Scenarios For 2009: How CIOs Should Prepare (Forrester research)

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via Ed Cone

Ed is pointing to a very interesting document from Forrester about the reactions of CIOs, classified by sectors. Including the Finance &  Insurance industries.

For the Insurance Industry, the analysis of Forrester is quite aligned with what we are perceiving at Innoveo.

The analysis is very recent and was presented during a webinar on December 11, 2008.

What is the insurance industry doing to address the downturn?

  • Anticipating more cut backs for 2009.
  • Insurance has already made significant cuts in IT spending early in 2008.
  • Growth in IT purchases for Finance & Insurance:
    • 2007: +8%
    • 2008: -2%
    • 2009: -3%

How will the recession affect the Insurance Industry?

  • Shallow recession: GOOD
  • Deep recession: NEUTRAL

What are firms in these sectors doing to address the downturn?

  • Most firms focus on IT’s traditional cost-cutting tactics.
  • New investments (30% of the overall costs):
    • Portfolio segmentation
      • Use commodity / low-cost resources
      • Eliminate large-sized efforts
      • Focus on short-term returns
    • Adopt lean thinking, reduce complexity
    • Shorten planning horizons
  • Operational costs (70% of the overall costs):
    • Consolidation/standardization, consistent with the business model
      • Data centers, server/storage virtualization
      • Consolidate and squeeze vendors
      • Centralization of IT contracts
    • Lean thinking — reduce complexity,
    • Staff and asset utilization optimization
      • Delay upgrades and refresh
      • Downgrade for lower volumes
      • Automate where it makes sense

The Finance & Insurance sectors are considering to invest in the following actions in 2009:

  • Retiring older applications or technologies to save support costs 50%
  • Adjusting project portfolios to increase near-term return on investment 55%
  • Assessing the IT organization structure to improve efficiencies 60%
  • Investing in technologies such as automation to reduce IT operating costs 70%

Leading firms take multiple alternative approaches:

  • Traditional IT tactics to deliver short-term results
  • Agility to offer alternatives in the long run — providing a lasting ability to rapidly shift partners, customers, and markets
    • Focus on increasing ability to change: adding/removing services, reselling services from third parties, channel integration
    • Focus on external interfaces to data and systems
      • Apply SOA for strategic flexibility
      • Look to third parties for flexible interfaces
    • Increase flexibility of contracts
    • Employ agile development methodologies
  • Innovation to accelerate out of the downturn — new business models and product/service offerings in addition to operational improvements
    • Accelerating out of the downturn requires a strategic focus, but without higher overall costs
    • Use a portion of CapEx for innovative ideas
    • Focus innovation criteria on business strategies
    • Use Web 2.0 technologies to farm ideas from across your Innovation Network — internal and external
    • Employ a different idea pipeline / steering committee
    • Keep investment performance metrics

Summary for the Finance & Insurance sectors:

 

summary forrester

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