea in the Netherlands. Thank you so much, Richard. Very insightful.

Aarnink: Thank you, and you're very welcome.

Gardner: And lastly, a thank you to our audience for joining us for this special HP Discover Performance Podcast discussion. I'm Dana Gardner, Principal Analyst at Interarbor Solutions, your host for this ongoing series. We appreciate your attention, and please come back next time.

Listen to the podcast. Find it on iTunes. Download the transcript. Sponsor: HP.

Transcript of a BriefingsDirect podcast on how Achmea Holding has taken big strides to more successfully run their IT department like a business within the business. Copyright Interarbor Solutions, LLC, 2005-2013. All rights reserved.

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