Today, insurers that are thinking about replacing their core systems have several strong technology options to consider. Core projects typically involve big investments and do not come along often. It’s important to understand what technology approach will best deliver the business capabilities you need to meet your objectives. Central to that goal is finding solutions that align to your strengths. For some insurers, this will mean pursuing a best-of-breed approach. For others, an enterprise suite might better serve their needs.

Best-of-Breed Approach

The best-of-breed approach—selecting the best solution for each department or for each core function—has been all the buzz since the early 2000s. For a period of time, best-of-breed was really the only option for moving toward a modern architecture with modern technologies, since many of the older enterprise solutions often consisted of legacy technologies.  

On the plus side with this approach, all stakeholders select the solution they want, need, or think they should have. In some cases, a best-of-breed approach opens the door for functional and technological innovation. Best-of-breed solution providers have great depth in business and technology functionality because of their sole focus. The insurer spreads out their technology risks and can stagger software upgrades based on the upgrade path of that technology. In addition, some insurers believe it is wise not to “put all their eggs in one basket” and be totally dependent on a single vendor.

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The negatives for a best-of-breed approach have become apparent for many insurers. When several departments and lines of business are making independent technology selections, the company has no common standards, rendering an enterprise view very difficult. Integrating all the pieces becomes costly, time consuming, and extremely complex. The many versions of technology require constant regression testing and continual monitoring of the quality of the reconnected components. If you do not have mature vendor management processes, managing multiple vendors can be a challenge, and accountability is often very difficult to assign.

The pure best-of-breed approach is right for insurers who have specific business needs, resources, and talent to successfully implement and manage the required integration and multiple vendor relationships.

Enterprise Approach

The enterprise solutions approach has experienced a resurgence in the past few of years due to the number of newly architected modern enterprise suites available in the market. Today, a new breed of solution providers offers enterprise solutions with open platforms and modern architectures using new, advanced technologies. These providers offer a variety of options, including full feature and function core applications and a range of advanced application components. The enterprise solution components deliver strong business value, as they have the depth and functionality to meet the business needs while leveraging their common platform to make the whole greater than the sum of its parts.

On the plus side, these enterprise solutions provide a full suite of core systems that align to a common modern architecture. Because these systems are comprehensive and based on a common data model, challenges with integration between them and the core system are significantly reduced. Insurers will find that these systems can be faster and less expensive to implement, depending on the level of customization that is requested. There is only one vendor and that vendor has full accountability.

The negatives for an enterprise solution approach are few, but may have significant impact on an organization whose stakeholders and users are accustomed to selecting solutions based solely on the benefit to a specific department or process instead of looking at enterprise value. The risk of independent customization must be managed, particularly in organizations in which functional departments are in the habit of making autonomous decisions. Insurers that choose an enterprise solution do put all their eggs in one basket. If there is a failure with any one aspect of the core, it can create a failure with the entire project. 

The pure enterprise approach is right for insurers who have shared common business needs across the enterprise and have limited resources related to both people and money that would be strained with the implementation and maintenance of a best-of-breed solution approach.

Insurers cannot afford any missteps regarding technology investments. Core systems are not one-size-fits-all. Each insurer is unique and has different requirements and capabilities. Taking the time to make a full assessment of the specific business and technical capabilities you require before going out to search for a solution will go a long way in helping you make a sound decision for your particular environment.