Fireman's Fund Selects IBM for On Demand Business Transformation

$94 Million Contract Can Reduce Applications by 70 Percent While Improving Customer Service

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SAN FRANCISCO - 11 May 2005: Fireman's Fund Insurance Company® has taken a third major step in its total IT transformation by awarding IBM a ten-year $94 million contract to modernize a major portion of the property casualty insurer's application, development and maintenance software into an On Demand infrastructure that could reduce the number of major applications by 70 percent while improving customer service. When completed, the work could save Fireman's Fund $200 million, more than double the project's actual cost.

With IBM's assistance, Fireman's Fund will shift its IT operations to an Internet-based computing model known as a "service-oriented architecture" (SOA) that enables consolidation of costly, redundant applications. Under Fireman's Fund direction, IBM will sift through mission-critical applications using a unique IBM Business Consulting process called Component Business Modeling to determine which applications deliver the most value to the business and which processes can be refined, consolidated or eliminated.

For example, Fireman's Fund currently has multiple legacy systems for policy administration and billing, many with areas of functional overlap. Fireman's Fund estimates the modernization could consolidate as many as 70 percent of applications, reducing costs and making resources available for new IT projects that generate new revenue.

The underpinnings of Fireman's Fund's On Demand infrastructure will be built on the Insurance Application Architecture (IAA), IBM's insurance industry expertise and best practices that will integrate with industry standards delivered in an SOA. IBM worked with the world's top insurance companies to create IAA -- a transformative IT architecture that allows the business of insurance to be expressed in formats that are easily usable by IT professionals. Newly available resources and a flexible architecture allow Fireman's Fund to link new IT investments directly to business objectives, such as quickly improving, simplifying and releasing new products to independent agents nationwide.

"Insurers are increasingly taking measures to improve speed-to-value through improved strategic flexibility and operating adaptability. They are taking a hard look at how IT can help enable this increased level of flexibility and adaptability while simultaneously reducing expenses," said William Pieroni, general manager of IBM's global insurance practice. "Fireman's Fund is clearly leading this trend by recognizing that there are no IT projects but rather business initiatives that rely upon IT for enablement. They are rapidly aligning strategic intent with IT capabilities."

"This move to SOA will directly match our IT resources to our real business needs," said Fred Matteson, chief information officer for Fireman's Fund. "We will reduce the size and cost of our existing infrastructure, giving us the resources to partner with our line-of-business colleagues to implement new technologies that can directly impact our bottom line. Our new operating model will differentiate us in the marketplace by making our technological connection with customers the smoothest in the industry."

The first step in Fireman's Fund's IT transformation happened over the past four months when the company transferred its IT hardware network infrastructure to IBM. The second step, taken simultaneously with the first, was a modernization and consolidation of Fireman's Fund's telecommunications functions through a contract with AT&T.

"This SOA contract is the vital third step in re-tooling our application development and maintenance capabilities to achieve better performance, higher quality products and reduced time to production in everything from claims processing to billing and financial programs," Matteson said. "Our IT managers will use IBM's advantages of scale and technological preeminence to simplify our architecture and save us $200 million dollars over the life of the contract. Just as important as cost savings, the contract will transform our IT support into a best-of-class delivery model for our agents and policyholders."

Insurance software provider Webify Solutions played a critical role in helping Fireman's Fund achieve its business goals. "SOA allows businesses to become more agile while avoiding rip and replace of legacy IT systems," said Manoj Saxena, chief executive officer of Webify Solutions. "As an IBM On Demand Optimized partner, Webify Solutions is delighted to provide Fireman's Fund with our WebSphere optimized suite of products that simplify agency collaboration, enable process transformation, and improve SOA governance."

Industry standards connections in the SOA and IBM's insurance industry semantics in an IAA create common interfaces to access data in legacy and custom applications. This allows Fireman's Fund to speed the deployment of new solutions and provides a viable ecosystem for independent software vendors to more easily integrate their software. IBM software used at Fireman's Fund includes WebSphere, Rational and Tivoli.

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