Enterprise -> Technology
By: Dana Gardner, Principal Analyst, Interarbor Solutions
Published: 20th March 2013
Copyright Interarbor Solutions © 2013
Welcome to the latest edition of the HP Discover Performance Podcast Series. Our next discussion examines how Achmea Holding, one of the largest providers of financial services and insurance in the Netherlands, has made large strides in running their IT operations like an efficient business itself.
We'll hear how Achmea re-architected its IT operations to both be more responsive to users and more manageable by the business, all based on clear metrics.
Here to explore these and other enterprise IT performance issues, we're 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.
And we also welcome our special guest, Richard Aarnink, leader in the IT Management Domain at Achmea in the Netherlands, to explain how they've succeeded in making IT better governed and agile—even to attain "enterprise resource planning (ERP) for IT" benefits.
The discussion is moderated by Dana Gardner, Principal Analyst at Interarbor Solutions. [Disclosure: HP is a sponsor of BriefingsDirect podcasts.]
Here are some excerpts:
Gardner: Why is running IT more like 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, is this something you are seeing more and more of in the field?
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: Tell us a bit about Achmea, the size of your organization, and why IT is so fundamentally important to you.
Aarnink: 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.
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: How has all this allowed you to better manage all the aspects of IT, and make it align with the business?
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.
Bock: 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 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.
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: What sort of problems or issues did you need to resolve as you worked to change 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 is a big topic.
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: 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 benefits?
Bock: 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.
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.
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.
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.
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 you 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?
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.
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.
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.
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 steps 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.
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.
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