My colleagues and I got together recently to discuss what we see trending in the P/C industry. Top of the list was the possible return of the core system custom build.
Once widespread, core system builds fell out of favor during the highly competitive core vendor landscape that emerged in the early 2000s. The horror stories of cost overrun and missed expectations associated with a “build it yourself” approach didn’t help the case either. For the last five years at least, buy v. build wasn’t much of a question in P/C core systems.
But there are signs that this may be changing. I know of several carriers that are actively pursuing such an approach and having some success doing it.
Much has been written already about the advantages and drawbacks of custom building, so I won’t dwell on that here. Suffice to say that a solid business case and honest self-assessment is critical, and risks can be high for companies without a high level of maturity in software development and product planning.
The really interesting question to me is, why are carriers looking at this option more seriously right now?
Some of it is undoubtedly due to better carrier experience in software development associated with adoption of agile. Success breeds success, and a better track record in delivery builds the confidence to attempt larger and more complex development efforts.
But what is it telling us about the COTS (commercial off the shelf) market?
There are several consistent themes that surface when you talk to the custom builders. Top of the list is that their horror stories are about the cost and risk associated with vendor implementations. COTS clearly isn’t a silver bullet. Implementation costs are significant. Then there is the recurring cost associated with subscription fees and upgrades, which can be 6 or 7 figures every year or two.
Another consistent theme raised is that the vendors are falling behind the technology “state of the art.” It’s now common that the technology carriers are using in-house is more advanced than what their vendors are bringing to the table. Cloud-nativity, platform as a service, microservices architecture and support for DevOps were all areas where many vendors are lagging. Technology is trending away from server-based monolithic applications, but that’s the reality of where most vendors are in terms of architecture.
A final theme is customer experience and digital. We’ve seen headless implementations gaining traction for a while, and they are part of the same custom build trend. Clearly, many vendors are not meeting carrier needs from a UX perspective either.
This trend should serve as a “shot across the bows” for the incumbent vendors. Because even if a custom build approach isn’t for every carrier, the fact that it is a becoming viable option again suggests that some carriers’ needs are not being met as well as they had been by the COTS market place. What were formerly market niches may be opening into cracks, and if the incumbents don’t rise to meet these demands, new vendors will emerge that will.
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