For many insurers, the approach towards IT budget construction and the measurement of IT value remains rooted in a traditional approach of centrally planned budgets and top-down portfolio metrics that can mask where IT value is really being delivered.
Those who are looking to better understand how value is being delivered for IT should not only look towards the building blocks that make up their IT cost base; they should also consider ways to translate them into an outcome-based measure of IT value. IT organisations that are seen as more strategic are more likely to measure the overall financial impact of technology delivered.
When it comes to evaluating a new Customer Communications Management (CCM) application, IT management should consider three key areas:
- support of key business outcomes,
- the impact on IT and
- the level of financial return.
Support of Key Business Outcomes
Customer communication solutions can have a significant impact on key business outcomes. Linkages between the outcomes and the application should be as detailed and explicit as possible. It is fine to say that a proposed customer communication application investment will improve the customer or agent experience; that may be true and an important justification.
However, it is much better to identify specific elements of the customer experience and translate those into the business impact. For example, it may be that representatives are able to quickly personalise letters to customers for cross-sell or upsell campaigns, and the e-delivery of those letters will save quantifiable dollars in paper, postage and labour.
In addition, the ability to personalise and execute more campaigns should result in increased sales.
Impact on IT
For any new customer communications project, IT management must understand the impact on IT in three areas: fit to the current architecture, integration effort and the IT resources required to support development and production. The IT architecture evaluation is important since it has direct implications for the integration effort and resources, and ultimately translates into time and money.
New customer communication solutions should fit well into the current architecture and the current software products that inhabit that architecture. But integration is often the top issue when implementing new applications.
In an ideal situation, the new customer communications application will be based on a modern, web services architecture with well-defined interfaces for integration. Prior integrations with related core systems and the experience of the vendor in working with other key suppliers are vital.
Finally, IT management will determine how the new application will affect their valuable resources. In the case of customer communication solutions, the impact extends beyond system implementation into support in the production environment.
Solutions that are “business-user friendly” and allow the user to make modifications without (or with minimal) IT involvement are a win-win. The business user gets up to speed quickly and has the flexibility to address their objectives, and IT spends less time on training and making changes to the system over time.
The return on investment will be a critical component of any plan that IT management develops and/or considers. Elements of the financial case will be included from the analysis of the business outcomes and the impact on IT as described above.
Generally, the business case for a new customer communications application will hinge on improved productivity for users; cost savings from reduced paper, postage and IT resources; and improved compliance. Overall, there are many elements that will factor into the financial return.
In addition to the efficiency and cost-related factors, there are important upside levers that relate to the business objectives of the users, such as the impact on sales, retention or claims.
In many cases, the potential to affect the key business outcomes will drive the justification for IT management as they seek to respond to their colleagues on the business side.
As insurers continue to modernise and rapidly deploy new technologies, the measurements of IT value will continue to mature and shift toward value metrics (those who are looking at the outcomes of cost, time and value improvements) to rate the performance of IT.
Customer communications is a key area where all of these outcomes can be achieved, and quickly.