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To SaaS or Not to SaaS

By Karen Sullivan,

We all hear the same mantra in business today:  decrease costs, increase efficiency, and do more with less. But how do you do this when it comes to core systems? How do you replace legacy solutions with modern ones and do it cost-effectively? One answer is to look at how you deploy systems and see the cloud and Software as a Service (SaaS) as a solution.

Companies across all industries use SaaS solutions to increase their capabilities without the overhead and upfront costs that traditional on-premises solutions incur. Even essential "desktop" applications are moving to the cloud such as Adobe's Creative Cloud and Microsoft Office 365.

As stated in a recent Gartner report, "Year-over-year, more insurers in mature and emerging markets are beginning to implement P&C core business solutions such as policy, claims and billing management modules. Greater interest in software as a service (SaaS) models has been observed, and significant changes are unfolding in the vendor market, such as the establishment of more-modular core solutions that offer P&C insurers options for reduced risk for deployment and reduced maintenance costs."

There are many things to consider when evaluating solutions and deciding on the delivery option that best meets both needs and budgets is now a major factor in the equation.

What You Need, How You Need It

Developing business requirements and evaluating needs is standard operating procedure for everyone. However, in the overall scheme of things, it's essential to consider all the possibilities and that now includes how a solution is delivered. Systems need to serve an ever-changing list of wants including mobile, self-service, analytics, multi-platform access, and more. More importantly, they need to be ready for whatever may come.

While everyone has a wish list for a system, there is one set of voices that cannot and should not be ignored—the customers. Customer needs are paramount today and need to be heavily weighted in your current and future solution.

According to a Deloitte report, "In an effort to evolve along with customer expectations, innovation, agility, and flexibility have become more than just buzzwords. Marketplace competition is relentlessly increasing and it is the insurers who can rapidly offer innovative products and services to their customers through multiple channels who will be the winners."

Needs and technology are ever-evolving and your systems need the ability to change along with them.

Patch, Partial Replacement or a Whole New World

Based on requirements, carriers need to evaluate solutions to their needs. As research continues to show, there are a lot of old—some really old—core policy and claims systems out there today and they can't provide the agility or capabilities needed to compete with modern solutions. If you're not providing customers with the features and functionality they want, someone else can and guess who gets the sale.

Patching is where many people go to save money. However, as the cliché goes, it can be like putting lipstick on a pig. Patching and plugging may solve one problem but may not be the answer to the long-term corporate needs and more problems will keep arising.

Some carriers opt to replace specific modules of a core system, such as integrating a new claims solution, to solve some of their needs without totally replacing their legacy systems. Integrating existing systems with SaaS solutions can spread that cost of change over time.

Of course, there are many who choose to replace their core systems and modernize all aspects of the technology. At this point, it's an ideal opportunity to examine deployment options. SaaS, particularly for cost-conscious small- and mid-sized insurers, is an ideal way to upgrade systems cost effectively while gaining the technology to compete with larger players.

The Value Proposition

The bottom line is always the bottom line and an area where SaaS can be a deciding factor. Even as budgets slowly increase, according to analysts, there are limitations and it is still essential to carefully utilize assets. That's why it is essential to look at the whole cost, not just the solution itself.

Ask  yourself, what would the true expense be for running and maintaining the hardware and software internally be to  your company—including hardware purchase and maintenance, electricity, personnel, office space, back-up, disaster planning, and more?  Is SaaS, with a lower total cost of ownership, increased agility, and greater flexibility better fit with your needs?

Letting Go

The most difficult thing to do when considering SaaS is giving up the touch and feel of the hardware and software you've known so long. For those who grew up in technology, there is a certain sense of security seeing all those computers lined up and having shelves of software releases. You can see and feel it. Today, it's not essential to have that tactile experience so you need to let go and make room for the future.

Partnering for Success

It used to be that you bought the software and received updates as released. There was help when needed. But times have changed. Today, insurers and providers, particularly in the SaaS deployment scenario, are truly partnerships. You and your solution provider have to work closely from first analysis through deployment and routine maintenance and activities. As needs and the world change, your SaaS solution will be there to change with them. The secret to success is teamwork.

So it's essential to ask yourself the big question when planning to replace part or all of your core systems … to SaaS or not to SaaS.

(Karen Sullivan is executive vice president, delivery, North America Innovation Group.)

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