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There are many reasons for an acquisition, from gaining market share to acquiring a new line of products, but all companies involved in a merger are under pressure to show rapid results. Mergers have a poor record of success that often leads to even more expensive de-mergers or sell-offs. For the majority of banking and financial services companies, a successful merger is measured in terms of the reduction in costs and the rationalization of overlapping organizations and processes. Failure to quickly identify integration hotspots or areas of excessive expense can rapidly lead to detrimental impacts on the business. The integration issues described in this article are not unique to the insurance industry or to company mergers. For any business, continual business change and organizational consolidation can result in a myriad of hardware, software, and applications that rapidly need to work together as one solution.
From the IT perspective, the response to business integration has traditionally focused on consolidating data and applications. Although this is a valid approach, it is a long-term, high-cost activity that needs to be balanced with the need to demonstrate a more immediate return on investment. The scenario in this article focuses on a set of solutions that provide rapid return by exploiting a combination of process management and enterprise application integration. The goal is to provide a single integrated view to customers and business partners across the two companies with minimal disturbance to the existing legacy systems.
There are two fictitious companies in this integration scenario. The primary acquiring company is Lord General Insurance (LGI), a traditional personal lines insurance company that has realized it needs to expand its market share by establishing a direct customer channel to complement the existing agent and call center channels. To this end, it has acquired an insurance newcomer, DirectCar, to provide a quick entry into the direct insurance market and to utilize this company's Internet-based IT skills and Infrastructure.
- LGI
- In business 50 years focusing on auto, home, and contents insurance
- 5 million policyholders
- Traditional channels through independent agents and a recently outsourced call center
- Mainframe-based legacy IT systems
- DirectCar
- Less than one million policyholders, but an expanding new company focused on auto insurance through the Internet
- Single direct customer Internet channel
- Desktop/server-based systems
- Supporter of open (J2EE) architecture
The acquisition and proposed merger of DirectCar with LGI has several business goals related to gain of market share, improving product portfolio, and the buy-in of know how and expertise. This scenario focuses on two key business goals:
- Improve profitability and value
LGI wants to improve the company's profitability by reducing administration costs overall. Its immediate focus is on auto claims and policy administration across the two companies. To achieve this, LGI would like to improve its ability to monitor and manage the policy and claims business processes across both LGI and DirectCar, identifying and eliminating business inefficiencies.
- Improved access to market
LGI wants to quickly make its new extended product range available to all customers The immediate priority is the direct customer channel, which is predicted to grow the fastest in terms of capturing new business. LGI would like to have full product support within one year. This will then be extended to the call center and traditional agent channels.
The business vision, as shown in Figure 1 below, is to create a one-company-for-all-channels view that hides the customer from the complexity of the LGI and DirectCar back-end application.
Figure 1. Single view of two companies
Costs of consolidation, managing disparate processes, and managing separate IT infrastructures are some technical constraints to be addressed in the merger.
LGI wants to quickly create a consolidated interface to customers. However, the two companies have existing legacy applications which, due to expense and timing constraints, cannot be physically merged or replaced in the immediate term. These systems have customer and policy data in inconsistent formats, and cleansing and merging is a long-term effort. Both companies want to maximize the value of existing legacy assets.
Managing disparate long running processes
LGI needs to reduce the costs of the auto claims administration process, where costs were steadily increasing even before the merger. This is partly due to administration and commission expenses, and to an increase in the complexity of claims, which have at times overwhelmed the company's administration system.
Being able to monitor an entire business process has been made even more difficult because of the different technologies and standards used by the two companies. It remains difficult to monitor the latest status of customer claims or new business requests in a timely fashion. There are increasing delays and costs resulting from chasing requests for external information both in claims and policy administration (for example, for a claims vehicle damage assessment or a new insurance policy credit check).
Managing separate IT infrastructures
While the responsibility for managing the IT systems will move to LGI, initially the LGI and DirectCar IT systems will be in physically separate locations, leading to problems in managing the new cross-site claims and policy solutions. This involves:
- Increased costs in building a reliable and secure connectivity infrastructure
- Difficulty monitoring and managing the different distributed solution components, since systems information within the solution cannot be easily correlated
- Delays in problem determination that cross product, solution, or organization boundaries.
The existing technical architectures
Figure 2 shows the existing technical architectures. The scenario assumes that any solution will reuse and interoperate with the existing legacy infrastructure. LGI already has a central business integration infrastructure for messaging and workflow using IBM WebSphere Business Integration Message Broker and MQ Workflow products. Having acquired DirectCar, LGI is now looking to expand on the J2EE technologies based on IBM WebSphere Application Server, which it believes will provide a more open architecture for future development. The acquired DirectCar direct channel complements the existing EDI and XML channel for communicating to agents and the MQClient channel to its outsourced call center.
Figure 2. Original architecture of LGI and DirectCar
Figure 3 shows the logical business context in which the solution will sit. The primary systems are the auto claims and policy management systems. The policy systems are invoked by the auto policy quote and acceptance process, while the claims and service provider management systems are used by the claims process. Around the systems you will see the various personnel involved in using and supporting the business processes. They fall into two categories.
- Business users
- Insurance agent, customer, claims handler, and service provider who use the operational systems.
- Technical users
- The technicians involved in the development, installation, and maintenance of the operational systems. These are shown on the right in Figure 3, and include the business analyst who initiates the development of the business process. As part of the input to the design and development of the scenario solution, several use cases were developed to capture requirements based on the activities of the identified users.
Figure 3. Business and technical roles
The solutions developed for LGI are briefly described below. They are based on the merger and the development of common claims and policy administration processes that support the integration across the two companies. The solutions fall into two broad areas: policy administration and claims.
The first solution focuses on the creation of a single company Web application accessed through a Web browser. Once the customer's information is validated, the Web application accesses the policy quote systems of both LGI and DirectCar using a message broker. Based on rules, the broker selects and returns the best insurance quote. It will demonstrate how a complex environment involving WebSphere Application Server, CICS, and TXseries can be integrated through WebSphere Business Integration Message Broker and WebSphere MQ.
Once a customer accepts the insurance quote, the next step is to verify the customer's previous history. This involves requesting and receiving the prospective customer's motor vehicle information (MVR) and credit check rating from external agencies. This part of the solution involves building a sub-process to handle the multiple requests for external information. The process handles the timing issue of delayed responses from the external agencies, while continuing the process to the point of acceptance. These external Web services are implemented as Microsoft .NET and WebSphere Web services, accessed through the WebSphere Gateway.
For LGI to begin to demonstrate some rationalization from the merger, a new common rating engine is developed as a Web service, which is accessed internally by both DirectCar and LGI systems. The transport chosen to support the flow of internal information through LGI is SOAP/JMS.
Technical focus
- Routing and mediation of messages through a broker
- Broadcasting and aggregation of responses
- Managing high message throughput with clustering and load balancing
- Problem determination across a solution
- WebSphere enterprise development support for legacy technologies
- Deploying SOAP/JMS across WebSphere Business Integration Message Broker
- Managing multiple interactions with Web services (including .Net)
- Developing Web services with WebSphere tooling.
Claims: Developing and monitoring a claims business process across distributed applications
This solution covers the problem of developing, monitoring, and managing long running business processes that interact with the different environments of LGI and DirectCar. It exploits the capabilities of the existing WebSphere MQ Workflow and the new functions of WebSphere Process Choreography working with WebSphere Business Integration Message Broker, and the existing LGI and DirectCar systems.
Technical focus
- Developing complex workflows
- MQ Workflow interoperability with WebSphere Business Integration Message Broker and WebSphere Application Server
- Tooling: Full business analyst level process modelling support
- Exploitation of insurance-based executive and business process dashboard
- Supporting the common event infrastructure.
Future articles in this series will focus on the technical details of developing common policy and administration claim processes. The next article in this series, Merging disparate IT systems, Part 2: Understand the claims system, describes the architecture and implementation of the claims system, including the products, platforms, and tools used.
- Visit WebSphere Business Integration on the WebSphere section of developerWorks.
- Find out more about WebSphere Business Integration from the IBM Software site.
- Check out IBM WebSphere Business Integration for Insurance solutions.
- "Business processes and workflow in the Web services world" (developerWorks, January 2003) explains how a workflow is only as good as the business process underneath it.
- Learn about IBM WebSphere MQ Workflow.
- Learn about IBM WebSphere Business Integration Message Broker.
- See an example Web application which uses WebSphere Portal for the Web front end, WebSphere Application Server as the application server, and WebSphere MQ for the messaging layer to an enterprise back-end system in "Configuring your solution with WebSphere Portal, WebSphere Application Server, and WebSphere MQ" (developerWorks, January 2004).
- For information about the compatibility and integration of the products used and tested by the IBM Software Group System House Solution Test Team in the "Merging disparate IT systems" solution, see the "Mergers and acquisitions scenario" section in
Integrating IBM middleware to develop business solutions (developerWorks, February 2005).
- Innovate your business with the latest technology from IBM. Get trial downloads of IBM products now.
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