Agents Would Benefit From Open Source

Products are cheaper and more secure, and give agencies thepower to choose

Now that the soft market is a reality, agency professionalsincreasingly are aware that along with static or falling pricescome reduced premiums.

Unfortunately, our overall costs of doing business continue torise--just as they do for all businessowners--even during a downcycle. We handle revenue shortfalls by boosting production, butmanaging costs requires a more disciplined approach.

We notice some cost increases immediately. All it takes is atrip to--or even past--the local gas station to see how pricesfluctuate at the pump. Other price hikes are not so quicklynoticed--or so painful. These seem to garner our attention onlyafter a series of incremental increases brings an expense to acertain point. That's when we stop and do something about it.

This awakening occurred for me during a recent midyear budgetreview in our agency. One of the items I assessed was our totalcost of automation. I looked not only at the hardware components,but at software and related costs as well. And I viewed ourexpenses in the context of revenue over a period of years.

Initially, what I found did not surprise me at all. Automationhas been profoundly beneficial for our agency. Since 1998, we haveincreased gross revenues nearly 400 percent, with most of that gaincoming from new business, not just price increases. At the sametime, on a head-count basis, we increased our service staff by just200 percent.

A closer look at the numbers shows that the vast majority of ourproductivity gain came from the use of automation. Most of thatimprovement can be attributed to both the use of our agencymanagement system and the deployment of improvements such asreal-time interface and imaging capabilities, which our vendor hasmade available.

High Licensing Costs:

The other top cost we incur is for ongoing licensing foroperating systems and office-suite technology, which our staffregularly uses as they manage word processing, e-mail and, attimes, spreadsheet functionality. We pay bi-annually to maintainthe licensing of these programs, in the form of a "softwareassurance" program.

What gave me pause is that the amount of money that we pay forthese operating and office-technology product licenses each year isactually more than what we pay for our agency managementsystem.

So, I found myself asking the $64,000 question: "Do we get asmuch value for the money we pay for these licenses as we do forwhat we pay out to our agency management system vendor?" For me,the answer is a resounding "No!"

Perhaps a more relevant question is: "How much longer will wehave to wait until all agency management system vendors agree tosupport their products in conjunction with 'open-source'products?"

This will give agents the power to choose between anincreasingly cost-prohibitive, bloated platform and officeproducts, and what are called open-source products.

(Open-source products have an open-source code, are written bythe worldwide community of people that use them, and are sold bycompanies that provide extensive testing and customer support.)

Open Source Benefits:

Without a doubt, these products are much cheaper, and for many,they seem to be more reliable and secure. They don't regularlyimpose unwanted upgrade cycles and the resulting learning curves onour organizations.

By enabling agencies to work with these open-source products,vendors would allow principals and tech leaders to manage theirnetworks and desktops on their own terms.

I believe the tide is, in fact, turning against traditionalsoftware products and that open-source programs will eventually winthe war.

For several years, for instance, the operating system of theopen-source universe has been used on the majority of the world'sWeb servers. It now is being quickly adopted into networkenvironments, and even has a small foothold in the desktopplatform.

Programs designed to replace more traditional, commercial officesuites are spreading like wildfire as more individuals, schools andcompanies refuse to pay the high initial price and ongoing costs ofother, widely available products.

For the average independent insurance agency of 12-to-15employees, moving from traditional products to an open-sourceplatform would not only reduce ongoing costs associated withlicensing; it could also reduce an agency's exposure to securityand virus threats, since the vast majority seem to be targeted atvendor-specific products, not open-source products.

Check Facts, Then Act:

While there never is a time when agency principals should ignoretheir expenses, the soft market poses a special challenge. Becauseof where we are in the market cycle, now is a perfect time for allagencies to review their cost of doing business and evaluate theirdependence on traditional platform and office-suite products.

We retain our relationships with our agency management systemvendors because they continue to improve their products in waysthat reduce our overall costs of doing business. But we must urgethem to start leveraging open-source products, as it will help usfurther reduce costs.

After all, the power to choose is what being an independentagent is all about.

Robert "Robby" E. Dunn III is vice president and agency managerof Hotchkiss Insurance Agency in Houston, as well as president ofthe Applied Systems Client Network (ASCnet) agency managementsystem users group. He can be reached at [email protected].

Quotebox, with mug:

"By enabling agencies to work with open-source products, vendorswould allow principals and tech leaders to manage their networksand desktops on their own terms."

Robby Dunn III