Harmonizing Eight Acquired Company CIOs’ Requirements with Board of Director Mandates

Executive Summary

On acquisition of eight companies to grow its base in North America, a Europe-based reinsurance company needed to quickly and efficiently integrate the firms’ IT environments. It had retained each of the acquired companies’ CIOs, each of whom possessed differing views on the make-up of the operating environment, and the Board of Directors required ongoing profitability despite the expense of merging multiple, disparate environments. Everest Group created a highly flexible target operating model and conducted self-funding-focused scenario modeling workshops to enable the CIOs to select their collective best-fit solution. With a client investment of US$4.9 million, Everest Group’s plan has resulted in US$17.9 million in IT environment savings.

The Client’s Challenge

This Europe-based reinsurance company had recently expanded its presence in North America by acquiring a mix of eight primary and reinsurance companies, each of which had significantly different business requirements due to their widely disparate focuses. While the Board of Directors mandated the parent company maintain profitability in the midst of these acquisitions, this was challenging due to the importance of retaining all eight CIOs. Because of each company’s specialized underwriting processes, only that company’s CIO understood how those processes were automated. Retaining the CIOs assured continuity, and enabled the parent company to keep systems sufficiently separated to remain compliant with regulatory requirements. As a result, the parent company wanted to make changes only to computing and telecommunications systems, not to any of the applications in use within the acquired firms. This required a synergistic and integrated IT solution that was acceptable to the CIOs from all eight acquired companies, while simultaneously eliminating the exponential costs associated with utilization of multiple IT systems.

Insight to Action

Everest Group followed a three-step process to construct a target operating model for the client: 1) baselined the current environment; 2) identified specific initiatives that would enable it to meet the profitability mandate and the needs of the CIOs, and to create the requisite efficiencies; and 3) conducted scenario modeling workshops with all involved stakeholders.

Realizing the need to create a consensus among the CIOs for any given scenario despite the fixed budget within which the initiative had to operate, Everest Group’s target operating model was highly flexible, and allowed the companies to pick the right answers for themselves. For example, one component focused on outsourced facilities management enabled the firms to keep all their employees and retain all their data in the same place. However, that choice, although mitigating risk, would only result in two to three percent cost savings. Another option looked at using a major provider’s public cloud to dramatically reduce development costs.

To manage all the variables, the target model was also built on a self-funding business case to control all the investments and design decisions throughout the process. This enabled Everest Group to dynamically adjust and instantly demonstrate the required investment and associated savings per each operating scenario. Prior to presentation of the plan to the parent company and the Board, Everest Group conducted final due diligence to ensure implementation viability.

Impact

Despite the challenges in harmonizing the needs and desires of eight CIOs with different business requirements, Everest Group’s fully transparent and non-mandating scenario modeling workshops ultimately led to agreement on the solution. It focused on eight components: optimize mainframes, condense wide area networks, streamline enterprise storage, reduce local area networks, reduce facilities expense, reduce messaging towers, consolidate application servers only for shrink-wrap software, and insource disaster recovery. The solution called for an investment of US$4.9 million dollars, resulting in savings of US$17.9 million.