allow maximum flexibility as they
seek to compete in various markets
and locations with varying demands.
K Whether the application is for a new
product line or intends to replace an
existing system for a current product
line: If a company is launching a new
operation or expanding operations,
such as a personal lines insurer
stepping into commercial lines, then
many new software functions will be
needed simultaneously, so a suite can
be more efficient. However, in certain
cases, the organization may choose to
retain some of the existing systems.
In such cases, the use of best-of-breed
applications is the usual choice.
K The organization’s IT strategy:
whether the IT utilizes in-house
hosting vs. use of a SaaS platforms.
In organizations preferring SaaS
platforms, a suite is preferable over
custom integration of individual
components since such integration
is perceived to be more difficult for
SaaS solutions than in-house hosted
solutions due to security and man-ageability considerations. Conversely,
an organization using an in-house
solution could go either way.
K Timeline to implementation: Typically, a suite has a smaller implementation timeframe when replacing all
systems. However, in most mid-to-large insurers, installing core systems
on a component-by-component basis is often the only practical way to
avoid getting overwhelmed with the
amount of work involved. Thus when
pressed by timelines, such organizations either select best-of-breed applications or select a suite that can be
installed in increments by breaking it
into individual components.
Choosing between a best-of-breed
application approach and a suite gets
complicated when organizations start
considering the following non-function-al criteria. These criteria do not immediately favor either implementation
approach, and should be kept in mind
when making decisions:
K How dynamic is the insurer’s product line, i.e. does the insurer add/
update products frequently? Would
the selected choice (best-of-breed or
suite) meet future product needs?
K What would happen if another vendor
offers a better application in the future
than what is being used by the insurer?
K How large is vendor risk if the vendor’s existence in the future is questionable or if the cost of the vendor’s
product could change?
The good news is that the market is
heading to a state where the above factors
are becoming less critical. This is because
best-of-breed vendors are increasingly
providing complete suites to address
most insurance company needs. While
a couple of years ago, only a few vendors
had complete core system suites, many
vendors today offer complete suites of
core system applications, where each
function can be deployed in increments
and be mixed and matched with other applications as needed, in order to support
the transition and future upgrades.
Such capability presents a solution
that can be referred to as a “best-of-both”
solution, since the organization gets the
benefits of a suite along with the flexibility of swapping individual components
with the best-of-breed application when
needed in the future. However, such a plan
requires a well-designed, component-ori-ented application reference architecture
to achieve this flexibility. A well-designed
reference architecture enables the organization to know what solutions it can mix
and match with a suite or best-of-breed
applications in order to maximize the value
of the implementation.
As the application software market
continues to evolve, it will be interesting to
watch what happens next. Once the field
is leveled with almost all vendors offering
best-of-both solutions, what will vendors do
next to stay on the leading edge? Value-added services like bundled business process
outsourcing (BPO) services and integration
with third-party systems have already started to emerge. As a result, insurers should
ensure their information systems are flexible
enough to respond to further developments
in the ever-evolving software market. ITA
Aman Aggarwal is an insurance
technology professional with nearly
20 years of experience. He is also the
author of the “Industry Reference
Blueprint for Insurance.” The views
are the author’s personal opinion and
do not represent opinions of his employer or any other organization.