Interview: Aon IT shines in Latam

Chief information officer for Latin America at insurance giant Aon Tadeu Machado tells IT Decisions about the firm’s plans for technology and why his team is positioned ahead of the curve.

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Insurer Aon Corporation is now driving a global IT transformation to consolidate systems and save money, just as many other organizations looking to get technology in a good shape to support future growth in the post-recession world.

However, the story in Latin America is a little different. While businesses have generally stagnated in Europe and the US, Latin countries are booming –  and that is also true at Aon, which has massive Brazilian clients in its portfolio such as oil giant Petrobrás and mining multinational Vale. This has in turn translated into an expansion agenda for IT at the region.

“The Latam [market] is very different to what it used to be five years ago: we had a fivefold increase in revenue over that period and a threefold increase in staff numbers,” said the firm’s chief information officer for the region, Tadeu Machado.

“If you take Emea as an example, the market is saturated, it is very difficult to win new business and the US is the same, but Latam revenues are rising every year. I showed these [numbers] to my boss and said: ‘we have to invest’.” He said.

“Last year, it was established that 2011 budgets would be – at a maximum – the same as 2010, but Latam is an exception: my spend has increased by 20% while Emea and US [IT] budgets remained flat.  We needed to spend more, otherwise our operation would collapse.”

Generating savings

According to Machado, Aon has a global plan in terms of applications and projects around that area respresent the largest chunk of the firm’s IT efforts this year and Latin America is no exception.

Aon has policy management systems – which perform the company’s core functions, much like an enterprise resource planning software – in about 80 different versions worldwide. The aim is to reduce that down to four systems.

According to Machado, the situation in Latam around the consolidation of the region’s system, dubbed Aon Access, is better. This is because the countries use the same platform, which is developed in Argentina in partnership with supplier Inworks.

“Today, we are in the process of moving Aon Access to the web and migrate it to .Net and SQL Server.  By moving to the web, I can consolidate the systems in one datacenter and reduce a lot of costs linked to items such as hosting, maintenance and people,” he said.

According to Machado, the move to the cloud is planned to take place in about two years and a minimum reduction in spending of 15% in relation to the current set-up is expected.

Aon’s key vendors for infrastructure management are currently CSC and HP. The Latam CIO isn’t yet certain of where he would host the new cloud-based system, but may take advantage of existing global contracts.

“When you move to a web-based platform, you can host it anywhere. It could be that we may use Aon’s existing datacenter in the US. But you have to be careful about regulations around data for different countries we operate, so we need to find a facility that meets all these regulations,” said Machado.

Machado makes the point that such migrations to the web only ever generate savings when the move is well-planned from the start. He also argues that generating short-term savings by going for the web-based approach is close to impossible.

“You may think that you will get savings in a very short-term period, but it doesn’t always work that way. We are migrating from Lotus Notes to web-based Outlook now, but you cannot cut the Lotus Notes servers or move old messages to the new set-up, both platforms have to co-exist for some time, so you can’t cut the servers, licensing or anything,” said Machado.

The CIO also mentioned that there are differences in architecture around shifting to the web-based approach, so Aon had to carry out some upgrades around areas such as remote links between countries. So far, $300,000 has been spent in the revamp, on top of licensing of the new products, maintenance, operational systems and databases, which takes the migration bill to about $500,000.

“You can probably generate savings [by moving to the cloud] in the mid-term, but to say that this can be achieved in the first or second year is nonsense,” said Machado.

Keeping track of progress

Aon also keeps a close eye on every penny that goes in technology as well as progress around IT projects to ensure the budget is well spent.

According to Machado, if a request for an application is not mentioned in a particular business budget and said system is required down the line and at a cost of over $50,000, a cost-benefit analysis has to be prepared along with additional paperwork. This is then sent to the company’s headquarters in Chicago to be analysed by top management.

“The idea is to avoid the scenario where one can say that a project will take longer, that budgets are no longer enough and so on. That keeps me on track and I also don’t get any surprises,” he said.

“IT is very expensive, and I always tell CEOs in Latam to think a lot before telling IT to do something – if you need to hire people and do data entry manually is may be something cheaper than going off and building a system from scratch.”

Apart from the consolidation of the policy management systems, Machado’s team is also looking to replace the 50 disparate claims processing systems currently used at Aon in Mexico by a single web-based platform supported from Argentina. Again, the intention here is to drive down cost by reducing the third-parties involved in keeping the software operational.

A new web-based quotations platform is also undergoing development – also delivered from Argentina, this is an initially regional project that has now gone global.  Other global initiatives involve the changeover of financial applications from Sun Systems to PeopleSoft, as well as the implementation of revamped web services for customers.

According to Machado, overall about 30% of Aon’s systems are global and 70% local. When it comes to Brazil, the intention for the next three years is that 60% of the applications will be global or regional, while 40% will be local.

“You need to think globally, regionally and then locally. By applying that philosophy, I can reduce a lot of unnecessary spend.”

Problem-solving, Brazilian style

Aon’s Latam IT team consists of 120 in-house employees, 18 of which are based in Brazil and 35 in Argentina, where the regional team is also based due to language matters and lower cost.

The regional techies in Argentina support anything that is used across Latin America, from Outlook to corporate systems such as Salesforce.com, which the firm uses for prospects. Country teams will often work in systems related to specific areas such as human resources.

“The idea for local people is to develop local applications, but we do have a very rigorous process to analyse any local expense. Firstly we need to see if Aon has a global application that can be reused and if the answer is yes, I will bring it to the regional team to tailor it for the entire region, once. If not, we can develop it locally,” said Machado.

Machado said that in this organizational set-up, the Brazilian team comes in with the creativity and problem-solving, which comes in handy in the planning stages.

“[Brazilians] always needed to get on with things with little money, so that also provides a considerable advantage over, say, an American. That is because [in the US] everything is easy: for example, web connections can be switched on within 24 hours – now go to Brazil and see if that happens,” he said.

“When you are planning in IT, you also have to think a lot about a whole range possible problems and because we are used to that, we can tackle [issues] in a better way. For the Americans, it is easy as they have things we don’t have [in Brazil] such as good infrastructure.”

Thinking globally

However, dealing with Brazilians is not always a bed of roses. According to the CIO, bringing in the global mindset has been a constant leadership challenge.

“If you are a Brazilian IT director, you want to deliver solutions here and do everything locally, it’s normal. But it is also an issue,” said Machado.

“What I tell my team is that they work for a global company and have to follow global decisions and this can very difficult at times,” he added.

According to Machado, this is partly down to the fact that Aon – particularly in Latin America – is a consolidated group of what used to be standalone, indigenous companies, so some people are still attached to the idea of working for a local firm.

Just as many other IT leaders, there is also the issue of translating business needs to technical staff and pushing them towards a common goal.

“I tell people this company is theirs: if you build better systems, we will get more money in and reduce cost. Then there will be more money to spare, so bonuses will be bigger – you have to think that way,” said Machado.

“[I tell people] to think about their own homes: do they spend unnecessarily? People in IT follow fashions a lot, like the iPad – but if it does not make sense in terms of bringing cash in or cutting costs, you are doing something stupid,” he said.

Machado comments that another testing aspect of his job is not only push a global technology agenda, but also defend the local interests.

“Sometimes, people feel inclined to make decisions on a global basis, so fighting for local things is very important. You also have to know when it makes sense to go global,” he said.

The CIO points out that Latin America has gained more negotiation muscle in the last few years due to the region’s business performance –  and that spells good news for IT.

“Five years ago, Latin America represented 2% of Aon’s overall business and now we are already reaching 10%. So now we have a lot more power, we are growing and in IT and we were the only region that got an increase in technology budgets while everyone else’s was flat – so the numbers say everything.”

Photo by Anthony Muñoz licensed under Creative Commons