While the hype around cloud computing can seem cloying, the economic realities of the insurance industry and the promise of the technology warrant attention. Insurance Networking News asked Dublin-based Accenture's chief technology architect for insurance, Matthew Foster, and North American technology delivery lead for financial services, David Radvany, whether cloud computing is ready for primetime, and what insurers can do to ease implementation.
INN: What is the business case for insurers embracing cloud computing?
ACC: While cloud computing is still in its early stages of adoption among insurers, it is clear that the cloud offers insurers enormous opportunities to reduce the amount of money spent on running IT systems. It is becoming increasingly clear that the cloud also provides insurers with the possibility of dramatic improvements in the way they attract and retain customers, expand the markets they serve, and design and deliver products and services.
INN: Have the security concerns surrounding the cloud been allayed?
ACC: Security and data privacy remain major concerns for insurers considering cloud implementation, and have been among the primary reasons for the industry's cautious approach to cloud computing to date. The fear of having data "in the cloud" is the biggest hurdle that insurance leaders must overcome to gain the benefits from cloud computing. The cloud is a multi-tenant environment, and CIOs are concerned that their data could be stolen or compromised by hackers, mixed with data from their cloud providers' other customers, or released by mistake.
While these concerns are understandable, there are potential security and privacy benefits from moving to the cloud. Many insurers operate separate IT systems for different functions or business lines, leading to highly fragmented and inconsistent approaches to security and data privacy issues. Moving to cloud computing can drive more consistency and automation in security and data privacy and may actually provide a catalyst for delivering greater security and reduced costs.
INN: Are there sufficient standards in place for the cloud?
ACC: Most insurers tag data with different levels of sensitivity, from low level to ultra secure. Cloud services, both private and public, should have similar appropriate levels of security built in. So, for example, low-level data and access may be suitable for a public cloud infrastructure service with simple password access, while highly sensitive data may require dedicated servers housed in ultra-secure data centers, with strong authentication required for access.
Insurers should approach the issue of data security at their own pace, gaining experience as they advance along their "journey to the cloud."
INN: What are some best practices for maximizing benefits from cloud computing?
ACC: Our experience suggests that there are seven key steps for insurers to take to keep data secure while making the most of what the cloud has to offer:
1. Understand the condition of your IT infrastructure and portfolio to create a prioritized list of what should go to the cloud, and when. While security concerns are top of mind, the lifecycle of an application is another determinant. An application that is due for a major upgrade, replacement or retirement within the next two years could be a good candidate for a move to the cloud.
2. Establish a clear governance structure for cloud computing. Many organizations have rules and structures in place that govern how IT decisions are shared between departmental leaders and IT executives. These can be used to define who inside and outside the IT organization should be engaged in decisions on cloud computing.
3. Inspect what you expect. Service-level agreements are crucial in dealing with the cloud because of the reliance on third parties, so choosing a service provider that meets the SLA's terms is critical.
4. Keep cloud efforts on track. Make sure cloud computing receives the focused thinking, planning and follow-up it requires.
5. Set the standards for success. Make sure goals deliverables are well understood, and projects are well aligned with business needs. Clarify how the value from cloud computing is to be determined.
6. Provide the necessary support. Support extends beyond financial resources and technical talent. Establishing a community of practice, or a cloud program office to develop skills and share experiences, can underpin the success of cloud initiatives.
7. Buy cautiously, appraise frequently. It is too early to predict who the major cloud providers will be in a few years. When selecting cloud providers, carefully consider whether they have the potential to be a desirable partner in the future. And, after they are chosen, evaluate their financial stability and their ability to improve functionality and service levels.
INN: What would a successful cloud migration entail?
ACC: A successful migration to the cloud can help insurers align IT assets and applications with their companies' strategic aims. Insurers that capitalize on the cloud's lower costs, unlimited capacity and the flexibility to develop innovative products, services and channels-while protecting the security and privacy of their business and customer data-will be in position to generate competitive advantage.
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Corrected March 11, 2011 at 3:16PM: yes