Service-oriented architecture is a critical tool for insurer technology teams. However, the high level of hype threatens to erode support for experimentation and the creation of documentable business value. Insurer CIOs should make sure they track and communicate the value of their tactical SOA investments in order to help their business partners truly understand the value of this technology approach.

 

Still a Hot Topic

SOA has been a hot discussion topic in insurance IT for at least the last five years. Many solution providers, consultants, and a few forward-looking enterprise architects and CIOs have articulated a sweeping, transformational vision of SOA that will allow insurers to align not only their IT strategies but their IT systems themselves with business goals and strategies.

While this is a worthy and ambitious goal, the heavy focus on this transformational vision in the industry risks putting SOA into the category of other “Transformational TLAs” (three-letter acronyms) such as CRM, which over-promised and under-delivered for insurance-industry CIOs over the past 15 years. Many CIOs, faced with such soaring rhetoric, assume SOA is a high-risk, high-cost strategy they would do best to avoid for now.

 

New Maturity and New Focus on Metrics

CIOs are especially cautious of such high-flying talk in the context of the newly energized partnership that exists between business and IT at many insurers. Most senior business executives realize that effectively deploying and managing technology is core to their enterprises’ abilities to create advantage and that a true partnership with IT is the key to making that happen.

While this is a positive development for insurer CIOs in general, giving them a seat at the top table and ability to participate in, not just react to, strategic decisions, it also means business expects its IT partners to communicate in the same language business partners use to communicate with each other—financial performance metrics. Novarica has described three common classes of metrics used by insurer IT groups:

• Cost metrics measure spending amounts or ratios and are useful in tracking changes in expenditures over time periods and helping insurers benchmark their spending against that done by peers, but an over-reliance on them risks pigeonholing IT as a cost center.

• Performance metrics measure the internal effectiveness of the IT organization, which provides a useful tool for CIOs to manage their own groups but communicates little to business partners in terms of enterprise impact.