In the hot seat

FST sits down with Liberty Mutual CIO Joanna Young to discuss current issues that are cooking up a storm in both the technology and insurance space.

Since 1912, Massachusetts has been the home to insurance giant Liberty Mutual. Today, Liberty is a Fortune 500 Company and America’s sixth largest P&C insurance company. The firm prides itself on its commitment to provide a broad portfolio of insurance products and services that meet the needs of the ever-changing demands of today’s modern consumer. Furthermore, the most recent entries into Liberty Mutual’s award cabinet include, as the nation’s eighth-largest provider of auto and home insurance, being recognized for call center operation customer service excellence and a jump of 12 places in Business Week’s ‘50 Best Places to Launch a Career’ list.

As Vice President and CIO for Corporate Information Systems and Enterprise Services at Liberty Mutual, Joanna Young is responsible for all corporate systems at the firm and her goal is to provide best value in this area, as well as best value shared services. “We’re very focused on flexibility and affordability, together with high quality,” she explains. “We’re also very focused on some acquisition activity that we have going on at the moment, as well as a number of consolidation activities to get more efficiency out of our application portfolio.”

Of course, Liberty Mutual is well known for being something of a conservative outfit, where there obviously has to be an enormous degree of care taken in the things that are being implemented. This is especially interesting given today’s unpredictable and erratic markets. “The thing is, we don't do technology for technology's sake,” notes Young, “we do it for the business' sake.”

Nonetheless, Liberty has proven that it is a combination of this conservative approach and the leadership of innovative thinkers such as Young herself that has resulted in Liberty’s success. Here she provides insight into why Liberty Mutual is right at the top of its game.

On the teamwork needed between IT innovation and its business partners
IT can't be successful unless it has that incredibly strong relationship with its business partners, whether it's sales, service or, in my example, the corporate functions within Liberty Mutual, and there's a number of ways in which a really strong partnership is manifested at Liberty. First and foremost, each business unit has a dedicated chief information officer, and he or she is the primary steward and advocate for their business unit, all the way from the application layer, all the way through to the infrastructure. Secondarily, I have directors that are even aligned into specific business units. For example, I have a director that aligns with human resources, a director that aligns with our legal department, and so that strong alignment filters all the way through the organization.

In IT, we have four cornerstones, and one of them is insurance knowledge. That’s equivalent to technical skill, so we deliberately align top-down very closely with our business partners, and then, when you get down to the actual program level on individual projects, we start our projects with the business and the IT teams working together. I recently had one of my customers come to me and say, ‘I think we'd like to do something with document management’.  Well, how we started that was not by implementing a group of document management technologies but by doing a business process modelling exercise, whereby the business team, using its Six Sigma methodology, went through and understood the as-is business process and then the target business process.

On the concerns surrounding spiralling IT costs
I don't think that costs have to spiral. The way I approach it is this: First of all, what are the right controls for your business? That then gets you back to having to understand your business, understand the government regulations or other controls that apply to the business, and then, from an IT perspective, the CIO needs to do is establish the right framework — for example, COBiT is now a framework that many people are accustomed to and can work very well. What we have done is taken the approach that controls should not be additive, but they have to be in line with current processes.

We do dozens and dozens of changes in our IT organization every week, every month and what we did with the controls around change is figure out how to integrate the control into the change process. We then applied some automation so that when a technician or analyst is making a change the control aspect is in line with the process.

If a CIO takes the perspective of making sure that the control activity is in line with the normal IT activity then you're going to find you're able to control those costs better than you otherwise would.

On the growing prevalence of Software as a Service (Saas)
SaaS is relatively early in the hype cycle. If you look at it there are certainly places that are emerging, for example sales compensation and project and program management, where you're seeing software as a service at differing levels of maturity depending on what you're talking about. When I think about software as a service, I go back to my experience with ASPs and what we went through there to make sure that those were positive, productive partnerships, and how we really had to focus on some very basic things.

First of all, what is the service or the process that you're putting into that model, whether it's ASP or a SaaS? You need to have the right contract and the right partner, but even more than that, you have to have the right IT management structure to manage the service. SaaS is going to be a different model for us; it's a different cost model; it's a different licensing model. We're going to have concerns about security and integration and agility that are going to be different and so we’re very focused on making sure that our organizational structure is prepared for that difference.

We've all heard horror stories where people have gotten themselves into arrangements where the contract hasn't been right or the service level agreements haven't been right, and what we’ve seen is that these people didn't think carefully enough about the internal structure that they would need to support that model.

In all honesty, SaaS will only become something to actively pursue when the business case is right. We don't do technology for technology's sake; we do it for the business' sake. It's not that we'll never implement SaaS it or that we'll never look at other SaaS opportunities, but right now the business case isn’t right. 

On the relationship between Liberty Mutual and Belfast-based development center, Liberty IT
Liberty IT was first started in response to the IT resource constraints in the .com era. We thought we we're going to have trouble getting the IT skill sets that we need and the numbers that we needed so we looked around the world to see where would be a good place for us to have our own offshore development center. Northern Ireland was chosen because they had an excellent education system that was putting out some top-quality graduates. We started small – about a dozen or so – and have now grown to close to 250 people to become a flexible, affordable, high-quality source of IT resources for us.

All of our business units use the center and we have some incredible strengths there.  Almost all of my new projects use the LIT folks to do the testing and it's been very valuable to us because of the quality and the cycle time that they've been able to offer.

But how this has really made a difference to us is in a particularly key way is that LIT has provided flexible, affordable, business knowledgeable, IT employees across a multitude of projects in the business units, and I think what this has really proven to us is that employee-based services of this nature are very effective and in fact incredibly advantageous.

On the possibilities and advantages of outsourcing
While LIT could, in some ways, be perceived as outsourcing, there's more of a patronage there, and a feeling that the Liberty Mutual is taking ownership and growing that component – and that certainly is a better approach for us. 

I think we have seen, with our quality IT pool, that we get resources faster by conducting our operations in that way. For example, if I'm starting on a project and I see that needs more Java developers but I don't have enough on my aligned staff, I can call on the development centers, LIT and or the similar development center that we have in Wisconsin, and I can get people within hours onto that project.

We find that the ramp-up time is significantly less because chances are we’re getting someone who has already worked on a project associated with that business unit, already understands the application portfolio that we're dealing with, already understands our infrastructure, already has the relationships with management and senior technologists and are already on our networks, part of our human resource systems, and it is incredibly simple and easy to get those people integrated into the project.

That's certainly not to knock our outsource partners, who we also value very highly, but there are places where you want that Liberty Mutual expertise, that Liberty Mutual passion, that known affordability, flexibility and quality applied to projects – usually projects that are kind of near and dear us and critical to us – whereas we will use our outsource partners in different ways, maybe more on legacy or commoditized items, and we tend to see more value there.

We conclude by speaking about how a CIO must prioritizes their functions, especially in today’s difficult markets. “My answer is always that a CIO needs to focus on rightsourcing, okay?” says Young. If you look at any organization there is always a blend of issues that are dealt with in-house or through outsourcing partnerships or offshore centers.

“What’s very important for a CIO to understand is that spectrum across the board,” she adds. “Each one of my directors has both their directly aligned staff and a variety of outside relationships – ASPs, offshore development, various expert relationships with top consulting firms – and they need to understand how to manage that across the spectrum.” For Young this is the key skill that any senior IT manager or executive needs to have these days:  First of all, determining what needs to be in and what needs to be out, and then making sure you have the right operational management structure to ensure that set-up is a positive one.