Deciding between a suite vs best-of-breed strategy when upgrading core systems is an important decision, but it is only the first of many choices insurance companies will have to make throughout the upgrading process.

For a smaller commercial-lines company, like Pennsylvania-based Millers Mutual, best-of-breed seemed a sensible choice, and while CIO Larry Fortin champions the decision's benefits, he noted that any major upgrade comes with its share of challenges.

During a recent webcast, "Core Systems: When is a Best-of-Breed Strategy the Right Approach?," Fortin outlined Miller Mutual's journey and provided tips and lessons to help insurers understand what to expect when undergoing a similar process.

"Trust me when I say we didn't take the decision lightly," Fortin said. Millers Mutual considered two key factors: the requirements of each of the company's functional areas and the goal of leveling the annual spend on enhancements and upgrades.

Fortin said Millers Mutual first determined the needs of each part of its organization, then looked at what systems were in the marketplace. A best-of-breed approach allowed the insurer to select the appropriate vendor for each area, he said.

Concerning the costs of upgrading, Fortin said, "For us, we're a small company. Can we afford the multimillion-dollar investment to replace an entire suite every X number of years, or did we want to get in a position where we could, every year, add some enhancements to [one] major system, [then upgrade another system the next year], and get sort in a cycle to manage this a little bit better financially in the long term?"

Ultimately, Fortin said he believes a best-of-breed approach allows for easier core system transition as companies can pursue a phased approach to upgrading rather than employing a "Big Bang philosophy" that requires many areas to take the plunge at once.

Still, the best-of-breed implementation was "not without issues," Fortin noted.

Lessons Learned

First, Fortin noted, it takes a lot of work to upgrade each system.

"They're all going to be difficult," he said, adding that no implementation goes 100 percent as expected.

Millers Mutual, for example, originally planned to take a phased approach to upgrading core systems — one of the key benefits of going best-of-breed. However, one implementation failed, and time became a factor due to the need to upgrading other systems. So the company ended up implementing best-of-breed all at once.

Fortin said he'd recommend other firms avoid the Big Bang approach whenever possible. Roughly 60 percent of the company, he noted, became involved in the process over a three-year period, tying up resources while trying to run an insurance company on a day-to-day basis.

Fortin also suggested setting a primary vendor contract. Millers Mutual, he explains, dealt with multiple vendors during the process — an inevitability with best-of-breed. He said he wanted to avoid a situation where Millers Mutual was left trying to determine which vendor(s) is responsible when a problem arises.

Millers Mutual sat with all its vendors and chose one primary vendor, with the others acting as subcontractors.

"With 60 percent of the company going through the implementation process, we were busy as busy can be," Fortin said. "Having someone help with managing that helped us out."

Fortin also advised companies to define an "agency of record." Old legacy systems and end-to-end suites, he said, revolve around an agency. When going best-of-breed, he added, "you have to make the decision: Where is that agency-of-record information going to be stored?"

To address this, Millers Mutual built a centralized agency hub with which other systems could interact.

"Then, as we brought on best-of-breed components, we knew there was a place where we were sharing that information," he explained.

Fortin also addressed some best-of-breed challenges that others should consider.

With system-to-system communication, for instance, insurers should focus on controls and be familiar with audit processes. What does a policy administration system issue for policies and premiums, for example? Control totals and audit paths are not always apparent with best-of-breed, Fortin said.

Insurers should also be ready to manage multiple instances of data when going best-of-breed. For example, if a claim is reported and policy information is pulled to verify coverage, that information is duplicated. But who owns that information — underwriting or claims? A comprehensive data-governance approach should be in place beforehand, Fortis said.

Best-of-Breed Vs. Suite

Ultimately, there is no right or wrong answer when it comes to choosing between suite or best-of-breed. As Karlyn Carnahan, research director at Celent, noted during her presentation, it all comes down to the individual company and its needs.

A suite model allows companies to deal with a single vendor, process integration across modules, and benefit from a common user interface and a consistent data model. Disadvantages include the high cost of and long timeline for implementing all the modules, limited vendor R&D money (suite vendors are typically spread more thinly across a wider range of priorities) and the level of organizational readiness required to truly benefit from an integrated suite.

Best-of-breed, Carnahan said, tends to offer better functionality, again because vendors are focused on one module, and faster implementation because of the smaller project scope. Disadvantages include more difficult integration and a monotonous look and feel across systems (which Carnahan notes may not be important to some organizations — "Are underwriters spending a lot of time in claims systems and vice versa?" she asked).

Systema Software President and CEO Jose Tribuzio said two key innovations make a best-of-breed strategy a better bet today than ever before: web services and browser-based/cloud apps. These are in addition to the major advantage of best-of-breed: single-focus vendors that concentrate on and focus all research and development on one system or solution.

"It's not really a question of which strategy is the best," Carnahan added. "Best-of-breed vs. best-of-suite shouldn't dominate the discussion. Underlying business drivers are key. How does this software help me meet my needs?"

Click here for more information and to register for "Core Systems: When is a Best-of-Breed Strategy the Right Approach?"

Special Reports /

One insurer’s best-of-breed journey — and how others can benefit from it

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