Rebooting IT to Run Like a Business

It’s one thing to employ enterprise resource planning to streamline an entire organization’s business processes — to use software and data to create a more efficient flow of information between different departments. However, what about applying ERP to an individual information technology department within that organization? What benefits could be achieved?

A possible outcome is that IT operations are run more like a separate business, with an emphasis on being more responsive to users, more manageable — to deliver results that easily beat deadline, budget and spec restrictions.

Achmea Holding, one of the largest providers of financial services and insurance in the Netherlands, has rearchitected its IT operations with an eye to being as predictive and goal-oriented as any other business. The idea of running IT with the customer in mind may be different from 10-15 years ago, but it has been pushed to the top of business agendas thanks to trends such as cloud computing and mobility.

In this podcast, Richard Aarnink, leader of the IT management domain at Achmea Holding, is interviewed by Dana Gardner, principal analyst at Interarbor Solutions, and George Bock, director of the Customer Success Group at HP Software.

Download the podcast (28:30) or use the player:

Here are some excerpts:

Dana 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?

Richard 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?

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?

Georg 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, 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: 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.

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.

Dana Gardner is president and principal analyst at Interarbor Solutions, which tracks trends, delivers forecasts and interprets the competitive landscape of enterprise applications and software infrastructure markets for clients. He also produces BriefingsDirect sponsored podcasts. Follow Dana Gardner on Twitter.

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