As We Emerge from the Downturn, Where Will the Upswing Take Us?

Celent’s Catherine Stagg-Macey – a fellow contributor here at the Insurance Expert’s Forum – has made the call: the industry is emerging from the economic downturn. This is a recession that famously ravaged the financial services sector, and those insurance companies with a stake in financial services saw a more sever impact on their businesses than those focused on policies and premiums.

So, collectively, we passed through the dark tunnel of the 2008-2009 financial crises, and the signs are all around that we are coming out on the other side. But, as is the case with every recession over the past three decades, our organizations – and more specifically, information technology – take on a different caste with the new economic era that emerges.

Consider the changes we saw as we emerged from each significant economic downturn. While its coincidental that certain technologies developed during these times, their adoption was accelerated by companies seeking more cost-effective solutions to get through the lean times and still be positioned for growth: 

• 1973-75 recession: The rise of “minicomputers” that took on more distributed workloads from centralized mainframe systems were a solution for cash-strapped companies during this period.
•  1981-83 recession: The commercial birth and rise of personal computers that afforded individual departments the opportunity to deploy point solutions without hitting the central IT budget. 
• 1990-91 recession: Client/server emerged in a big way during this period, but the immediate years that followed saw the birth of the commercial Internet and Web-computing model. 
• 2001-2002 recession:  The collapse of the dot-com boom and post Y2K hangover for legacy systems gave rise to Web services as quick points of integration and legacy access. Service oriented architecture was forged during this period and afterwards, as companies sought to better leverage existing IT assets. This eventually opened up to the Web 2.0 phenomenon, in which many services are provided, and communities hosted, across the Web.

Bear in mind that during each of these downturns and immediately after, no one – not even the savviest analysts or futurists – foresaw the technology boom periods that followed. For example, no one during the 1990-91 downturn was talking about the boom in Internet business that followed. What were they talking about? Periods of prolonged economic stagnation, lowered expectations and tight budgets as a permanent fixture going forward.
So it’s impossible to foresee what the 2010s (is that what the decade will be called?) will bring us in terms of information technology developments. As frequently explored here at INN, there is plenty of continued movement toward new paradigms, such as Web 2.0/Enterprise 2.0, SOA, cloud, and business analytics.

Some trends that have been accelerated by the recent downturn include the following. Expect to be hearing more about these trends reshaping computing within the insurance industry in the decade ahead. 

• Cloud computing: Buying or leasing hardware and software is a major capital expense, but cloud enables resources to be secured on a pay-per-drink basis, usually for monthly incremental payments. Companies now can access foundational services and applications from the network. While the viability of cloud computing for sophisticated insurance systems is uncertain, expect to see a greater thrust for “private” clouds secured within enterprises -- sharing resources between business units, as well as from the outside. 
• Customer networking: Companies across all industries are finding value in networking with key customers online. This proved to be far more cost-effective during the recent crunch, versus expensive broader traditional marketing campaigns. As recently reported here in INN, CSC’s WikonnecT business-to-business social networking site has been a hit across the P&C industry, 700 insurance companies interacting across more than 100 communities. The greatest advantage? Highly committed customers take on marketing as well as customer service roles on these networks – often providing more timely information than paid representatives. 
• Outsourcing: The recent downturn put more urgency into streamlining. As Catherine observed, most insurers now have outsourcing strategies. Business process outsourcing has been popular for some time, as has outsourcing of IT departments. With the rise of cloud and social networking, noted in the first two items, outsourcing takes on a new caste, with the procuring of online services from the cloud. 

Again, these are only hints of what is in the decade to come. But clearly, every economic disruption lays the foundation for new ways of doing business. It remains to be seen where the upcoming recovery takes us.

Joe McKendrick is an author, consultant, blogger and frequent INN contributor specializing in information technology. He can be reached at joe@mckendrickresearch.com.

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