The Build Vs. Buy Debate

An Update from the Insurance System Landscape
by Craig Beattie,  Nicolas Michellod, October 11, 2011
Industry Trends
Global, Asia-Pacific, EMEA, Latin America, North America

Abstract

Despite IT vendors’ great progress in offering systems based on modern technology and tailored services to insurers, the build versus buy question remains a hot topic and a key strategic decision insurance companies have to make prior to replacing a core system.

In a new report, The Build vs. Buy Debate: An Update from the Insurance System Landscape, Celent examines the results of a survey designed to obtain an understanding of insurance companies’ preferences in terms of system replacement:

“Insurance companies tend to adopt a selective approach when they have to make a choice to buy or build a core back end system, meaning that they will buy or build depending on the type of business component involved,” says Craig Beattie, Analyst with Celent’s Insurance Group and coauthor of the report.

“A combination of risk appetite and quick benefits are leading to a best-of-breed approach in the long run, and insurers are part way through legacy modernization programmes that will ultimately address their system segmentation approach,” adds Nicolas Michellod, Senior Analyst with Celent’s Insurance Group and coauthor of the report.

This report examines insurance companies’ preferences with regard to the build or buy approach for a variety of systems using a triangle methodology consisting of evaluating past choices by insurers, understanding the existing system landscape and identifying future trends.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

3

Survey Methodology

4

The Shift to Buying Front End Systems

7

Adopting a Selective Approach for Core Back End Systems

13

Identifying Benefits from Buying Noncore Systems

22

Final Thoughts

28

Leveraging Celent’s Expertise

30

Related Celent Research

31

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