There are plenty of red-flag subjects that will spark a greatdebate in our society. Should Pete Rose be in the Hall of Fame? WasOswald acting alone? What was Coppola thinking when he madeGodfather III? But in the often-staid world of insurancetechnology, there are three little words that are sure to get theIT staff worked into a lather: Build versus buy.
Not surprisingly, that question sparked some interesting responseswhen IVANS posed it as part of its Emerging Strategies in Insuranceand Technology Survey last fall. The safe route turned out to bethe popular route: 45 percent of those responding said thattechnology decisions were made on a case-by-case basis, and whetherthey built or bought depended on a cost evaluation conducted at thetime of the decision.
Joanne Currier, vice president information systems with VermontMutual Group, agrees with the IVANS study. The survey results areconsistent with our current philosophy, she said. The rate ofchange of technology, increased specialized skill set requirements,and accelerated expectations of time-to-market deliverables haveforced us to extend our support needs beyond our internal staff,she explained. The reduced risk factors and total cost have alsomade outsourcing options more appealing for certain specializedprojects.
Insurance carriers are comfortable with the quality of the productsthey can purchase from software vendors, which is reflected in thefact that only five percent of the respondents admitted to buildingeverything internally and managing it themselves.
That goes back to the first question businesses should askthemselves when considering build vs. buy: Is this one of my corecompetencies? Most insurance companies would probably say softwaredevelopment is not.
But while they may be reluctant to build their own systems, theyare also somewhat uncomfortable in outsourcing their entireoperation. There may come a day when virtual companies are morethan just a fad, but youll have a hard time convincing thisindustry that its a practical way to go.
So what this survey tells us is that insurers are, for the mostpart, conservative business people who will try something new (tothem) if they can be convinced it works. But you had better havesome good examples ready. Thats because most insurers agree thattheir industry is last among all the financial services in usingInternet technology. (Stock brokerages were first, followed bybanking, then real estate.) That snails-pace reputation is hardearned, but its something that the industry is proud of as well; 78percent of those responding described their attitude towardadopting technology as practical with 16 percent using the termconservative.
And somewhere out there is the six percent who described theirattitude as aggressive. Think of them as the next generation ofinsurance people. ROBERT REGIS HYLE