Trends … the mere mention of the word could have decision-makers rolling their eyes or opening their ears. One such trend that has elicited both reactions in 2009 is cloud computing. These reactions could stem from the lack of usage and proven success, so Celent released a report to resolve the confusion by providing clear explanations of cloud computing and other recent insurance technology trends with context for the insurance industry.

The report, “Cloud Computing, SaaS, and Technology Outsourcing for Insurers,” details many recent trends, but the cloud computing section seems to be where Celent’s passion exists.

“There is a lot of talk in the insurance industry right now about cloud computing,” states the report. “This talk is coming more from vendors and journalists than it is from insurance companies, and this means there is a lot of talk, but not as much actual use.”

Celent says the term “cloud computing” is used (often incorrectly) to talk about both hardware and software, and everything from to Gmail to, according to the report. A more appropriate definition, Celent says, is the use of computing resources, typically a server or part of a server, over the Internet, which means that instead of installing a server onsite, a company can take advantage of, and utilize, a server in some other location without having to manage (or know how to manage) the physical box. This is typically paid for on a per-usage basis over time rather than an upfront fee, meaning that a company could use the server for one hour a day and pay only for that time. The fees for cloud computing virtual servers are expected to cover licensing for the operating system and sometimes platform applications (such as databases), so there is some element of software outsourcing involved. But, cloud computing is primarily about hardware outsourcing.

So, will/have insurers buy/bought into cloud computing? INN has covered those that emphatically say no, and those that are thinking about it.

Darby O’Neill, Princeton Insurance’s CIO was recently quoted, “There is no way I am putting my data out there.” And, in a story coming up in the November/December 2009 issue, INN has learned that while insurers may balk at external clouds for mission critical apps, they may use cloud-type techniques internally.

In its report, Celent gives and insurance-specific examples of how cloud computing can be used, one being:

An insurer has an existing data center that does fine 11 months of the year. But during the 12th month, there is typically a peak in enrollment that overloads its systems. Instead of spending a lot of money to buy servers that will remain unused 11 months of the year, the company utilizes a cloud computing provider to scale up the number of servers available for one month, paying only for the time used.

But, as seen in the example, Celent asserts there are numerous values to cloud computing, including lower initial capital expenditure, rapid scalability and the ability to better enforce best practices.

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