Do Insurers Understand The Cloud's Real Value?

Is cloud computing most valuable to insurers as a tactic for reducing infrastructure costs, or can it help them be more competitive and innovative? The answer probably is both. But it's becoming increasingly clear that using cloud, virtualization and as-a-service models strictly for efficiency underestimates the potential of this disruptive force. Insurance & Technology has examined the ways carriers are enhancing their abilities to get to market faster with unique and profitable products, services and processes via the cloud and other hosted computing models.

One thing is clear: Cloud computing can no longer be considered an emerging technology or unproven platform. According to Gartner, this year the public cloud services market will grow 19.6% to total $109 billion worldwide. Business-process services and business-process-as-a-service are the largest segment, accounting for 77% of the total market, while infrastructure-a-a-service is the fastest-growing segment of the public cloud-services market and is expected to grow 45.4% in 2012, Gartner reports.

[Customer Experience, Analytics and Cloud Will Drive Insurance Industry Growth — I&T Summit Panel]

In a recent SMA study of cloud adoption trends in insurance, 35% of participants said the cloud "provides companies with the flexibility needed to respond quickly to changing needs." This despite lingering concerns about security risks, SMA partner Karen Furtado told attendees at the analyst firm's recent conference. Innovative carriers recognize that the differentiators come from "how you do computing, not where you do it," she says.

This brings us back to the distinction between IT and technology, a concept with significant implications for financial services technology executives that is being advocated by Gartner VP Mark McDonald, coauthor of the e-book The Digital Edge. In a recent interview with Eric Lundquist, VP and editorial analyst at InformationWeek, McDonald characterized the cloud as an "amplifying technology" that expands an organization's reach and impact, as opposed to "IT solutions like ERP, CRM and the like [that] automate the enterprise with a focus on consolidation and cost."

CIOs and others who are accustomed to advocating tactical solutions that can cut costs and save resources may find that the potential cost savings of cloud computing are relatively "quick hit" and can be hard to prove, not to mention sustain. Adopting cloud because of what it enables organizations to analyze, build and deliver will take a new kind of leadership.

Katherine Burger is Editorial Director of Bank Systems & Technology and Insurance & Technology, members of UBM TechWeb's InformationWeek Financial Services. She assumed leadership of Bank Systems & Technology in 2003 and of Insurance & Technology in 1991. In addition to ... View Full Bio