Health insurer reinvents the IT management wheel

Hub-and-spoke structure has made IT department more efficient: CIO

Joining Blue Shield of California as CIO in 2005, Elinor MacKinnon found no strategic or tactical planning function inside the IT department. So she set about creating one from scratch for the San Francisco-based health insurer.

“When I came here, there was no multi-year planning function or capability,” MacKinnon says. “There were no positions or people in the organisation performing that function.”

Strategic planning is key for any IT shop, but it’s especially important for organisations that outsource. Blue Shield has 300 contractors working on IT projects, including 200 EDS employees.

“We will never manage all the people doing the work for us,” MacKinnon says. “We have lots of vendors. We are primarily a buy-shop, not a build-shop. This notion of being able to understand and plan is key when we are making agreements with vendors and trying to put it all together on a multi-year basis.”

MacKinnon’s new integrated planning function handles portfolio management, vendor management, process improvement, risk assessment, auditing, business continuity and training.

She hired an outsider — Bob Veeneman — as the new director of IT integrated planning in the Office of the CIO. Veeneman came from Levi Strauss, where he held a similar post. Veeneman has a staff of 25.

MacKinnon says having an integrated planning function is an important factor in allowing Blue Shield to execute on its overall corporate strategy.

“Without planning, skills and experience, it’s impossible for this IT organisation to go from where we were to where we need to be,” she says.

The rest of MacKinnon’s IT shop is organised into the following areas:

• Infrastructure and operations has 125 people and is responsible for networks, servers, OSs and security.

• Applications has 85 people.

• E-commerce enterprise architecture has 50 people.

• Enterprise data services, including data management and business intelligence, has 30 people.

MacKinnon chose what she calls a hub-and-spoke model for the new Integrated Planning Group, to improve collaboration across the IT department. She has a centralised planning group run by Veeneman, but the other areas of the IT department also have staff responsible for integrated planning.

“I provide tools sets and processes for strategic planning, tactical planning, vendor management and security,” Veeneman says. “I provide a whole wheel of services that the planners out in the various IT verticals come to my organisation to get.”

Veeneman says his group helps the whole IT department — as well as the rest of the business units — understand what the long-term corporate strategy means to the IT department.

“Many companies have done a tremendous amount of work developing strategies for three to five years ahead, but most of those strategy documents are not the easiest things to read,” he says. “One of the features of our planning function is that we become how the organisation realises that strategy.”

Both MacKinnon and Veeneman recommend the hub-and-spoke organisational structure to other IT shops.

“It really puts the collaboration in place for those of us who have this expertise to be a shared service, but we are not out there forcing this on the various IT verticals,” Veeneman says.

“They have skin in the game. They are brought into the process. They like doing things in a consistent manner.”

For example, the Integrated Planning Group is providing better information to the infrastructure group about what new applications are under development so they can plan accordingly.

“Without the hub-and-spoke model of planning, infrastructure was always surprised because they didn’t have enough visibility and we didn’t have enough processes to incorporate them into the business decisions,” MacKinnon says.

That’s not to say that creating such a group is easy. Veeneman came on board seven months ago, and he said he “spent the first month on medication for headaches because everybody had a different interpretation of where we were going.”

Now that everyone in the integrated planning function has an accurate job description and list of responsibilities as well as training and mentorship from Veeneman, the planning process is going more smoothly.

The hub-and-spokes model “has been a great working metaphor for us”, Veeneman says. “The spokes are very, very deep into the hub for doing the process design. It’s as simple as creating a new template for how project management is done. I can’t shove it at them as if it were solid-line relationships. Every time I introduce something, there’s a sell component. But it actually speeds up adoption... It’s all collaboration and cooperation.”

Veeneman adds: “We’re not singing ‘We are the world’ every day. We have healthy debate all the time because the men and the women in the spokes are very bright.”

Next up for MacKinnon is creating a hub-and-spoke model for enterprise architecture. She is putting a centralised enterprise architecture group under Veeneman, but each of her other IT areas — applications, infrastructure, e-commerce and enterprise data services — will have dedicated architecture groups, too.

“I have resisted centralisation of planning, architecture and governance within IT, because I believe the hub-and-spoke model will be better for what we are trying to achieve over the next three to four years,” MacKinnon says.

She says the payback of the hub-and-spoke model is better visibility across the IT department and the company.

“What we couldn’t do was look ahead to changes in the business and business strategy and significant changes in technology and understand what that would mean to us and Blue Shield,” she says. “The return on this reorganisation is the ability to see out and the ability to see in from a transparency point of view.”

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