It’s no secret that insurers, especially small to medium-sized carriers, have a variety of concerns about doing away with their servers and moving their enterprise systems to the “cloud.” Indeed, the idea of turning over your core applications’ data and processing to a Software as a Service provider can feel risky, especially if you’re unsure that the “cloud” is a proven, safe, reliable solution.
For many, it’s a control issue: insurers want control of their data and what happens to it. That’s understandable. And for most small insurers, servers are still perceived as a reliable and safe means of knowing their data is secure. So were paper files and stone tablets at points in history. But in today’s rapidly changing business environment, small carriers also want, and need, lower costs of operating, ease of doing business, fast, reliable processing, and the ability to scale without the capital investment required of all server-based operations. Ironically, cloud computing offers all of that, but few truly understand its power or its reach.
More than half of insurers on a global scale are now either fully deployed, in trials or planning deployment with cloud-based solutions, and only 20% are not yet considering any cloud-based solutions, according to research published by consulting firm Ovum.
Cloud-based technology already makes up a sizeable portion of corporate and government IT systems, with 38% of enterprise IT currently based on this technology; this figure will likely grow to 45% by 2019, according to recent survey results published by The Economist’s Intelligence Unit in its report “Trust in cloud technology and business performance.”
The three most common uses of cloud-based solutions are customer service, policy administration and regulatory compliance, notes the firm. And 68% of insurers plan to significantly or moderately increase their budgets for investing in the cloud.
Yet while investment is up, trust in cloud technology remains fixed, with only 16% of The Economist’s survey respondents indicating very high trust in the cloud.
Why is that? There are two reasons: First, assumptions about security are based largely on insurers having limited information. The cloud is still a strange and mystical concept for the masses. Plus, many following the news about the recent variety of malware, “WannaCry” ransomware, assume that hackers can target the cloud to reach any number of organizations. Yet using cloud services could actually help mitigate the threats of ransomware infection.
For example, as a course of doing business, Microsoft’ Azure cloud-based security testing is ongoing and pervasive, and Microsoft reports that customers with updated operating systems were fully protected before “WannaCry” even first appeared on the scene. While hackers will continue to try to infect the world with random cyberattacks, the defense provided via the strength and power of large cloud-based providers such as Microsoft cannot be overstated here.
Second, some argue that a cloud implementation can serve to expose vulnerabilities in data and IT management. Maybe. But then again, we can’t fix something we don’t know about. I suspect that the minority arguing against the cloud are afraid it will expose limitations of existing IT/business alignment. To those organizations, the cloud is perceived as a threat because it creates perceived obstacles to “doing it the way we’ve always done it.” However, to my point, if we describe the cloud as less about technology and more about people and processes, it tends to cause insurers to rethink how they conduct their business. It’s a mental chasm to be sure, but one worth crossing. Think about it.
Imagine moving all workloads to the cloud, and improving existing business operations at almost every level. To a great extent, this is the reality of a cloud implementation. If you consider the simplicity that the cloud offers, your perception of IT changes… meaning, you don’t perceive IT problems to be the cost of capital investment, hiring additional IT staff, or a matter of blending the right combination of software and hardware any more. Instead, you will be able to perceive IT problems in the context of business alignment issues—will we continue to operate the same way we’ve operated for the past 20 years? Or will we be able to help the business elevate by keeping pace with efficiencies, changes to market demands, etc.?
Back to the trust factor. In The Economist’s report, respondents who said their companies had higher trust in the cloud, also report better outcomes on both financial and non-financial success metrics, including revenue, profit and share price growth— than do their peers who indicate lower trust.
The Economist further reports that the relationship between trust in cloud technology and positive business outcomes at organizations that hold a high amount of trust with the cloud appears to be linked to their willingness to foster business transformations that leverage what the cloud offers. “Put simply, higher cloud trust appears to facilitate behavioral and process changes within an organization,” states The Economist’s report.
Among the many expected benefits, in the view of insurers included in the Economists’ report are; support for market expansion, collaboration, time to market, ease of support for new technology, reduced need for internal development and reduced IT costs.
Change is hard. It’s no easy feat to move away from the safe harbor of that which feels familiar and comfortable. I met a guy the other day that still has a BlackBerry, and it works for his needs. But the needs of each company are quite different. And for the majority of insurers that are already demonstrating that they are not willing to be left behind, implementation of cloud/SaaS represents the opportunity to point the ship away from the old safe harbor toward the promise of a new digital world that is better, faster, and more affordable. So, what’s stopping you?