Digital transformation is happening faster than ever in the insurance industry. In this blog, you’ll learn key factors to keep in mind when considering cloud-based core insurance software options.
These days, most insurance carriers I meet with see the value in adopting cloud solutions. But they’re often faced with the difficult challenge of comparing cloud solutions with each other and against on-premises alternatives. Which has more capability? Which will best support my digital strategy? Will a “run-anywhere” solution give me the flexibility to run it on-premises or in the cloud? Is multi-tenancy important?
Single tenant or multi-tenant?
In the early days of SaaS systems, the pioneers had to build their clouds from the technology available at the time. Salesforce launched in 1999, seven years ahead of AWS and only one year after VMWare. This was when cloud infrastructure was unavailable and even virtualization was in its infancy. Back then, all software infrastructure like databases and application servers were designed for single-tenant on-premises use.
This approach was okay for large applications in big companies but suffered from high fixed costs for applications with smaller intermittent workloads. Early SaaS vendors set out to solve this problem by building the multi-tenant capability into their applications. As a result, multi-tenancy became the marker of high scale application companies set to win in the increasingly global application market.
Now, multi-tenancy is table stakes
Roll on to today and infrastructure companies have made everything multi-tenant. Virtualization and containerization mean all modern applications (and many older ones) share hardware with other applications often serving other tenants. The incentive to bake proprietary multi-tenancy into the application is no longer there.
In fact, infrastructure multi-tenancy is better, since it’s implemented by a small number of global technology companies with specialist teams who are audited to the highest standards. This means that application companies can focus on what they do best (in the case of FINEOS, L&H insurance for the employee benefits market), and carriers don’t have to take the risk of application bugs creating data leaks with other companies. This change has made multi-tenancy much easier, and it is no longer the marker of success it used to be. So, what questions should we be asking now?
Cloud is more than just containers
The macro trend is to move the burden of infrastructure to large utility providers who have economies of scale in operations and security. Virtualization in the cloud removed the burden of hardware management, and container technologies like Docker are removing the burden of OS management.
Containers are often used by engineers to avoid the decision of where their application runs. If all the software runs in containers, it can run anywhere – on-premises or any cloud. Surely that’s a good thing, right? The problem is, this approach blocks the adoption of technologies beyond containers which are typically not available on-premises and not standardized across IaaS clouds.
Some of the latest developments in cloud are in serverless and managed cloud services, where we can reuse cloud managed components for AI, analytics, databases, self-healing, security, connectivity, etc. These reusable components allow SaaS companies to stand on the shoulders of technology giants, offering more complete solutions with more value at less cost.
SaaS is more than a cloud option
As a result, many carriers have stopped asking about multi-tenancy and are more focused on whether applications are SaaS. Sure, you can run an application in containers anywhere, but that doesn’t make it SaaS since you lose the benefits of cloud component reuse. So, ask your vendors whether their application is also available on-premises and be wary when the answer is yes. You can’t deliver SaaS benefits when you have only one foot in the cloud.
FINEOS offers modern, SaaS core insurance software, purpose-built for the employee benefits market. The cloud-based FINEOS Platform features robust digital capabilities including no-code/low-code configuration tools, a standardized API connection, and a cloud environment powered by AWS. Learn more about the FINEOS Platform’s capabilities here.