By Alan Radding

In an effort to maintain and enhance its position in the fiercely competitive supplemental insurance market, Aflac has integrated a new interdisciplinary governance initiative. Part of that initiative is a commitment to managing a balanced portfolio of maintenance operations and new value-driven IT projects. Since senior VP and CIO Gerald Shields launched this new approach to IT management, the results have been impressive.

The insurance company is now able to more proactively field new technology projects that contribute differentiation in the marketplace. In so doing, the company ensures that current and emerging technical, operational and strategic objectives are achieved. This state of affairs is in stark contrast to the situation Shields was in two years ago, when more than half of his resources had to be dedicated to fixing things that were broken and the IT staff struggled to maintain basic levels of operational readiness. That left few resources with which to anticipate and address future requirements.

The transformation that ensued has elevated the strategic importance of IT within the company and provided an opportunity to develop and deploy new innovative initiatives.

With more than $56 billion in assets and over $14 billion in revenue, Aflac provides health insurance to supplement out-of pocket expenses not covered by a customer's existing primary insurance. It is the leading provider of guaranteed-renewable insurance in the United States and the largest individual insurance provider in Japan, according to the company.

On any given day, Aflac's IT operation manages several dozen new projects while maintaining existing systems and infrastructure. In 2006, the IT group set a goal to launch and complete 31 projects on its road map and ended up rolling out 40. Of those, 90 percent are progressing on time and within budget. Aflac's 580-person IT staff, supplemented by about 100 contractors, now spends 30,000 man-hours each month on these new projects. Of these, a full 25,000 man-hours are dedicated to achieving new business unit capabilities. The rest address infrastructure maintenance.

"We're not just maintaining systems; we're growing and continuing to build new projects," Shields says.

What has changed
The key to Aflac's IT resurgence is governance. "We have a well-defined governance process that is business unit-driven," Shields explains. Spearheading that process is a high-level U.S. steering committee chaired by Aflac's U.S. president, which includes the COO, other senior business executives and Shields.

Between its governance model; new project initiatives; a constant effort to find, attract and retain top IT talent; close relationships between IT and the business units; and a utility-oriented approach committed to delivering high levels of service, Aflac has emerged as a model for IT shops. As proof, Aflac IT earned Capability Maturity Model for Software (CMM) framework Level 3 certification—rare for the insurance industry.

In August 2006, the steering committee began work on the 2007 IT road map. "We had a good idea of the budget for 2007, based on sales and forecasts," Shields explains. Each business unit submitted its strategic plan, which included a technology wish list. The business units wanted more than was possible, but through an iterative process, the steering committee, working with Aflac's project management office, weeded out projects on the basis of business need and value.

By the end of September, the committee had defined its 2007 road map, which consisted of 35 IT projects plus the usual maintenance, small enhancements and bug fixes.

The road map, however, isn't the final word. "If your project isn't on the road map, we can still do it," Shields says, because changes can be made through Aflac's six-step gating process. That's how the company found itself doing nine projects more than planned in 2006. A separate four-year IT plan and budget address technology infrastructure.

Aflac today is hitting the portfolio management sweet spot. "A reasonable range is 30 to 50 projects; even 100 projects are manageable," says Donna Fitzgerald, practice director at Resolute Corp., a systems consulting firm based in Bellevue, Wash., and analyst for the Cutter Consortium, Arlington, Mass. Beyond 100 projects in a single portfolio, companies lose control, she adds.

Aflac's governance process, which requires the project to pass through a number of control gates, ensures that the right projects are funded.

The gated process, sometimes called stage gate or control gate, is becoming a common portfolio-governance mechanism as companies try to get portfolio management under better control, says Jack Duggal, managing principal at Projectize Group, a specialist in portfolio management. The gated process gives managers the opportunity at each stage to compare the current situation with what was expected in terms of time, cost and anticipated results. If the estimates don't match the reality, managers can make adjustments to the plan or kill the project.

To make it through the first gate at Aflac, the project sponsors simply estimate the costs and likely results. To get through the second gate, however, they have to validate their estimates. "At gate two we may see some different numbers. We might not go forward at that point," Shields says. Gate three requires the project leader to commit to a delivery date and budget.

By gate six at Aflac the project is done, and the project leaders are expected to report the results. There should be no surprises; the results should be in line with the estimates at the preceding gates. "We take accountability seriously. You don't want to lie up front about estimated costs and results, or you might not get funding in the future," Shields says. This accountability discourages people from underestimating costs earlier in the process or overestimating results they aren't confident they can deliver.

"It took us six years to get this gated process finely tuned. By 2004, we gave it a passing grade. In 2005, it really started to work well. By 2006, I'd say it rated a high mark. For 2007, it is institutionalized," Shields notes.

Smart Results
Certainly, it's hard to quibble with the results. Aflac last year rolled out a new enrollment system, the Smart Application Next Generation (see "Aflac's Top IT Projects," p. 22), to its 60,000 field agents. The system lets the field force sign up new business quickly and easily. "It is responsible for 90 percent to 95 percent of our business," Shields says.

The Billing Transformation Program (BTP) is a multiple-project effort to boost efficiency and improve customer service. Some aspects of the project have resulted in a 200 percent improvement in throughput. Overall, "business units report that IT has delivered projects to them that have provided more than $21 million in efficiency improvements," Shields adds. The project is rolled out incrementally, with implementations starting about every 60 to 90 days.

Another project, Aflac Anywhere, is drawing an enthusiastic response from the latest online and mobile technologies to alert individual agents when an event occurs. "It's a way to get the field agents connected," Shields says. The notification can be sent by e-mail, pager or mobile phone.

Aflac's growing portfolio of Web self service applications also excites Shields. These applications improve Aflac's efficiency and also bring the company closer to the customer. To get these results, Aflac relies extensively on CA solutions. "Our change control is through CA. We also handle scheduling and recovery with CA solutions... CA is a very strong partner," Shields explains.

Friend of the Business
Shields, who came from a technology background but sees himself as a businessperson, is quick to credit collaboration with the business units for the results. "What I'm most proud of is not any [single] project, but our relationship with the business units. We have reached the level of having a great partnership with them," he says.

Shields also relies on an extensive set of metrics to manage his large operation. The key metrics fall into three areas: stability in the network, meeting promises and managing his people effectively.

Stability metrics look at service levels and system availability. He looks at 15 to 20 indicators in this area, including email, Intranet/Web and voice.

People metrics address such issues as training and staff burnout. Shields insists that people rotate among different types of projects—doing new development today, for example, and maintenance work tomorrow. That's a smart move, because often the team developing the new project becomes the team that subsequently has to maintain it.

Return on investment, surprisingly, is not one of Shields operational metrics. Rather, ROI is part of Aflac's governance model. "[ROI considerations] are built into the funding of the project from the start," Shields says. For many of the projects, however, ROI isn't a factor at all. For example, projects driven by the demands of regulatory compliance or infrastructure projects don't require ROI analysis. Even projects surrounding Aflac's Web presence avoid ROI metrics. "We must have a Web presence. It is not about ROI; it's the cost of doing business," he says.

Although not every project is driven by ROI, IT is concerned that projects deliver business value and support business growth. Even projects as mundane as an enterprise fax server are designed to handle the high volumes of activity that come with Aflac growth.

The people metrics may be the most important. "If you asked me what the most difficult part of running this operation is, [I'd say] it's the constant quest to attract and retain top IT talent. What I lose sleep over—what I get most stressed about-is finding and keeping top talent," Shields says.

A recent book comparing the basketball careers of Wilt Chamberlain and Bill Russell impressed Shields. "If you compared the individual stats, Chamberlain was the better player, yet Russell was the person you wanted on your team," Shields says, adding that Russell's presence on the team raised the level of all the players around him; they became better players because of him. "I want to find the Bill Russells of IT. I want people who will raise the overall talent level," Shields says. "That's my key priority."

Aflac faces serious challenges as it looks ahead. The IT talent shortage is not going away anytime soon, and Shields does not consider offshore outsourcing a solution. Similarly, the insurance industry continues to be subject to myriad regulations, from Sarbanes-Oxley to HIPAA to numerous privacy regulations. These, too, aren't going away.

Still, Shields is confident. The IT operation has come a long way in the past few years. The group is contributing to Aflac's bottom line. The business units embrace IT as a collaborative partner, and Shields is a respected member of senior management. Shields is proud of IT's success at Aflac, but he keeps it in perspective: "Success doesn't mean you don't have issues." Whatever issues arrive, the IT team will deal with them.

Alan Radding is a freelance writer specializing in business and technology.