5 Reasons You Blew Your IT Budget

First, the good news: If you work in the IT department at an insurance company, your budget isn't likely to fall this year. Research from analyst firms including Novarica and Strategy Meets Action--not to mention a couple of late-year polls conducted by Insurance & Technology--indicates that many insurance companies plan to invest more dollars in their technology departments in 2012 than in 2011, and a majority of carriers are at least holding their budgets flat.

The bad news? More money might mean more headaches for insurance IT organizations, as business pressures will require them to stretch every dollar to its limit. "There's a lot of pent-up demand [for new capabilities], but there are also things in the background that have been put off," said Jeff Muscarella, EVP of IT at NPI, an Atlanta-based IT spend management consulting firm. "So even though budgets have gone up, there's pressure for them to go even higher."

Keeping IT spending under control is a constant struggle for CIOs. But it's not an impossible task. Here are some of the most common reasons for budget overruns, along with some potential solutions.

1. Ineffective Communication During The Budgeting Process
A common reason for tension in any group, whether it's a multimillion-dollar company or a family, is an inability to effectively communicate desires and boundaries. True to life, a barrier to clearly delineated goals at insurance companies, according to Greenwich, Conn.-based IT consultant Joel Collamer, is simply language.

"The tech world uses very different words than businesspeople use," he said. "You can have a sentence that means one thing to technologists and something totally different to the business side."

Jeff Palm, CIO of Minneapolis-based Allianz Life, a subsidiary of global insurer Allianz SE (Munich; US$129.9 billion in annual revenue), said there are some executives within his company who are more tech-savvy than others and who will describe the systems that they want, right down to how they want the interface to look and which data elements they want included. But, he added, he works within a system that facilitates development of solutions described by less technologically inclined peers as well.

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