Cigna CIO Andrea Anania looked out at 250 peers at an October 2001 conference in Rancho Mirage, California, and declared that she had successfully re-engineered her company's IT. These days, she said, projects are completed on time and within budget.
Anania spoke too soon.
Four months later, in January 2002, Cigna HealthCare's $US1 billion IT overhaul and CRM initiative went live in a big way, with 3.5 million members of the health insurance company moved from 15 legacy systems to two new platforms in a matter of minutes.
The migration did not go smoothly. In fact, there were glitches in customer service so significant that millions of dissatisfied customers walked away, causing the US's fourth largest insurer to lose 6 per cent of its health-care membership in 2002.
IT malfunctions may not have been the only reason Philadelphia-based Cigna lost a large number of employer accounts last year and watched its stock plunge 40 per cent. Wall Street analysts say increased competition and pricing miscalculations on the part of Cigna management also contributed to the drop in health-care membership from 13.3 million at the end of 2001 to 12.5 million by January 2003.
But in a conference call with investors to explain why Cigna posted a $US445 million net loss for the first nine months of 2002 and could only look forward to more bad news in the coming year, Cigna executives made it clear that the company had stumbled badly on what company officials like to call IT "transformation".
"Unfortunately, we have not executed well [on transformation]," confessed Patrick Welch, the new president of Cigna HealthCare, to investors on October 28, 2002. "The cost is greater than anticipated, much of the economic and service benefits are yet to be realised, and transformation shortfalls have led to service shortfalls, which have led to lower new sales and [customer] retention."
Cigna's transformation was hobbled not only by the insurance giant's haste to get its new systems up and running, but by its eagerness to cash in on the technology's promise of reduced costs and increased productivity. Instead of waiting to see how the new systems performed, Cigna precipitously eliminated the very people who gave the company its human face: its customer service reps.
Anania and her team at Cigna now say they have fixed the glitches, and a subsequent migration of about 500,000 customers went far more smoothly. Even so, some observers consider the Cigna snafus a classic example of what can go wrong when a large enterprise is in a hurry to replace disparate legacy systems with new infrastructure and acts as if the promise of productivity gains is ironclad. And the lessons learned - about the need for methodical testing, experienced in-house project management and more standardised governance - are applicable to integration-minded CIOs in any industry.
"CRM is a very important business solution. Our [customers] want better tools and capabilities and product options, and they're driving us into this space," says John Ounjian, senior vice president and CIO of Blue Cross and Blue Shield of Minnesota, which recently launched an integration effort similar to Cigna's. "But there's a heavy risk involved. How you connect CRM to the back office and bring customers on board makes all the difference. When you stumble, the very credibility of your company is at stake."
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