Like many business marketplaces, the P & C industry is an extremely competitive one. Companies that want to be successful need to develop, grow, and manage their business effectively- yet to successfully accomplish this, today's insurers need to recognize industry trends and optimize them. However, in today's uncertain marketplace and rapidly advancing technology environment, innovation can be a risk. And while insurers are familiar with risks- most have built their business around identifying, analyzing, managing, and insulating against them, deciding on which trends to follow and what opportunities to leverage, is a critical decision.

With the advances in technology and the constant fluctuations in identifying risk factors, now more than ever, it is important to have a system that can deliver instant access, along with the ability to respond and manage your exposure. Yet when it comes to modernizing your operation, to maximize efficiencies of business processes, businesses often face the choice of whether to build or buy the software. Like any careful insurers, it is imperative to weigh the factors and consequences carefully. After all, the repercussions of a software choice can be long lasting and affect all your business systems and processes.

Many businesses assume that building their own in-house software is an easier route; especially considering that it would be customized for their organization. Since it is developed and maintained by in-house staff, you have total control over the software, changes, updates and overall design. However they often overlook the fact that a tailored solution could result in increased costs, including the addition or enlargement of IT teams and of front-end time by employees. Not to mention ongoing maintenance of the policy administration system, unsupported by an external company, as well as the costs for system developers necessary to help construct and implement such infrastructure. Businesses are often misled on the upfront expenses of an in-house build, as it is nearly impossible to estimate all of the modifications that are sometimes overlooked during the initial design.

In an effort to assist insurers with the decision about whether building or buying an insurance software solution is best for your company, we've complied a small comparative to consider regarding the differences between "buy" and "build."

UPFRONT COSTS

Build: It can be difficult when factoring in upfront costs, to build a custom insurance software solution, because initial investment in hardware as well as software may be required. Additionally specific software development tools, training and staff time must also be included in estimates. A common perception when developing in-house software is that users will not expect as much from it as a purchased software package, that they will be more forgiving of its shortcomings. But in reality, users demand as much, if not more, from software developed in-house. Not only that, users often think that because the developers are in-house and accessible, they can request customizations and changes whenever they want, which is obviously not an efficient way to manage expectations. A policy administration solution can be particularly tough to estimate the total investment; you have to include the cost of the resources involved in environment & software development, including :

• Requirements gathering

• Infrastructure construction

• Analyzing

• Designing

• Implementation

• Testing

• Training users

• Ongoing maintenance/enhancements/updates of the software

Buy: Purchasing an insurance solution suit or policy administration software is often more cost efficient, as it eliminated many of the costs involved in architecture design and development, however there are still licensing fees subscription costs, particularly with Software-as-a-Service (SaaS) model. Subscription or pay-as-you-go models can minimize risk, as a business can roll in applications based on need. Vendors often include a setup or installation fee, which in some cases may also include a maintenance package or service plan. Additionally, when opting to buy a solution, you want to ensure that expansion costs are considered -as adaptability of the product is a key advantage especially for expanding distribution channels and/or leveraging new market opportunities. Other typical costs to factor in include on-site requirements gathering and training, as well as any travel expenses which are often involved.

DEVELOPMENT TIME

Build: Business need to factor in the multitude of required meetings necessary to plan, discuss, design, execute proof-of-concept, and maintain continual development. Requirements gathering, writing and testing the application code, user training and acceptance, hardware/software coordination and testing systems, comprises only a portion of the time necessary to developing a customized system. Each of these stages can take months or even years before you’re ready for launch, which can be further complicated by system defects, flaws, and revisions.

Buy: Speed-to-Market is a term that has been abundantly utilized, as insurers recognize the importance of rapid response, fast turnaround and the downside of development time. When you buy an insurance software solution, true speed-to-market is easier to achieve with a competent product that can be ready to launch, and it only requires an investment in time for user training. Proven vendors often have honed their experience in an effort to provide the most effective and efficient development and testing methodologies, thereby allowing businesses to focus on adapting to a new system. There are however, considerable challenges too, as vendors may tout a rapid deployment, however if there are complications in a build, or they fail to adhere to company's business requirements, inevitable delays can turn costly. Of course, this situation could be prevented/controlled with a careful management process.

SOFTWARE MAINTENANCE

Build: Anyone who has an iPhone or who has ever logged into Windows is probably familiar with the message indicating software updates are available and to install. Regular release updates not only improve functionality, but also to eliminate flaws. However, when software is developed in-house, there are added costs involved for development, testing and design, especially in order to keep software from becoming dated or obsolete. In order for a system to remain innovative, it must remain current and effective. As most Legacy system users learned (the hard way) if your system is not future-proof, than technology will continue to evolve, regardless of whether your business can.

Buy: When you purchase policy administration software, updates and maintenance are the responsibility of the vendor, as opposed to in-house staff. While this is an often overlooked benefit, it can be a key factor, as having the ability to stay modern is a critical element for business. Additionally, SaaS solutions also have the added advantage of rolling out new releases, quickly and efficiently without the need to train additional resources or invest time into programming and development.

SOFTWARE MATURITY

Build: Like a fine wine, good software often needs time to age, or rather mature. if your programmers have fast fingers, your data can be captured and coded quickly, however no matter how speedy your developers are, there is no rushing quality. Software developed in-house is especially taxing, on both the builders and the testers, as there are always 'bugs' to squash and faults to find. It can takes years of development and maintenance—not to mention a quite a lot time and money before the system meets the requirements that guided its development and design, works as expected, and can be implemented with those same characteristics. Even though a custom-built application may seem to offer

control and flexibility, build-your-own-software can lock your company into a less than

optimal solution.

Buy: Solution vendors have the benefit of having invested their time, money and resources into perfecting solid software that they can tailor to fit your needs. Gone are the days when one dimensional insurance portals are packaged and sold, with rigid tactical application for submission and limited data capture. Now solutions are being honed to fit the growing demands and ever changing imperatives of business. Vendors can now focus on increasing acceleration, value, and innovation, so when a business chooses their system, the software arrives with already proven performance quality.

OTHER FACTORS

Build: The reality with most businesses, particularly insurers, is anything can happen. Budgets can change based on economical factors, and so can moods, minds, and development criteria. There are no guarantees that could bridge the gap between an in house system’s capabilities and the actual implemented system, which those who have encountered this dilemma know, can often become exceedingly significant. There are a myriad of other factors that businesses must consider when building their own solution, like: Do our business and IT Strategies align ? Is our solution adaptable, responsive, and future-proof? Is our design scalable ? Can it cater to the businesses growth and expansion into new markets ? What if the developer(s)who build our in-house system are heading out the door? What resources should we be willing to sacrifice if we maximize our budget but encounter unexpected issues ? How do we accommodate for an unsuccessful implementation ? When and how can we measure growth, return on investment (ROI) and true speed-to-market ?

Buy: SaaS solutions, particularly those with a scalable suite of insurance processing applications that handle core functionality, have measurable benefits, including faster time to value, minimized operational costs, and simplified integration. Any software investment should yield positive results, whether they address complex system challenges by streamlining operations, reduce costs, leverage new market opportunities, or as with some vendors, a unique combination of all. Proven software solutions should have an agile development methodology, which would allow for a continuously enhanced platform, and ensure that custom feature requests can be folded into the base application. A system with true multi-tenant architecture will enable every client to benefit from system enhancements. Being adept at implementations, especially those that are scaled to fit any size insurer, as well as having exceptional experience in software development, maintenance and systems integration, is also a key factor when opting to buy. Other compelling items to consider when trying to decide whether to build or buy include:

• Vendor solutions for policy administration applications have the capability to leverage reusable components.

• Purchased software can often be easier/quicker integration with third-party technologies.

• Reliability has been tested and proven.

• Purchased software should be scalable, future-proof, and able to handle fluctuations in user demand, providing the ability to grow with your business.

In conclusion, ultimately, there will be additional underlying aspects, many unique to your business's current and expected demands which should also be explored, but in summary, as indicated by recent analyst and industry reports, organizations who opt to build often fall short of their expectations when choosing to build their own software, versus buying a system.