In this article:
|Welcome to the private sector: Grupo Financiero Bital|
|Baylor pulls it together|
|CIGNA saves a bundle|
How can you say “business process reengineering” in three simple syllables?
Intranets are finally enabling corporate IT groups to follow the tenets of BPR–such as throwing out old notions of how businesses should be organized and run–without making massive, costly changes in computer infrastructure.
Baylor Healthcare System’s Marylynn Henry, project manager, and Michael Miller, senior technical architect, deployed an intranet that simplifies business processes and increases the company’s purchasing power.
Photo: Greg Smith/SABA
BPR gurus Michael Hammer and James Champy, co-authors of Reengineering the Corporation (HarperBusiness, 1993), say BPR means “starting all over, starting from scratch,” but you know what kind of a place scratch is: You’ve been there. Scratch is where your company was thousands of programmer-years ago, programmer-years devoted to coding, recoding, testing, and retesting. Throwing out the old ways sounds good on paper, but for many corporations, the old ways are hard-coded into legacy systems.
Intranets change everything. Intranets offer so much flexibility that corporations really can reengineer their basic business processes and increase the value of intellectual capital without sacrificing legacy databases or switching to new platforms. There are two major reasons for this.
First, Web browsers run on many platforms, so an intranet doesn’t require different versions of client applications for different platforms. An organization can use a Web application across a mix of operating environments, from Macintosh to Windows95 to UNIX. Furthermore, the application can be modified and updated from a central source (the Web server) without requiring changes on the client machines.
Second, intranets permit the implementation of a three-tiered architecture, which makes it unnecessary to upgrade or modify legacy systems in order to support changes in core business processes. (See, “How intranets facilitate BPR”)
The bandwagon cometh
Seldom has a technology hit the IT world harder or faster than intranets. Intranets can be found in 59% of U.S. and 38% of European organizations contacted in a recent survey by International Data Corp. Some 77% of U.S. and 75% of European organizations expect to be using intranets next year. Boston-based Delphi Consulting Group polled 400 Fortune 1,000 buyers, evaluators, and users of intranet products and discovered that an astounding 90% of respondents were using or actively evaluating intranets. Zona Research estimates that the intranet market will be valued at over $7.8 billion as early as 1998, and IDC predicts that there will be as many as 133 million intranet users worldwide by 2001. Many of these users will be employing the intranet for collaborative applications such as groupware, document management, and group calendaring/scheduling.
There’s hardly a software vendor that hasn’t jumped onto the Web-based bandwagon, and all of them are positioning themselves to grow as this market grows. Press releases about new products and showcase customers abound, as the world is bombarded by so many Internet, intranet, and extranet tools, facilities, and applications that it’s difficult to keep track of it all. It can be a challenge for even the most talented IT professional to keep everything in perspective and to allocate the right amount of time and resources in order to best serve the corporation.
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The point, of course, isn’t just to become “Web-enabled,” but to extract profit and value from the new technology. This means harnessing technology to the goals of the organization. And that’s not always easy, because organizations are changing in unexpected ways, even as you read this.
Welcome to the private sector
One organization that has had to change rapidly is Grupo Financiero Bital, one of the largest financial holding companies in Mexico, It controls assets of around $9 billion. Bital is, among other things, a full service retail bank with almost 1,200 branches servicing more than 3 million customers. As you can imagine, that kind of customer base involves an enormous amount of data processing. But that’s only part of the story.
IT implementations in Mexico face additional challenges. Telecommunications facilities aren’t always as reliable as they are in the United States, and there are often wild differences in the technical literacy levels of employees and technicians. Furthermore, major fluctuations in the exchange rate between the U.S. and Mexico has made it difficult for Mexican companies to budget for IT upgrades.
Bital not only suffered from those generic difficulties, it also suffered from difficulties connected with the dispersed nature of its business. Migration and upgrades to new technology have to be done manually by technicians who visit the widely scattered branch offices. This means that perhaps 30% of the branches might have a new software version within a week, while some branches might not get the new software up and running for a month or more. In one case, Bital’s IT group discovered eight versions of a client application-seven of them obsolete-installed at various branches around the country.
Merely maintaining Bital’s computing infrastructure is clearly a difficult task. Considering this, you’d think it unlikely that Bital would try to make major functionality improvements. But Bital had no choice, because the bank was privatized in 1992. When Bital had been run as part of a government agency, providing employment was as important as making a profit.
Unfortunately, Bital’s computing infrastructure is still more appropriate for a massive government agency than for a profit-driven business. Branch managers could query Bital’s massive databases for information, but that tended to produce 500 pages of statistics–a deluge of information rather than the exact information that was needed. Bital’s IT group thus had two goals–to make a complicated system more stable and to offer much-needed functionality.
The only way to cut this Gordian knot was to implement an intranet, according to Jorge Sosa, director of branch systems development at Bital. Without altering the centralized database structure of the legacy system, Sosa provided a Web-based application that could query the database and return compact reports on an individual branch. As a result, a branch manager can now look at the branch as being his or her own business, and can make intelligent, branch-level decisions concerning resources, time, and money. “This allows the branch manager to take the steps necessary to make the branch more profitable and thus make the entire bank more profitable,” Sosa says.
Sosa’s team used the Cactus application development workbench from New York City-based Information Builders to implement a back-end system that accesses legacy data in three ways. Some of the information comes from the central banking system; the information is extracted into massive VSAM files, which are moved onto the Web server. In other cases, the Web server reaches directly to the central data source without an intermediary step. Finally, some of the bank’s information is fed into an Informix database on the Web server itself. All of this complexity, however, is hidden from the branch managers, who merely use their browsers to build queries.
The intranet has also helped Bital’s top management get a handle on the business. Sosa’s group created a special Web page called the “tablero,” which functions like the mission control of a space launch. The tablero allows executives to examine, easily, the various aspects of Bital’s business, as well as the performance of the company’s branches. This, in turn, helps Bital’s management balance resources and make decisions about which branches to shrink and which to expand.
The intranet has even helped Bital get a handle on its IT support problem. When each branch utilizes the system, the Web server collects data about the software on that client, allowing Sosa’s group to track the software versions that are in use at each branch. This, in turn, allows the group to better schedule technician visits, keeping the overall system much more current. Over time, Bital expects to migrate more applications onto the intranet, further reducing support requirements.
Baylor pulls it together
Like Bital, Dallas-based Baylor Healthcare System was hampered by processes left over from the old days. Baylor is a north Texas-based network of hospitals, acute-care facilities, and family health centers employing 12,000 people. Baylor, a nonprofit, is often called upon to provide health care to the poor, and faces the constant challenge of providing high quality care without losing money. Therefore, top management is constantly looking for ways to make operations more efficient.
But reengineering Baylor’s core business processes sometimes has proved difficult because Baylor grew in fits and starts through a complicated series of mergers and associations. Each organization in the network has its own way of doing things, not to mention its own legacy computer systems that support site-specific activities.
One particularly thorny problem was that each organization negotiated a separate contract with each pharmaceutical vendor, which meant that Baylor was unable to use its full purchasing clout to obtain discounts. Baylor’s management insisted that the organizations pool their drug orders, but this effort required multiple meetings and the mass publication and distribution of various constituent contracts. A BPR project that was intended to be a cost improvement ended up creating hours of extra work for Baylor’s executives, who were forced to drive to many off-site meetings, where (as often as not) decisions couldn’t be made because all the information wasn’t available.
Fortunately, Baylor has two key executives who understood both the technological and the business challenges that the organization faces: CIO Robert Pickton and chief medical information officer (CMIO) Peter Dysert, M.D. Acting as partners, Pickton and Dysert provided the upper-level management support that Baylor’s IT group needed in order to move the reengineered drug-purchasing process onto an intranet. “The key to a successful intranet-based BPR effort is strong senior management support,” says Mike Miller, senior technical architect. “Our CIO and CMIO have a vision that’s matured over the last year and we’ve helped them make that vision into a reality.”
The intranet, which Miller’s team was able to bring from conception to production within a matter of months, has the following three components:
The new intranet-based process allows Baylor to get the lowest price possible on drugs without creating a major increase in employee workload. That, in turn, helps Baylor achieve its mission in the community. “The new system has had a substantial impact on Baylor’s cost control,” says project manager Marylynn Henry. “More importantly,” she says, “by providing accurate information, we’re reducing the confusion in the negotiation process and making it easier for employees to do their jobs.”
CIGNA saves a bundle
Another organization with a pressing need to reengineer some of its core business processes was CIGNA Corporate Insurance, a unit of CIGNA Corp., which controls assets of $99 billion and had international revenues of $3.1 billion in 1996. Hartford, Conn.-based CIGNA Corporate Insurance, which is a part of CIGNA’s Retirement & Investment Services division, sells life insurance primarily to corporations, targeting highly paid individuals. These policies don’t just provide death benefits to the individuals’ beneficiaries–they also serve as a way for the individuals to accumulate tax-deferred savings. Participants can accumulate wealth in the life insurance “accounts,” assigning money to a number of different mutual funds.
Every year the life insurance contracts come up for renewal, “creating the need for a ton of communication,” according to David Choleva, principal technical consultant at CIGNA. CIGNA policies are sold by independent brokers, and communication between these brokers and CIGNA was labor-intensive and time-consuming. Brokers needing to update client records during renewal were forced to call CIGNA’s administrative staff for information, while CIGNA was dependent on the brokers to provide timely information about the status of accounts. This awkward process virtually guaranteed that some of the information available to both the brokers and CIGNA would be out of date.
Because the independent brokers used a variety of computing equipment, the only way to create an efficient, interactive process was by way of the Web. In order to make sure that knowledge about CIGNA’s business operations was folded into the Web-based system, the company created a BPR team that was a nearly even mix of business analysts and programmers. The analysts provided the business requirements; the programmers took the requirements and created a running system.
The CIGNA solution consists of an intranet and an extranet. The intranet provides case managers with information about each policy, including its design, how it was sold, any special conditions written into it, and the benefit due upon the individual’s death. The extranet is for the brokers: It provides information on the policies and investments offered by CIGNA so that the brokers have more and better information to present to customers on the potential investment values of various policies. The extranet application, implemented with Progress Software’s WebSpeed, requires each broker to use a password.
The result is a Web-based system that’s making CIGNA Corporate Insurance far more competitive. “Not only are we saving hundreds of thousands of dollars, but we’re positioning ourselves to service the brokers and the customers more effectively,” says Diana Rolny, a business analyst for CIGNA, “and that’s good for everybody involved.”
Intranets thus represent an extraordinary opportunity for IT groups to become responsive to the organizations they service–supporting, rather than thwarting, attempts to make fundamental changes in business processes. Ellen Kitzis, vice president and worldwide director of Dataquest’s Framingham, Mass.-based IT Services group, puts it this way: “Intranets are a way of logically completing the client/server revolution in a neater and more user-friendly fashion. Web technology has the potential to help organizations manage their supply chains, their cost of doing business, and their level of responsiveness in delivering products and services to companies.” //
Geoffrey James can be reached through http://www.businesswisdom.com.