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(originally published by Booz & Company)


IT Road Maps for IT Transformation

The operating plans of each business include what’s expected relative to that return on investment [ROI], and the businesses are required to report what they have achieved in terms of that ROI. We don’t just allocate investment dollars to a business. We allocate the money, track it, and report on it to be sure that we are getting the expected return, given the dollars that we invest.

We haven’t always gotten the kinds of returns we’ve hoped for. But over the years, we have refined the process so that we’re looking at milestones along the way in terms of both the dollars that it will take to build whatever we are building, and the dollars that we expect in terms of the return. In some cases, we’ve called a time-out if something is out of balance along the way.

S+B: What are the greatest benefits you’ve gotten from this type of IT planning process?
McCARTHY: We put together an overall technology blueprint for the company, and that’s a three-year view of the underlying technologies that are going to be required to support the business blueprints. And in a company of our size and scale, that’s a pretty complex set of hardware, software, and other technology capabilities that need to be positioned appropriately. So we have very few situations where we are being asked at the last minute to implement some piece of technology. It’s all very well laid out, and I think that’s one of the greatest benefits: We can plan our spending, we can plan the implementation of these technologies, and we can bring into our labs the technologies that need to be tested, to be sure that the capabilities are going to be there when the business needs them.

S+B: In an industry like healthcare and a company as broad and complex as Aetna, things must happen that are not on the IT road map. How do you manage those exceptions?
McCARTHY: In two ways. First, we work in a regulated industry that’s becoming more and more regulated. Throughout the year, the federal government or any given state government will have a requirement that they want to see implemented in short order. So we allocate a total dollar amount to the regulatory environment, and as those requirements come up, we evaluate them and then incorporate them into the overall investment planning process and the technology planning process, recognizing that we’re not going to have a three-year road map for federal or state government mandates. So we try to incorporate the investment and the work into our overall release planning. That’s probably the biggest exception area.

Second, in some cases where we have some lead time, as with the new healthcare reform legislation, we are looking out over the next three years at what we need to have in place, and by when, and what needs to be positioned underneath that from a technical standpoint to support the healthcare reform legislation. So in that sense, we are able to create a quasi-blueprint.

S+B: Do you approach all these diverse demands in terms of portfolio management, dividing up the portfolio into different types of investments, perhaps regulatory versus differentiated? And do you set targets that you change year-over-year based on your strategy?
McCARTHY: We do, and we’re pretty challenged in that regard, as I’m sure most of the other healthcare companies are. Over the past five years, the regulatory component has consumed more and more of the discretionary spending that we would prefer to allocate to the businesses. And this year and next year in particular, as we get positioned for healthcare reform, there’s very little strategic investment that we can make, because the regulatory component is consuming so much of our spend.

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