In recent years, insurance companies have spent more money on legacy system maintenance than on packaged software applications, according to industry experts.There are several factors influencing this trend, but one undoubtedly stands out: Many insurers concur that there's a lack of robust software application options to fulfill their needs.
A newly launched initiative by Armonk, N.Y.-based IBM Corp. might have what it takes to pique insurer interest in software application investments.
In late June, IBM unveiled an initiative known as PartnerWorld Industry Networks for Insurance Software Providers-a program now offered to the insurance and government industries.
Driven by participation from a host of independent software vendors (ISVs), PartnerWorld Industry Networks provide ISVs with "unmatched go-to-market sales support and technical resources that are specifically tailored to an industry's requirements," according to the company.
Currently, IBM has networks encompassing eight industries, with plans to introduce more throughout the year, the company reveals. Nearly 600 ISVs across 43 countries in the banking, financial markets, health care, life sciences, retail and telecommunications industries worldwide are presently leveraging the IBM Networks. By year's end, IBM projects $1 billion total spending across the PartnerWorld program.
IBM is no stranger to ground-breaking e-business solutions to support the insurance and financial services industry.
For instance, the company's on-demand business model, introduced two years ago, is a solution that can "break down siloed business processes into core components to be shared more easily across the enterprise," states IBM.
A component-based operating model, on-demand enables insurers to manage pieces of their business (underwriting, product management, commission payment processing, etc.) as independent "building blocks," according to IBM. Getting the most mileage out of on-demand requires fundamental changes in the way insurers view their businesses.
While on-demand is a more sweeping initiative, PartnerWorld is regarded as a niche program.
Moreover, its emergence represents a dramatic shift for IBM because for years the company had focused mainly on middleware development above and beyond software applications, explains Susan Cournoyer, principal analyst, at the Stamford, Conn.-based research and advisory firm Gartner Inc.
However, IBM has a renewed purpose to support industry-specific application partners. Conversely, IBM's partners are equally willing to jump on the PartnerWorld bandwagon, one of which is Atlanta-based DWL Inc.
DWL's Customer Data Integration (CDI) solution is supported by IBM hardware and middleware. The IBM PartnerWorld Insurance Industry Network takes this joint commitment "to the next level by creating a unique network of companies with the common goal of creating better solutions for insurance companies worldwide," says Justin LaFayette, chairman and co-founder of DWL.
"With more than 15,000 IBM employees, and the full weight of an elite partner community dedicated to providing the best end-to-end solutions for insurers, no one can touch this program or the offerings it represents," he adds.
Leveraging its acquisition of PWC Consulting in 2002, IBM is tapping PWC expertise to help drive the PartnerWorld endeavor, Cournoyer says.
PartnerWorld Networks for Insurance is being carried out by IBM's global insurance division, under the direction of William Pieroni, general manager of global insurance for IBM. IBM's Business Consulting Service, which was instrumental in formulating on-demand business, also has a role in strategy and direction for PartnerWorld.
"With this program, we are helping ISV's leverage our industry-specific middleware capabilities," says Cindy Maike, global market segment manager, insurance group, for IBM. "In the past, we offered a PartnerWorld program that integrated ISVs, but it was more generic in scope. This version of PartnerWorld has a vertical market flair to it."
The question is whether insurers are ready for PartnerWorld. The jury is still out on whether insurers are embracing on-demand to the extent that IBM had hoped they would.
"So far, there has been confusion about the on-demand program with insurers," says Cournoyer. "IBM is still trying to communicate to insurers that on-demand is designed to enhance a company's business, such as underwriting and policy administration. Insurers still perceive on-demand as having too much emphasis on IT and not enough on the business," she says.
IBM has recognized a golden opportunity with PartnerWorld to cater to what's currently an underserved market, sources say. That's because insurers have not been as willing to invest in packaged applications as other industries-such as banking-have been.
Through support of IBM, ISV partners will have access to a customized and single source of business insight, networking and collaboration, enablement blueprints and technical resources, and sales and marketing support benefits.
Working together with IBM, ISVs can capitalize on this wide range of benefits to more effectively develop and market solutions to customers that meet government and insurance industry requirements, says IBM's Maike.
PartnerWorld Industry Networks participants must have what's known as the "ready for" application validation program, which enables ISVs to test their applications against pre-established technical criteria and ensure compatibility with IBM middleware. Through the "ready for" program, IBM is providing technical assistance to ISVs and guiding them through the stages of application enablement to validation.
So far, Maike says 50% of all ISV's have fully adhered to IBM's PartnerWorld standards.
"PartnerWorld is a concerted effort by IBM-a united front so to speak-to entice insurers to invest in these applications rather than devoting their capital to highly customized legacy solutions-patching, so to speak," says Cournoyer.
"And it's interesting that this program appears to target middle-market insurers rather than large companies, which has long been IBM's focal point," she says.
As for the prospects for growth for PartnerWorld, Cournoyer predicts over the next year "the vanguard of insurers will perceive this program as having great value."
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