August, 2002 Article Submission Journal Archives ABOUT FSO Financial Services Online (FSO) is the first and largest financial services publisher and portal on the Internet. Our publications include Financial E-News, Financial Services Journal Online and Messages From The Masters, which are available at no cost on our Portal http://www.fsonline.com ADDENDUM: This Newsletter is published by Financial Services Online, Inc. and distributed on a complimentary basis to members of NAIFA, subscribers of the Virtual Sales Assistant(TM) and selected other recipients. It is designed to provide financial service professionals an overview of the events and happenings that may affect their business. If you would like additional information on any items or the sources used, please e-mail us at e-news-list-admin@ e-news.fsonline.com Contact: Carolyn Hersman chersman@comcast.net Copyright © 2002 Financial Services Online. Reprints and/or permission to reproduce Financial Services Journal must be obtained in writing from the publisher, Financial Services Online. LEGAL NOTICE Please read these important legal notices concerning this publication About NAIFA Founded in 1890 as the National Association of Life Underwriters, NAIFA is comprised of 900 state and local associations and represents the interests of 90,000 life and health insurance agents and financial advisors nationwide. Many of NAIFA's members are NASD-licensed registered representatives or registered investment advisors. Benefits of membership include legislative and regulatory representation, education and training, and networking opportunities. The NAIFA umbrella includes the Division of Financial Advisors and three specialty organizations: the Association for Advanced Life Underwriting (AALU), the Association of Health Insurance Advisors (AHIA) and GAMA International.		BUDGET CONSTRAINTS: TIPS TO CUT IT COSTS DURING THE DOWNTURN by Dan Osborne According to a July survey by Stamford, CT-based research firm Gartner Group, 44 percent of organizations have reduced their Information Technology (IT) budgets this year, some severely. Gartner reported that most were cutting back sharply on IT capital expenditures, particularly hardware. Now the situation looks even grimmer, with budgets tightening further and software allocations being pared down. "The impact from the events on September 11 will extend and intensify the economic slowdown impacting the global software industry for the next 18 months," said Joanne Correia, vice president for Gartner Dataquest's Software Industry Research group. "The verticals that could have slower software purchases will include the airlines, travel, automobiles, insurance and new consumer PC segments." Clearly, it is time to take stock of the financial side of IT. Here are tips from financial services companies that have found ways to cuts costs without letting it affect service levels or impact business operations. Unified Messaging Instead of being stuck in gridlock for an hour or two per day, how would you like to zero out your email, fax and phone messages? That's what Kelly Walls does 90 minutes a day in the midst of Atlanta traffic. "I receive 75 to 80 messages a day, so it's good to arrive with a clean inbox," said Walls, CIO of Royal Specialty Underwriting (RSUI). "I can immediately engage in productive work rather than playing catch-up with messages." This is made possible by Unified Messaging (UM). It offers a universal mailbox for voice mail, email and fax communications. Users can manage, review or respond to messages using a PC, wired telephone, wireless phone or handheld. According to research firm Ovum, three quarters of insurance companies will be using UM by 2005. One study by Palo Alto, CA-based market research firm The Radicati Group, Inc., found that support for UM averaged $208 per user, compared to $708 in companies administering separate email, voice mail and fax systems. Further, users saved anywhere from 25 to 38 minutes per day as a direct result of more efficient message handling. The problem? UM hardware and software isn't cheap. Cost of deployment for voice mail and unified messaging comes in at around $200,000 per server and you might need more than one. To put it another way, that's $150 to $1000 per user, depending on the size of the site and the range of services. RSUI's Avaya system is at the low end of the price scale as the company didn't need to buy any new servers or PBX systems. Fortunately, there is a cheaper way to go about it ñ outsourced messaging. "It's too much hassle to hook UM up ourselves," said Charles Whitener, National Sales Director of Albuquerque, NM-based Primerica Financial Services. "We prefer to focus on our core competencies, not IT." Primerica utilizes a UM system by Orchestrate.com, of Atlanta. Whitener estimates that Primerica has UM 7,000 users. He uses it to send out group emails, faxes and conference calls, allowing him to spend 90 minutes a day in the car answering email and fax messages, as well as voice mail. Overall, he estimates a total time savings of two hours per day. The service costs $10 to $20 monthly per user. Several UM hosting companies offer similar services. Storage and Pizza Some companies are looking at various approaches to storage as a means of cutting costs. Continental American Insurance in Columbus, Ohio, found an economical way to reduce storage costs. Instead of just buying more servers, it decided to implement a storage area network (SAN). "This will greatly reduce the upgrade costs associated with buying new servers," said Dave Thompson, Continental's technology supervisor. "The expense of buying'pizza box' style servers is considerably less than traditional servers." Pizza boxes are basically servers that are the same thickness as a regular pizza box. This allows far more data to be stored in a smaller space. As well as reducing storage costs, they also cut down on power. IBM, HP, Dell, Compaq, Sun and many others are coming out with their own versions. Such storage solutions "are becoming the configurations of choice for many companies," said Intel's technology business research analyst, Brooks Gray. A similar concept, but especially suited to small or remote offices, is the SnapServer. Eric Mark, president of Mark Walter Insurance in Canonsburg, PA, didn't want the expense of a full-blown server. "By paying attention to keeping costs down, it soon became clear that we didn't require a dedicated NT server to extend the file sharing and storage capabilities throughout our office," said Mark. "The SnapServer cost us no more than a third of what it usually takes to establish a traditional network." Cost-Effective IT Management Large companies are used to forking out big dollars for comprehensive network/system management solutions. They help them to monitor network traffic, track the health of every device on the network, and troubleshoot problems before users become aware of them. Vendors offering such products include Computer Associates, HP and IBM. Allstate Insurance, for example, utilizes Computer Associates' Unicenter TNG management suite. "Unicenter allows us to manage all our remote locations from a single console, which gives us the ability to reduce operational costs and increase system availability," said Roger Einbecker, Allstate's assistant vice president of IT. Not everyone, however, can afford the price tag, nor the many months it often takes to get such complex systems functioning. Anthem Life's Maine operation, for instance, used HP OpenView to manage desktops at its headquarters in Portland, ME, as well as over 20 remote sites. "It required a lot of attention from several dedicated resources to keep that system going," said Charles Cahoon, Anthem's Network Manager. "Despite years attempting to get it running well, we never reached the point where we felt in control." He looked around for an inexpensive alternative. From its headquarters in Portland, ME, Anthem now uses WebNM from Somix Technologies (Sanford, ME) in conjunction with What's Up Gold, a network monitoring, alerting and recovery tool by Ipswitch Inc. of Lexington, MA. WebNM provides real-time access to network status, remote monitoring, and inventory reporting. "We installed it in less than a week and found it simple to operate," said Cahoon. "Now we get much better uptime than before, and can be more proactive for a fraction of what we were paying before." He estimates the old management system came to over $300,000 compared to $30,000 for the new set up. His yearly maintenance contract fee has dropped from $55,000 to $6,000. Further, instead of two personnel each spending twenty-plus days a month, one person runs everything in one or two days a week. Another company taking an economical approach to IT management is American Equity Underwriters in Mobile, AL. "When the Code Red Virus attacked our network, we could take action before our system crashed," said Chief Technology Officer Alicia Widder. The company uses WebNM to monitor headquarters and 40 remote locations. Boosting Performance Without New Hardware With hardware dollars at a premium, companies must find innovative ways to make PCs last another year or two. One smart approach is to address fragmentation ñ a disease that slows Windows-based systems to a crawl by splintering files into many pieces. Left alone, files can eventually be split into hundreds or even thousands of bits, leading to a deterioration in speed and responsiveness. It is remedied by a process known as defragmentation. "Defragmenters are rising sharply in popularity as people realize they can often deliver comparable performance gains to hardware upgrades at a fraction of the cost," said Paul Mason, Vice President of Software Research at IT analyst firm International Data Corporation (IDC) of Framingham, MA. The technology has experienced steady growth in financial services in recent years, and is affordable for small offices as well as large enterprises. "I need to defragment my disks regularly to keep them performing well," said Leo Petroski, a developer at Cigna Insurance. Rick Adams, an executive at Allstate Insurance in Charlotte, NC, is also a firm advocate. "Regular defragmentation has increased the overall efficiency of my Windows NT workstation," he said. But it is in an enterprise setting that defragmentation really comes into its own. A large bank headquartered in California, for instance, conducts daily defragmentation on over 2600 workstations and 200 servers at its west-coast headquarters, 200 machines at an East Coast facility and hundreds of machines at a dozen regional offices. This company uses Diskeeper by Executive Software of Burbank, CA., the market leading defragmentation software. "For most Office users, a fragmented disk takes about five seconds longer to open and reboots take about 4 or 5 seconds longer," said senior technical architect Gary Stout. "Heavily fragmented disks exert an even bigger impact on performance." Per his calculations, at approximately five seconds lost opening a document, times 20 files per day for the average person, times 240 work days a year, times 3000 employees, that equals 20,000 hours a year of lost productivity. At $40.00/hour, that's a cost of $800,000. "Obviously, these are only rough figures, but I'd suggest that they're really underestimated," said Stout. He notes that Windows NT is heavily fragmented as soon as the operating system is loaded. On average he finds it in 1000 to 3000 fragments, enough to seriously affect performance. "That new 1.5GHz PC may seem like a screamer, but you're not getting top performance," said Stout. "It's like using regular gasoline in a formula-one race car ñ it will run and you'll feel real cool driving it, but you won't win any races." Help for the Help Desk When IT budgets must be trimmed, many firms see the help desk as a place to cut corners. Big mistake. This leaves employees struggling with their own problems or asking colleagues for assistance. According to Gartner analyst Kris Brittain, "For every dollar a firm cuts out of the support budget, it spends another two dollars on an'underground help desk'." A better approach is to invest in tools that offer monetary savings while improving the level of support. Earlier this year, Wausau Financial Systems of Mosinee, WI implemented Network Associates Magic Help Desk software. Wausau has 63 support staff assisting more than 800 financial institutions around the country. When a client calls in, the software recognizes the caller and puts account information on the screen. Tom Nohelty, the company's Vice President for customer care estimates that this feature has improved efficiency by 10 to 15 percent. Such savings are not unique. Brittain says that companies using help desk software only for logging and tracking calls spend $50 to $60 per call, while ones using automated help management tools can cut that to $10-$14. Such applications enable the help desk to be proactive in addressing problems without adding staff. Instead of viewing the help desk as a cost center, then, it can be used to significantly improve return on investment from the total IT resources of the organization. As well as writing technology-based articles, British Columbia, Canada-based Dan Osborne is a jack-of-all high-tech trades. He offers website proofreading services to overseas companies; Japanese/English translation; technical writing of articles, helpfiles and manuals; business writing of news releases and articles; web site design; and HTML programming inJavaScript, PHP and MySQL.He can be contacted at djosborne1@telus.net