Finance :: Insurance Software Solutions - Build or Buy

Companies that want to be successful need to develop, grow, and manage their business effectively-yet to successfully accomplish this, today's insurers need to recognize industry trends and optimizethem.

DEVELOPMENT TIME

Build: Business need to factor in the multitude of required meetings necessary to plan, discuss,design, execute proof-of-concept, and maintain continual development. A policy administrationsolution can be particularly tough to estimate the total investment; you have to include the cost ofthe resources involved in environment & software development, including :

o Requirements gathering

o Infrastructure construction

o Analyzing

o Designing

o Implementation

o Testing

o Training users

o Ongoing maintenance/enhancements/updates of the software

Buy: Purchasing an insurance solution suit or policy administration software is often more costefficient, as it eliminated many of the costs involved in architecture design and development,however there are still licensing fees subscription costs, particularly with Software-as-a-Service(SaaS) model. Even though a custom-built application may seem to offer

control and flexibility, build-your-own-software can lock your company into a less than

optimal solution.

Buy: Solution vendors have the benefit of having invested their time, money and resources intoperfecting solid software that they can tailor to fit your needs. Other compelling items to considerwhen trying to decide whether to build or buy include:

o Vendor solutions for policy administration applications have the capability to leverage reusablecomponents.

o Purchased software can often be easier/quicker integration with third-party technologies.

o Reliability has been tested and proven.

o Purchased software should be scalable, future-proof, and able to handle fluctuations in userdemand, providing the ability to grow with your business. Additionally, SaaS solutions also have theadded advantage of rolling out new releases, quickly and efficiently without the need to trainadditional resources or invest time into programming and development. After all, the repercussionsof a software choice can be long lasting and affect all your business systems and processes.

Many businesses assume that building their own in-house software is an easier route; especiallyconsidering that it would be customized for their organization. Since it is developed and maintainedby in-house staff, you have total control over the software, changes, updates and overall design.Proven software solutions should have an agile development methodology, which would allow for acontinuously enhanced platform, and ensure that custom feature requests can be folded into thebase application. While this is an often overlooked benefit, it can be a key factor, as having theability to stay modern is a critical element for business. Budgets can change based on economicalfactors, and so can moods, minds, and development criteria. However they often overlook the factthat a tailored solution could result in increased costs, including the addition or enlargement of ITteams and of front-end time by employees. Subscription or pay-as-you-go models can minimize risk,as a business can roll in applications based on need. Any software investment should yield positiveresults, whether they address complex system challenges by streamlining operations, reduce costs,leverage new market opportunities, or as with some vendors, a unique combination of all. However,when software is developed in-house, there are added costs involved for development, testing anddesign, especially in order to keep software from becoming dated or obsolete. However, in today'suncertain marketplace and rapidly advancing technology environment, innovation can be a risk. Acommon perception when developing in-house software is that users will not expect as much from itas a purchased software package, that they will be more forgiving of its shortcomings. Each of thesestages can take months or even years before you're ready for launch, which can be furthercomplicated by system defects, flaws, and revisions. Additionally specific software developmenttools, training and staff time must also be included in estimates.

Buy: Speed-to-Market is a term that has been abundantly utilized, as insurers recognize theimportance of rapid response, fast turnaround and the downside of development time. Like manybusiness marketplaces, the P & C industry is an extremely competitive one. Additionally, whenopting to buy a solution, you want to ensure that expansion costs are considered -as adaptability ofthe product is a key advantage especially for expanding distribution channels and/or leveraging newmarket opportunities. Gone are the days when one dimensional insurance portals are packaged andsold, with rigid tactical application for submission and limited data capture.

SOFTWARE MAINTENANCE

Build: Anyone who has an iPhone or who has ever logged into Windows is probably familiar with themessage indicating software updates are available and to install. Not to mention ongoingmaintenance of the policy administration system, unsupported by an external company, as well asthe costs for system developers necessary to help construct and implement such infrastructure.Vendors often include a setup or installation fee, which in some cases may also include amaintenance package or service plan. if your programmers have fast fingers, your data can becaptured and coded quickly, however no matter how speedy your developers are, there is no rushingquality.

Buy: When you purchase policy administration software, updates and maintenance are theresponsibility of the vendor, as opposed to in-house staff. Requirements gathering, writing andtesting the application code, user training and acceptance, hardware/software coordination andtesting systems, comprises only a portion of the time necessary to developing a customized system.

There are however, considerable challenges too, as vendors may tout a rapid deployment, however ifthere are complications in a build, or they fail to adhere to company's business requirements,inevitable delays can turn costly. As most Legacy system users learned (the hard way) if your systemis not future-proof, than technology will continue to evolve, regardless of whether your business can.But in reality, users demand as much, if not more, from software developed in-house. Businesses areoften misled on the upfront expenses of an in-house build, as it is nearly impossible to estimate all ofthe modifications that are sometimes overlooked during the initial design.

In an effort to assist insurers with the decision about whether building or buying an insurancesoftware solution is best for your company, we've complied a small comparative to considerregarding the differences between "buy" and "build."

UPFRONT COSTS

Build: It can be difficult when factoring in upfront costs, to build a custom insurance softwaresolution, because initial investment in hardware as well as software may be required. Vendors cannow focus on increasing acceleration, value, and innovation, so when a business chooses theirsystem, the software arrives with already proven performance quality.

OTHER FACTORS

Build: The reality with most businesses, particularly insurers, is anything can happen. There are amyriad of other factors that businesses must consider when building their own solution, like: Do ourbusiness and IT Strategies align ? Is our solution adaptable, responsive, and future-proof? Is ourdesign scalable ? Can it cater to the businesses growth and expansion into new markets ? What ifthe developer(s)who build our in-house system are heading out the door? What resources should webe willing to sacrifice if we maximize our budget but encounter unexpected issues ? How do weaccommodate for an unsuccessful implementation ? When and how can we measure growth, returnon investment (ROI) and true speed-to-market ?

Buy: SaaS solutions, particularly those with ascalable suite of insurance processingapplications that handle core functionality,have measurable benefits, including faster timeto value, minimized operational costs, andsimplified integration. It can takes years ofdevelopment and maintenance--not to mentiona quite a lot time and money before the systemmeets the requirements that guided itsdevelopment and design, works as expected,and can be implemented with those samecharacteristics. There are no guarantees that could bridge the gap between an in house system'scapabilities and the actual implemented system, which those who have encountered this dilemmaknow, can often become exceedingly significant.

In conclusion, ultimately, there will be additional underlying aspects, many unique to your business'scurrent and expected demands which should also be explored, but in summary, as indicated byrecent analyst and industry reports, organizations who opt to build often fall short of theirexpectations when choosing to build their own software, versus buying a system.

. Being adept at implementations, especially those that are scaled to fit any size insurer, as well ashaving exceptional experience in software development, maintenance and systems integration, isalso a key factor when opting to buy. Regular release updates not only improve functionality, butalso to eliminate flaws. Not only that, users often think that because the developers are in-house andaccessible, they can request customizations and changes whenever they want, which is obviously notan efficient way to manage expectations. Other typical costs to factor in include on-site requirementsgathering and training, as well as any travel expenses which are often involved. Now solutions arebeing honed to fit the growing demands and ever changing imperatives of business.

SOFTWARE MATURITY

Build: Like a fine wine, good software often needs time to age, or rather mature. Proven vendorsoften have honed their experience in an effort to provide the most effective and efficientdevelopment and testing methodologies, thereby allowing businesses to focus on adapting to a newsystem. And while insurers are familiar with risks- most have built their business around identifying,analyzing, managing, and insulating against them, deciding on which trends to follow and whatopportunities to leverage, is a critical decision.

With the advances in technology and the constant fluctuations in identifying risk factors, now morethan ever, it is important to have a system that can deliver instant access, along with the ability torespond and manage your exposure. Of course, this situation could be prevented/controlled with acareful management process. A system with true multi-tenant architecture will enable every client tobenefit from system enhancements. In order for a system to remain innovative, it must remaincurrent and effective. Software developed in-house is especially taxing, on both the builders and thetesters, as there are always 'bugs' to squash and faults to find. Yet when it comes to modernizingyour operation, to maximize efficiencies of business processes, businesses often face the choice ofwhether to build or buy the software. Like any careful insurers, it is imperative to weigh the factorsand consequences carefully. When you buy an insurance software solution, true speed-to-market iseasier to achieve with a competent product that can be ready to launch, and it only requires aninvestment in time for user training