Agency Management System Firms Get Cozy, But Merger Seen As Unlikely

Agency management software rivals Applied Systems and AMS Services Inc. have entered a new era of cooperation–with AMS even using Applieds platform for agent/carrier transactions–but the prospect of a merger between these two key players is unlikely, according to the two tech firms.

Late last year, Windsor, Conn.-based AMS sent shock waves through the software industry with its announcement that it would license Transformation Station–an Applied Systems data exchange technology for real-time transactions–from IVANS, despite the fact that it would benefit AMSs chief competitor in the agency management systems market.

In an interview with National Underwriter during the AMS Users Group National Conference, held in Dallas, Loren Parsons, chief executive officer of AMS Services, explained that, “we hadnt developed [a data exchange] yet, and we didnt see it as being a strategic thing for us, so why not?”

According to Mr. Parsons, “our relationship with Applied has gone from what used to be a bitter feud to a good relationship.” He noted that the good vibrations also extended to the companies users groups, with an ASCnet representative sitting in on an AMSUG board meeting during the conference.

“I think theres a lot we can do cooperatively at the user group level and with Transformation Station,” Mr. Parsons continued. “Certainly, theres a lot of hot air and very little results in [agent-carrier] interface. Im not wildly optimistic that the world is going to change because weve done this, but it removes a barrier.”

Mr. Parsons asserted that with both AMS and Applied using the same platform, insurance companies would be more likely to use Transformation Station. He conceded, however, that “there are still a fair number of companies that resist Transformation Station because they dont want to pay the transaction fees.”

However, despite the new era of cooperation, “I dont think a merger is going to happen,” according to Mr. Parsons. “I think it would be foul for the insurance agent,” he said, contending that it would force some agents to move to a different agency management system.

Mr. Parsons also maintained that the management systems offered by the two companies are “distinctly different,” despite the common platform.

“Applied gets very few of their customers from our base and we get very few from theirs,” he said. “As long as we do a good job of keeping the technology up-to-date, and answering phones when people have hassles, agents dont want to change. Its too much work.”

He also noted that there is a large existing base of users of both management systems. “There might be some other reasons to merge,” Mr. Parsons observed, “but certainly it wouldnt be to get everyone on one product.”

James P. Kellner, chairman and CEO of Applied Systems, based in University Park, Ill., characterized a merger as “a totally crazy idea. Its crazy to think that [we would merge] because of the cooperation thats been going on.”

Mr. Kellner said he preferred not to comment about industry rumors that either company might buy the other. Asked whether such a scenario might make any sense, he noted, “I havent given it any thought. Buying companies right now, well, its not an advantageous time in todays economy.”

Not everyone believes a merger is out of the question, however.

“By licensing Transformation Station, AMS has taken the first step in digging itself out of a technological hole they have stepped into through a consistent lack of focus and innovation,” according to Judy Johnson, vice president of insurance information strategies for the META Group, a Stamford, Conn.-based research organization. “A merger or acquisition by Applied or another player would not surprise me.”

Another META Group analyst, Chuck Johnston, program director of insurance information strategies, stated: “Its good to see sleepy, friendly rivals begin to realize that their true competitors are not each other, but converging [customer relationship management] vendors and portal vendors. If [Applied and AMS] do not wake up quickly, these companies are poised to take their markets.”

Dirk Boudreaux, who turned over his AMSUG presidency during the conference to his successor, Pam Parry, said he has “never considered the possibility of the two companies becoming one.” He said he believed that Applied and AMS target their products to different types of agencies.

“I dont know what impact [a merger] would have. Maybe it would stop some of the gnashing of teeth that would happen when you try to compare the two systems head to head,” added Mr. Boudreaux, who was senior vice president and treasurer of the Louisiana Companies Insurance Agency in Baton Rouge when he assumed his presidency last year. He left the agency during his term and is now moving on to another unidentified business venture, according to AMSUG.

“We dont want to underestimate the fact that we are still fierce competitors, and I dont think its likely that were going to get together on that level any time soon,” said Kathe Donlan, marketing director for AMS. “But we are working hard to cooperate where it will help the agents on interface and integration.”

G. Barry Klein, vice president of sales in the software operation of Irvine, Calif.-based Superior Access Insurance Systems, an insurance wholesaler, has a background with both companies, including more than 10 years working with AMS.

“I would be surprised to see it happen,” he said of the merger idea. “The two [companies] are just trading customers, except for the low end. The idea of it sounds intriguingbut they have very different corporate cultures. They have very different product lines. It wouldnt make any sense to keep all those products. So the only way it would make sense is if one of them bought the other and then started phasing out products. It could happen, but I would be surprised if it did.”

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, April 1, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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Agency Management System Firms Get Cozy, But Merger Seen As Unlikely

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