Many specialty insurers are transitioning their systems to the cloud. We spoke with several CIOs during last month’s Special Interest Group meeting on Specialty and Large Commercial, and they had a lot to say about what to transition to the cloud, when, how, and what a successful IT project looks like.
Transition to (multi-)cloud and costs
Specialty insurers are in the process of transitioning to cloud, but few begin with a “lift and shift.” Instead, many start with business continuity planning and disaster recovery (BCP/DR). Common next steps include placing new development in the cloud, moving non-production environments to the cloud, and shifting purchased services to the cloud.
Given the plethora of available cloud-based services and platforms, insurers can’t always stipulate which cloud a vendor will run on. Multi-cloud is, therefore, commonplace. Even when there is a choice, insurers are not always opting to stick with one provider. As one CIO explained, “When we looked at providers, AWS stood out, but it’s not the be-all, end-all. We want to choose what’s fit for purpose, but we don’t want to have to gain expertise in every offering out there. So, we try to go for AWS, but we’ll also take Azure if it’s better. We try to prevent excessive spread, however.”
A common theme among CIOs is the cost of shifting to the cloud. Most specialty insurers do not expect the cloud to reduce costs, but the resulting shift to OpEx models can make costs clearer and easier to control. “While cloud services and charges were the first consumptive expense we saw, that mindset has driven a more consumptive model for a broad set of expenses today. We want 80% or more of our charges to be consumptive in the near future so true costs aren’t hidden.” As a result, another CIO asserted, “I think we’re realizing savings in the form of expenses not growing as fast as they would otherwise.”
Business/IT strategy alignment and measuring success
Close communication between IT and other business units is essential, such as sharing and frequently aligning IT and business roadmaps. Still, alignment isn’t just about IT being on board with business priorities. One CIO explained that “we elected to simplify our IT environment, and that drove business strategy. We even pulled out of a line of business because it just wasn’t cost-effective to support it. And it was a good decision.”
Other CIOs noted similar situations in which the complexity of a given product would have made its sale prohibitive. IT/business strategy alignment must run both ways.
In a similar vein, a successful project may not always be delivered on time and within budget. Still, these are certainly important metrics, as are capabilities, and therefore premium, enabled for the business. Insurers must also consider technical debt: “You may have delivered something on time that’s working now, but is it really a success if we’ve created technical debt that needs to be cleared a few years down the road?”
Transitioning to the cloud is full of complex considerations and requires some qualitative judgments along with quantitative metrics. Nevertheless, the consensus among specialty insurers is clearly toward more cloud, not less.
For more discussions like this, please visit our events page.
Add new comment