Suncorp opts for open source cost cuts

Integration of Suncorp and Promina IT systems is a high priority

Suncorp will turn to open source software next year to drive down technology costs and improve efficiency in what is a proving to be a difficult financial climate for the insurance industry.

Chief information officer Jeff Smith says there was unlikely to be many new IT products bought by Suncorp in the year ahead, despite the fact that the company would begin work on integrating the technology environment of financial services group Promina, which merged with Suncorp in 2006.

Suncorp operates under several brands across New Zealand and Australia. as previously reported, New Zealand service provider Solnet is working on its transformation programme.

Smith says he is instead encouraging internal teams to innovate and follow his lead in open source advocacy.

"Our whole new internet platform is all open source, even identity and access management is the open source Sun ONE component," he says.

CIO Jeff Smith

Picture: Nic Walker

"Even for our underwriting service, we are going to be using Drools, which is an open source underwriting engine. It is simpler, it is cheaper and it is actually easier to manage if we standardise it on one platform."

Hitting technology integration cost targets following the merger with Promina will this year take on increasing importance for Suncorp, as it struggles to come back from disappointing financial results.

Suncorp's annual report showed that computer operating expenses had doubled from 2006-07's $61 million to $126 million in 2007-08, thanks to the inclusion of Promina IT systems into the overall reporting.

Smith says by next year more cost benefits would be realised as Suncorp would shut down its existing Brisbane data centres and relocate to the suburb of Springfield in January. The roll out of a uniform desktop strategy would be also completed, he says.

Despite Suncorp posting a drop of almost 50% in full year profits this week to the ASX, Smith says the ambitious IT efficiency drive is proceeding ahead of schedule and would not be affected by turbulence from external events. IT infrastructure changes and a greater emphasis on internet services would come to fruition in the year ahead, he says.

Smith said in June that the company's original target of $225 million post-merger savings after three years would in fact be achieved in just two years. In February Suncorp chief executive John Mulcahy revised his $225 million promise up to $325 million.

"It is not just technology. We are finding that overall integration benefits as a whole are ahead [of schedule," he said. "We are finding that the concept of leveraging and re-use of things we already had across the group is going very well."

"The two main focus areas this year are claims and the internet space for sales and service," he said.

Smith said he intended to introduce new claims systems for motor insurance, home insurance and workers compensation, as well as roll out up to 12 different online initiatives to its various market segments.

Plans to replicate processes from Suncorp insurance brand AAMI, where 27% of transactions can be conducted online, in stablemate GIO, which can only do 3% online, were still to get underway, Smith says.

"We haven't rolled that out yet into GIO because we are building one platform that can be used across all the brands and for the brokers and intermediated areas," Smith says.

Smith will be well rewarded for his efforts; the financial report shows he has been paid a total annual package of $1.3 million in the past year.

He says work has just finished on moving telephone payments systems from the old Promina business on to the Suncorp platform, which had resulted in significant savings. Promina's phone payment system had previously gone through Westpac, via a Telstra voice recognition system, at a cost of 65c per transaction.

Smith says the move on to Suncorp's own system, through its own bank, had reduced the cost to roughly 1c per transaction.

Suncorp saved millions of dollars on the development of its mobile phone banking platform, released earlier this year, because it was developed by one of its 21-year-old graduate employees as a side project.

— MIS Australia

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