Is the death of the Insurance CIO possibly around the corner?

It was during a conversation over a year ago someone raised the possibility of the “best-before-date” of a CIO. He made the point that in 10 years time, IT would be a commoditised service consumed as and when it suited the business. He was really pushing the envelope – he meant all of IT from infrastructure services through to core insurance applications. I nodded sagely, as analysts do, and agreed with him in the principle but not on the time frame. 10 years… surely not.

The conversation was with a UK CIO of a mid-sized P&C operation and it’s been replaying on my mind recently. Against the backdrop of increasingly meaningful conversations about cloud, the idea ofan IT organisation being commoditised to the point of removing the necessity of a IT management structure suddenly seems real.

There are two interesting case studies. Firstly, the UK Royal Mail moved from an internally managed mail system for 37,000 users, to an external public cloud by moving all the users to the Microsoft cloud. That’s a significant and meaningful change in strategy for a large organisation such as Royal Mail. The CIO said it was driven mostly by a need for agility rather than cost-savings. The Royal Mail had decided to focus on delivering parcels and letters, and let an external supplier deliver internal email via the cloud.

The second is an insurance specific test case. A UK insurer is testing a policy administration system in the cloud. This in itself is significant – this is a large insurer testing out the idea of a core system in the public cloud. It’s still under test but the insurer is excited about what this can mean for their agility in IT delivery.

With the growth of traditional sourcing models, it’s easy to accept that infrastructure could be moved from a private cloud with a traditional hosting company into a public cloud. What’s much harder to get agreement on is a vision of the world where core systems live in a public cloud. And there is good reason for this. Regulators, customers and insurers alike will have concerns over security and data privacy. There will be concerns about being tied to a large cloud provider with little interest in commercial issues. There will be (and have been in the cases above) some hand wringing over the gap in SLA’s delivered in the cloud versus what traditional sourcing models might offer.

The examples suggest an inexorable move towards the commoditisation of IT. It may well be too early to talk of the death of the CIO, but there is little doubt that the responsibilities of a CIO could shift towards supplier management as cloud offerings mature and become a viable solution to new outsourcing models.