It's Not About Tech – Or Is It?
Microsoft, IBM want to talk about your business.
BY ARA C. TREMBLY
Where theres a boatload of money to be had, people can come up with the most ingenious strategies and solutions to pry that money loose, no matter how much security stands between those people and their goal.
Take the late Auric Goldfinger, villain of the classic James Bond film that bears his last name. Here was a man who had designs on knocking over Fort Knox, the gold repository of the U.S., which today holds more than $66 billion in gold bars and coins (by my unofficial reckoning using a $450 per ounce gold market price and a reported 147.3 million ounces held).
Goldfingers strategy involved fatal nerve gas delivered by gorgeous female pilots, the near vertical bifurcation of 007 with an industrial-strength laser, and the irradiation of the entire gold reserve with an atomic bomb (guarded by an insidious chauffeur with an odd name and lethal headgear). Now, heres the evil-genius part: If the gold were rendered radioactive (untouchable for 100 years), that would drive up the price, making Goldfingers own gold holdings worth much more.
That grand planlike many such schemesdidnt work, but such failures, real or fictional, dont deter those who see a fat pot of gold at the end of some rainbow. One such prize in todays world is the information technology budgets of the insurance industry, and the two key plotters are familiar onesMicrosoft and IBM.
According to a report from Tower-Group earlier this year, IT spending in insurance for the U.S. alone is expected to be $36.4 billionand that doesnt include spending by agents, TPAs, and other parties. Its only a little more than half of the Fort Knox holdings but apparently still worth going after.
IBM has long been a player in our industry, selling and later supporting the mainframe technology that continues to be in place at many insurance companies. About two years ago, however, it began saying it was more interested in talking about the insurance business (as opposed to why insurance companies should buy IBM products). This shift in marketing strategy paralleled the vendors larger theme of delivering services first and products second.
As recently as May 2004, Microsoft still was touting the advantages of its .NET technology over archrival IBMs offerings. At last years ACORD LOMA conference, Microsoft brought together lots of media in a lush Las Vegas hotel suite and made the case for its platform while bashing IBM.
Why the aggressive push on the insurance industry? Its been the most profitable vertical for IBM, said Dennis M. Maroney, insurance industry managing director for Microsofts Financial Services Group. It makes sense for us to move in, [too].
Even so, the Microsoft message was, Weve got superior technology, that is, until the 2005 ACORD LOMA con-ference. In an interview with National Underwriter at that conference, Kevin Kelly, managing director of the U.S. insurance industry for Microsofts Finan- cial Services Group, had a different message.
We want to talk about business, said Kelly. Although he felt Microsoft had made a strong technology case to the insurance industry, he noted the company now wants to refocus on business. As part of that strategy shift, Microsoft launched its experience Insurance initiative, designed to improve carriers customer, employee, and operations experience.
Part of that initiative, said Kelly, will be to begin competing on middleware that can help carriers link legacy applications to newer systems without a complete systems overhaul. Interestingly, thats one of the things IBM does. Further, Microsoft wants to emphasize ROI in claims processing and to focus on building agency/carrier trust.
So, now we have both IBM and Microsoft looking at things from a business perspective and enabling insurers to make the most of their legacy systems. At ACORD LOMA, both vendors were lining up their partners (other vendors that are using or complementing their technologies) and stating their business cases to the insurance industry.
Make no mistake, however, this still is about the roughly $36 billion pot at the end of the rainbow, and it still is about technology. As Microsofts own announcement noted, it is continuing efforts to become the preferred enterprise provider for the insurance industry.
A battle is shaping up as these two players jockey for position. Unlike Goldfingers nefarious plan, however, this is a welcome development. It will pump more money and energy into the insurance technology sector and help the insurance industry to improve business processes in the long run.
So, let the gladiators fight and take as much gold as they can. The real winner is the insurance industry.
is technology editor for National Underwriters property/casualty and life/health editions. He may be reached at atrembly@nuco.com.
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