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Allstate IT Finance Changes Mindset to Become a Stronger Business Partner

 

“I really feel like if we had not invested in TBM, we would be left behind as a finance function. TBM is our catalyst for change, and we’re becoming the leaders that we need to be–and that we should be–for Allstate.”

Jeanne Borta
IT Finance Director

Executive summary

In a competitive industry like insurance, leveraging technology effectively is important to long-term success. To help Allstate make informed decisions and stay on the cutting-edge, IT Finance used TBM to look at IT costs differently. This built confidence in IT spend, turning business partners into champions for technology and enabling the right technologies, capabilities, and cost structures.

Allstate corporate overview

The Allstate Corporation is an insurance company with headquarters in Northbrook, Illinois. Allstate has many brands they operate, including: Allstate, Encompass, Esurance, and Answer Financial. The Protection segment sells auto, homeowners, and other property/ casualty insurance while Allstate Financial Business provides life insurance, retirement and investment products.

When people think about an 80-year-old insurance company, ‘leading-edge technology’ may not be the first phrase that comes to mind. Like banking or other heavily regulated activities, insurance is an industry with a dual personality: On the one hand, it is very risk-averse. But on the other, insurance is also one of the earliest adopters of digital technologies and new modes of customer interaction enabled by those technologies.

“The biggest technical change I’ve seen in my many years in financial services is simply what I call the Apple effect on consumers,” said Roger Kent, SVP & CFO, Allstate Technology & Strategic Ventures. “It’s the capability of handheld, having things instantaneously available, and being able to do those activities wherever and whenever you want to. That capability has changed consumer behaviors and consumer interactions dramatically for all companies.”

Today, customer expectations have led to new opportunities for the insurance provider to deliver on its promise: You’re in good hands. Digital transformation is very much in the driver’s seat at Allstate, as new, technology-driven capabilities give agents, adjusters, and other stakeholders more efficient ways to serve approximately 16 million households. For example, Allstate has introduced QuickFoto Claim, which allows customers to file a claim by uploading photos of the vehicle from their mobile phones. The company is also using drones for certain types of inspections, reducing risk and time to payment by using technology to inspect roof damage and other property losses, and new AI capabilities, like using Amazon’s Alexa to allow customers to access agent and policy information.

“We’ve got cases where the money has been in our customer’s account in less than an hour,” said Kent. “Which is a dramatic change from the prior process of having someone drive out, inspect the damage, and having the customer submit three estimates. Not only is this much more convenient and expedient for our customer, it helps us, too. It’s a much more efficient process for us to operate as well.”

Finance-led transformation

Keeping pace with all of this change has been the catalyst for rethinking the traditional role of IT finance at Allstate. “It’s really an exciting time to be in IT, because we’re looking to leave this company with a very different set of technical capabilities than it had going into this transformation,” said Kent. To this end, “IT Finance has shifted from being a controllership type of activity to more of a value-add responsibility. We provide much more insight in terms of investment decisions that help change the organization and represent our business and our customers more effectively.”

“Insurance is a very competitive industry,” said Jeanne Borta, IT Finance Director, “and consumers are demanding huge technology investments to make it easy to do business with us. But some people think insurance is a commodity so they’re looking for lower costs, too. They want more for less; driving down margins while increasing demand for new technology.”

In the past, technology at times was targeted for short-term expense reduction in order to achieve margin goals. “We were in a defensive posture when the corporate CFO would say ‘You need to cut your cost by X percent.’ When you do things on a short-term basis, you’re not proactive. As a result, you don’t have an opportunity to strategically assess the risks and the consequences.

“So, we decided we needed to do something different. Being in a publicly traded and highly regulated industry, it’s imperative that we have strong cost controls and that analytics are developed utilizing true costs. Technology is too important to the success of our company to not fully understand our costs or be able to educate our key stakeholders on the value IT brings to the table,” said Borta.

TBM enables IT finance to market IT more effectively

Many companies have used technology business management (TBM) as a springboard to educate key business stakeholders about IT costs. TBM has the potential to change IT’s relationship with the business in very meaningful ways because, once the business is able to see the all-in costs of the applications, infrastructure, and services it consumes, it can finally understand why things cost what they cost and, more importantly, the benefits (or lack thereof) of the technology decisions they make.

“We wanted the business to be just as much of a champion of technology as IT,” Borta said. “If there were reductions to be made, we all needed to make sure we were making the right decisions and understanding potential consequences and risks. That’s what led us to TBM. It was this desire to take control and move away from a defensive posture. IT finance wanted to market technology to the business: positioning how we think about it, how we manage it together, and how we develop a technology roadmap that was viable for the future. One that enabled the right technologies, the right capabilities, at the right costs.”

With TBM, finance transformed to be more about leadership. “It’s a completely different mindset,” said Borta. “We’re able to better work with our partners—whether they be in finance, technology, or the business—to really understand their needs and to factor that into the financials. TBM allows us to lead in a much different and more collaborative way to make sure we have the best business outcomes.”

“It’s been amazing, to be honest,” said Pete Corrigan, Group CIO, Allstate Personal Lines. “When you think of the traditional finance role, it’s all about managing expenses and where you are relative to plan. So, when IT finance first approached us about TBM, I was a little skeptical. But they totally took ownership of it and, in partnership with us, really delivered the solution. I can tell you, it’s completely changed how we operate with our business.”

Making the data work

To make TBM and Apptio work, you need data. While Apptio applications can leverage even the simplest of data sources, Borta knew she wanted to set up TBM reporting to include multiple data feeds from across IT and the business. She put a particular focus on IT project management and timekeeping, as well as pulling in feeds from the CMDB.

“We have probably around 80 feeds total that go into Apptio on a monthly basis,” she said. “Primary feeds are associated with timekeeping, CMDB, and infrastructure consumption. We have several thousand IT people in our IT organization, so our project management and timekeeping maturity was going to be a key input to ensure we had good credible data up and down the model.

“Excel’s very powerful but it’s not in 3-D, so to speak. Apptio is. It’s much more powerful. We’ve actually been able to re-purpose around $2 million because we’ve automated project-level and infrastructure consumption reporting as well as refined our forecasting processes. We’ve also been able to shut down our consumption monitoring tool.”

When they first implemented Apptio in the beginning of 2016, Borta was confident her data was good. But, just like many first-time Apptio customers, what she found surprised her. “We had pretty mature data around our infrastructure and I thought our timekeeping was pretty good, but I found out it wasn’t,” she said. “We had big holes with our suppliers so we used the first year to clean up processes. This year, we’re 18 months in, it’s all about the business.”

“It’s been great because before you would show up and say ‘Here’s the disposition of the financials’ and it was a very flat, one-sided discussion. I still lead with the finances but now I am operating more holistically. I’m able to bring together more thorough, end-toend discussions with the business. I’m not just ‘an IT finance manager’ anymore.”

– Jeanne Borta, IT Finance Director

 

Helping the business gain maximum leverage from IT

For businesses to gain maximum leverage from technology, they have to understand it. They can’t just throw money at the IT department and expect results. Nor can they just cut IT’s budget and not expect the business to suffer.

TBM and Apptio together give IT finance professionals like Borta the ability to cut through the noise by translating a sea of technology-related acronyms into levers the business can use to impact consumption. They also provide the business (and IT) a more complete understanding of IT operating-model changes, like moving to the cloud, that can have major impacts on the business’ ability to operate or innovate.

“The tool is so important to bring all these elements together,” she said. “We’ve got different ways that we’re talking to each other and integrating the data to enable the many strategic decisions underway currently. How do we get to the cloud? At what pace? What are the financials going to look and what are the levers? What do I need the business to do?”

“What TBM and our partnership with IT finance is really driving,” said Corrigan, “is an understanding of the products and services we develop: from the total cost of ownership to key performance indicators, total run costs ongoing, and the business benefit. Is the product driving revenue growth? Will this drive a better customer experience? And when you marry these things together, the conversation we have with our business partners becomes something different. Together, we can make more informed decisions about where we want to invest and how we want to grow.”

Using numbers to tell the story

For most business and IT people, spreadsheets are just a sea of numbers, rows, and columns. Feeding those numbers into Apptio finally gives Borta and the IT finance team the ability to tell a story that just wasn’t possible before.

“TBM becomes the framework for an optimization execution plan that would have been just one dimension before,” she said. “People would have been rolling their eyes like ‘Okay, here comes IT finance with some spreadsheets.’ Now, it’s much more connected. It’s been a huge benefit as we’re transforming and setting the path for the future. The financials are now integrated with the technology storyline, risk assessment, and roadmaps.

“We’re starting our annual planning process and if we didn’t have this tool it would be business as usual. Before, we used to lead with the numbers. Now we’re actually having two focused meetings instead of one all-in numbers meeting. The first meeting is all about the performance of individual technology ecosystems. Where are your roadmaps? When are you getting cloud? What’s the health of your environment? Do you need technology investments? How much demand is there for new features? And the second meeting focuses on specific financial targets after technology needs have been prioritized and aligned to.”

Fact-based decision making

To answer these questions, Borta uses Apptio to provide facts into consumption, unit cost, and overall expense trending. Initial efforts have resulted in a 5% decrease in the line of business software portfolio.

“We’re a very large organization,” said Corrigan. “I support over 2,000 applications and there’s a lot of duplication. When we used to look at the utilization of some of our products, it was very small but we could never really articulate to the business exactly how much it was costing to keep that product active or on the market. Apptio has helped us identify duplicate functionality used in multiple areas. Now we can shut down those products that are not adding the value we thought they were, consolidating and really streamlining the overall product portfolio. That helps us going forward for new products. So, I would say, we saw immediate value from Apptio, from a rationalization perspective.”

“We had some of those ideas before but there was no evidence behind them,” said Borta. “It was just ‘I think I should invest’ or ‘I think I shouldn’t.’ Now it’s evolving to fact-based decisions. As a result of Apptio, I was able to create reporting around the different development methodologies—which I never would have done before in spreadsheets because it would have been too overwhelming.”

“With our new portfolio dashboards, I’m able to look at current trending and future demand. And I’m able to do that using just-in-time analytics that, before, I would not have been able to do. I wouldn’t even have tried it.”

– Jeanne Borta, IT Finance Director

 

“The application services layer was the most challenging but the most rewarding,” Borta continued. “It was a question we wouldn’t have been able to support with good facts—are we spending too much on the bowels of IT? Should we be investing differently? Do we need all this stuff? How do you factor infrastructure costs in with the business-facing application cost so we understand true total cost of ownership?”

Moving forward

Now that the financial picture of IT’s application and project management portfolios has come into focus, the next steps are to start rolling up services into Apptio and move from showback to chargeback.

“Our model is set up and the data is reliable,” said Borta. “Initially we were focused primarily on the finance professionals and the portfolio managers. What we want to do in the next wave is think about some of the other stakeholders, e.g., the service management folks. We want to make Apptio very easy to use, easy to access with hotlinks to tickets, incidents, etc. through ServiceNow. That’s the next phase; working on the usability for the different functions.

“The goal is to eventually feed our corporate accounting system from Apptio. We’re currently using it for showback and the analytics have been great. But when we switch to consumption-based chargebacks in 2018, it will take it to another level when this information is driving our P&Ls.”

“Chargeback will have a real impact on decision-making,” said Corrigan. “In an organization of our size, if people don’t get the true direct expense for what they’re consuming, they’re not making informed decisions. Whenever you can provide that level of transparency on utilization, whether it’s IT assets or resources, it makes people more accountable for their decisions. When the cost shows up as an allocation back to the business, no one really feels they are making decisions about that. When it shows up in a line item that points to cost and value, they will make different decisions.”

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