Insurance carriers that rely on multiple-vendor application stacks to manage core functions such as policy management, billing, and claims administration may be placing limits on the strategic advantage IT departments can offer. As the number of supported vendors increases, more IT resources are forced to focus on managing application stacks rather than identifying and developing competitive technological advantages.
An Ivanti survey analyzed in The CIO’s Conundrum: Can IT Move From ‘Keep the Lights On’ to Creative Thinking? underscores the tension between maintenance and innovation. “In this survey, what became crystal clear was the counterbalancing of maintaining essential IT services with the desire to be bold and to act as a creativity dynamo.” Matthew Smith, President, Demand Generation at IDG Communications, notes that the survey results indicate that organizations “need to liberate their CIOs to think ahead of the curve rather than obsess over day-to-day operations. But today IT is all too often still regarded as a support function or information leaders are too stretched to drive competitive differentiation.”
Sandra Gittlen writes in Whittle down application sprawl, “out-of-control application stacks can jack up costs, introduce vulnerabilities, add to infrastructure complexity, jeopardize licensing and waste staffing resources.” This pulls resources toward the maintenance side of the spectrum and away from the strategic side. Glitten concludes, “IT’s value is not in supporting technology, but in understanding the business and using technology to achieve business goals.”
The hidden costs of multi-vendor solutions
While a “best-of-breed” approach makes sense on paper, in reality it can prove an expensive path. According to the IDC report Containing Vendor Sprawl: Improve Security, Reduce Risk, and Lower Cost, “Mixed-vendor environments can cost 4x as much as a single-vendor environment on an annual basis.” Multiple factors can contribute to this added expense.
The IDC report identifies the challenges involved with supporting integrated solutions:
“Integrated applications will operate together on the system, but they will still have different administration requirements, command consoles, and reporting mechanisms. Each application will require different skills and knowledge to operate the control interfaces, command structures, and data interpretation, among other issues. On a superficial but irritating level, different applications will likely use different nomenclature for the same term, consequently increasing the training costs and likely contributing to mistaken interpretations or failure to recognize similar vulnerabilities and attacks across multiple systems.”
This translates into more training, increased skill set specialization, and greater challenges related to updates and versioning. Additionally, multiple vendors increase an organization’s administrative burdens by creating multiple contracts to manage, each with its own set of renewal requirements, service and training procedures, and monitoring efforts. Future upgrade paths must also be coordinated between linked systems, since changes to one system may require modifications in another, or even the need to rebuild the integration entirely. As summarized in the IDC report, “system integration is not the gift that keeps on giving; instead, it is the sin that keeps on punishing.”
Multiple vendor application stacks increase the complexity of security analysis, thereby making it more challenging to determine cause-and-effect paths when responding to potential threats. The IDC report notes this downside to security efforts:
“All these issues make correlation among integrated applications more difficult. Beyond the cost due to extra training and operational costs associated with management, they may cause administrators to miss attacks or relegate attacks to a minor status.”
Making matters worse, the security automation tools that professionals rely on to help make the process scalable struggle in an integrated environment. Sixty-three percent of respondents in the Juniper Networks and Ponemon Institute study, Cybersecurity Professionals Face Challenges on the Path to Automation, say it is difficult to integrate security automation tools with legacy systems and more than half indicate that their organization must reduce the number of vendors they rely on. According to the study:
“As a result of this vendor sprawl, security practitioners are finding themselves bogged down for nearly two hours each day processing alerts, events and logs to find malicious activity, according to the study. This leaves them with limited manpower to implement critical automation technologies and results in diminishing security postures.”
The Ivanti survey indicates that nearly a third of respondents have issues with retaining tech talent, and that, given the global demand, “this is a problem that is likely to last for many years, even decades perhaps, to come.” An Indeed study confirms that hiring tech talent is even more difficult, with almost 9 in 10 hiring managers surveyed indicating difficulty.
Each vendor added to the application mix brings with it the need for new, specialized skill sets. This can further restrict the pool of qualified candidates, or require that resources be shifted to “grow your own” training programs. With more than half of Indeed study respondents admitting that they hired tech candidates who failed to meet a job description, adding multiple vendor knowledge requirements will likely make the situation more acute. When considering the total cost of ownership (TCO) for the applications used on a daily basis, insurance carriers often overlook the ongoing expense of finding and retaining talent with skills on multiple platforms.
User experience challenges in a multi-vendor environment
Aside from the quadrupled expense cited in the IDC report, multi-vendor application stacks can also degrade the efficiencies of day-to-day users. Bouncing among the different applications used to handle multiple lines of business or core functions, such as policy management, billing, and claims administration, has a far greater impact than might be suspected. Research shows that task switching, which occurs whenever users must move between applications, carries with it expensive time and accuracy penalties. These only increase as tasks become more complex. Even penalties measured in fractions of a second can add up to a loss of 40% of productivity for users making frequent application switches.
Aside from the productivity hit, using multi-vendor stacks can also impact the quality of service. The usage of different terms, data structures, and calculation methods can frustrate attempts to unify reporting and provide consistent, accurate performance. Having data stuck in silos also limits how insightful analysis can be. In the article The data-driven risk manager the author notes, “If data is spread across multiple silos it becomes impossible to provide valuable, truly comprehensive insights.”
Applying strategy to the insurance carrier application stack
In How to fix the data integration mess, Myles F. Suer, CIO magazine contributor, recommends that organizations “[s]tart by making investment in strategy and an enterprise architecture that can respond to the future.” This includes examining the options available for consolidating functionality and simplifying application stacks.
Entrepreneur and tech marketing consultant Adam Boone argues that the way we look at core applications needs to change. He suggests that businesses “[s]top buying from vendors who sell you stuff in silos.” Likening these vendors to producers of buggy whips, his analogy sums up the danger of accepting an outdated, fragmented architecture model:
“Put another way: Buggy whips are still being manufactured today. Vendors probably are still making fine, high quality buggy whips. Someone is probably even making a ‘next-generation’ buggy whip. But none of that means you should buy one as part of your transportation strategy”
Moving toward a Swiss army knife single platform environment, such as the one offered by the Origami Risk carrier solution, lowers TCO, improves the user experience, and frees up your IT organization to be more creative and forward-looking. The opportunity cost of missing out on those chances to innovate in an evolve-or-die environment could be the biggest hidden cost of all.
Talk to our experts how your organization could reduce application sprawl by moving to a single platform carrier solution.