Article

CIO drives IT business value with new perspective on processes

Linda Tucci, Senior News Writer
MADISON, Wis. --Tim Schaefer, CIO of The Northwestern Mutual Life Insurance Co., has used the economic downturn to make radical changes in the way IT is perceived and operates at the Milwaukee-based insurer. In this second of a two-part story, Schaefer outlines:

  • An asset portfolio management framework the company uses to get a return on its $3 billion investment in technology
  • Four areas where the IT organization is building capabilities and processes in 2010
  • Three ways to drive IT business value

As outlined in yesterday's story,

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"Building IT business value, one word at a time", Schaefer took the reins at Northwestern Mutual in 2006, at a time when the business was not all that pleased with its IT organization. With a staff of 2000 people, including contractors, that organization had taken on a half-billion dollars worth of projects during the previous five years, as the company went through a major expansion. In the process of responding to intense business demand, however, the department had lost its ability to manage itself.

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Schaefer's first priority was to restore his department's credibility with the business by attending to the fundamentals of IT service delivery. By 2008, IT leadership had made enough progress to focus on driving IT business value.

'TIME' asset portfolio management

Before the IT organization could drive business value, it had to figure out how to manage its assets. The organization is taking an asset portfolio management approach, not to be confused with IT project portfolio management, or PPM.

"It is no different from what the asset managers are doing in our customer departments. So, people who are running real estate portfolios, private equity and so forth have a process to manage their assets. We have a process too," Schaefer said, addressing a roomful of business and IT leaders at the recent Fusion 2010 CEO-CIO Symposium in Madison, Wis.

For applications, for example, IT is partnering with business groups to assess their applications against a framework referred to as TIME: Should the company tolerate, invest, mitigate or eliminate the asset? The exercise has resulted in some interesting discoveries already, Schaefer said -- for example, an application that costs the IT department $60,000 a year to maintain that the business manager did not know existed.

In tandem, Schaefer is also making governance changes. The IT department's Technology Strategy committee -- historically a mostly passive body -- is being moved to the Investment Management Board, one of several such bodies at Northwestern Mutual that oversee different aspects of the company's portfolios. The new group will play a role in how the IT department invests in technology.

Building IT capability in four areas

With governance in place, the IT group is focusing on developing new perspectives and processes in four areas: quality, technology, teamwork and talent.

In the quality area, for example, IT staff are zeroing in on right-sizing processes to increase productivity, Schaefer said. Reuse is a big focus in the technology area. The major thrust in teamwork is making the IT department an "an accountable business partner," he said. In the department's 2010 lexicon, "partner" is defined as someone who shares in the risks and the benefits, including financial, of the work being done together. In other words, IT staff should "feel as bad" as their business partners do when business objectives are not met, he explained.

The area that drew the most comment from Schaefer's audience of CIOs and CEOs was his strategy for IT talent improvements. Northwestern Mutual uses a "flexible talent model," Schaefer said, that includes a Northwestern Mutual IT employee base (its most expensive workforce), local domestic contractors and offshore providers (its least costly talent pool).

People who are running real estate portfolios, private equity and so forth have a process to manage their assets. We have a process too.
Tim Schaefer
CIOThe Northwestern Mutual Life Insurance Co.
Schaefer said he hopes to increase the number of contractors and offshore providers over the next few years, while keeping a smaller base of full-time IT employees. This will give the company more flexibility for increasing its hiring when help is needed and avoiding having to layoff full-time employees when the amount of work contracts. This is part of a strategy to move IT expenses from a fixed to variable cost, he said.

Frank Ace, CIO of the Wisconsin Department of Justice, asked for examples of other measures Schaefer had taken to move IT costs from fixed to variable.

Schaefer pointed to Software as a Service and the cloud as delivery models Northwestern Mutual is pursuing. The company's HR department, including payroll, for example, is running on an SaaS platform. His team is also looking at cloud offerings that will allow it to "tune" computing resources up and down. Adopting cloud offerings remains a challenge, however, because of regulatory requirements, he said.

But the biggest risk in his efforts to drive IT business value, comes down to how much change the organization can absorb, he said.

Let us know what you think about the story; email Linda Tucci, Senior News Writer.


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