It's Not About Tech–Or Is It?

Microsoft, IBM want to talk about your business.

Where there's a boatload of money to be had, people can come upwith the most ingenious strategies and solutions to pry that moneyloose, no matter how much security stands between those people andtheir goal.

Take the late Auric Goldfinger, villain of the classic JamesBond film that bears his last name. Here was a man who had designson knocking over Fort Knox, the gold repository of the U.S., whichtoday holds more than $66 billion in gold bars and coins (by myunofficial reckoning using a $450 per ounce gold market price and areported 147.3 million ounces held).

Goldfinger's strategy involved fatal nerve gas delivered bygorgeous female pilots, the near vertical bifurcation of 007 withan industrial-strength laser, and the irradiation of the entiregold reserve with an atomic bomb (guarded by an insidious chauffeurwith an odd name and lethal headgear). Now, here's the evil-geniuspart: If the gold were rendered radioactive (untouchable for 100years), that would drive up the price, making Goldfinger's own goldholdings worth much more.

That grand plan–like many such schemes–didn't work, but suchfailures, real or fictional, don't deter those who see a fat pot ofgold at the end of some rainbow. One such prize in today's world isthe information technology budgets of the insurance industry, andthe two key plotters are familiar ones–Microsoft and IBM.

According to a report from Tower-Group earlier this year, ITspending in insurance for the U.S. alone is expected to be $36.4billion–and that doesn't include spending by agents, TPAs, andother parties. It's only a little more than half of the Fort Knoxholdings but apparently still worth going after.

IBM has long been a player in our industry, selling and latersupporting the mainframe technology that continues to be in placeat many insurance companies. About two years ago, however, it begansaying it was more interested in talking about the insurancebusiness (as opposed to why insurance companies should buy IBMproducts). This shift in marketing strategy paralleled the vendor'slarger theme of delivering services first and products second.

As recently as May 2004, Microsoft still was touting theadvantages of its .NET technology over archrival IBM's offerings.At last year's ACORD LOMA conference, Microsoft brought togetherlots of media in a lush Las Vegas hotel suite and made the case forits platform while bashing IBM.

Why the aggressive push on the insurance industry? “It's beenthe most profitable vertical for IBM,” said Dennis M. Maroney,insurance industry managing director for Microsoft's FinancialServices Group. “It makes sense for us to move in, [too].”

Even so, the Microsoft message was, “We've got superiortechnology,” that
is, until the 2005 ACORD LOMA con-ference. In an interview withNational Underwriter at that conference, Kevin Kelly, managingdirector of the U.S. insurance industry for Microsoft's Finan- cialServices Group, had a different message.

“We want to talk about business,” said Kelly. Although he feltMicrosoft had made a strong technology case to the insuranceindustry, he noted the company now wants to “refocus on business.”As part of that strategy shift, Microsoft launched its “experienceInsurance” initiative, designed to improve carriers' “customer,employee, and operations experience.”

Part of that initiative, said Kelly, will be to begin competingon middleware that can help carriers link legacy applications tonewer systems without a complete systems overhaul. Interestingly,that's one of the things IBM does. Further, Microsoft wants toemphasize ROI in claims processing and to focus on buildingagency/carrier trust.

So, now we have both IBM and Microsoft looking at things from abusiness perspective and enabling insurers to make the most oftheir legacy systems. At ACORD LOMA, both vendors were lining uptheir partners (other vendors that are using or complementing theirtechnologies) and stating their business cases to the insuranceindustry.

Make no mistake, however, this still is about the roughly $36billion pot at the end of the rainbow, and it still is abouttechnology. As Microsoft's own announcement noted, it is continuing“efforts to become the preferred enterprise provider for theinsurance industry.”

A battle is shaping up as these two players jockey for position.Unlike Goldfinger's nefarious plan, however, this is a welcomedevelopment. It will pump more money and energy into the insurancetechnology sector and help the insurance industry to improvebusiness processes in the long run.

So, let the gladiators fight and take as much gold as they can.The real winner is the insurance industry.

Ara C. Trembly is technology editor for National Underwriter'sproperty/casualty and life/health editions. He may be reached [email protected].