(Photo credit: Bratislav Tabaš.)
As Gartner reported earlier this year in “P&C Core Platforms Join the Great Cloud Migration,” for the first time in more than a decade that Gartner has covered the P&C insurance core system market in North America, vendors profiled in the 2017 “Magic Quadrant for P&C Core Platforms, North America” reported a larger number of new customer wins with cloud deployments than on-premises. This matches increased levels of interest in cloud deployments for P&C core systems that Gartner is seeing across all tiers of insurers, and across the globe.
P&C Insurance CIOs are embracing the cloud to realize the same benefits with their core platforms that they have seen with other systems: improved agility and scalability, greater cost transparency, the ability to move from capex to opex, and often higher levels of availability. The overriding factor though—confirmed through Gartner client inquiry—is the need for speed. IT and business leaders are under tremendous pressure to deliver digital capabilities in support of new business models, products and services. Cloud deployment is a key factor that has allowed a growing number of organizations to achieve initial core system deployment timelines that are measured in months—in some cases even weeks.
The ability to support off-premises deployment is now ubiquitous among major vendors active in the P&C core platform market in North America. However, for many vendors their cloud journey is still in the early stages. They have participated in the “Cloud Rush” and “lifted and shifted” their offerings to the cloud, but they have not rewritten their solutions to be cloud-native. Their solutions are not yet architected to exploit the elasticity of the shared virtual environment in the cloud. They do not yet make full use of native cloud services from cloud providers such as object storage, virtualization, autoscaling, fault-tolerant domain structure, and database as a services (DBaaS). Among the offerings profiled in the Magic Quadrant for P&C Core Platforms, only 20 percent exhibited some cloud-native characteristics. This “rewrite for the cloud” phase that most core platforms are now in will put a greater burden on buyers to assess the strength of vendor roadmaps for adopting cloud native architecture and their ability to execute against these.
Variability in Licensing and Deployment Models
Gartner is also seeing wide variability in licensing and deployment models (a reflection of variability in vendor experience with cloud deployments). Some vendors are extremely flexible, offering a range of deployment models and application management services that allow their customers to take on as much or as little of managing their deployment as they see fit. At the other extreme, some vendors only offer cloud deployment in their own data center or only with certain public cloud providers, and only in conjunction with full application management services. In some cases, these vendors have further restricted configuration options available, leaving the customer with more limited options for tailoring their solutions and a greater reliance on the vendor for professional services.
The shift to the cloud we have seen among P&C Core Platforms provides IT and business leaders with new capabilities and faster deployment timeframes. However, we are still in the opening act for this move. Many of these cloud deployments are a work in progress. Levels of cloud readiness are low, and vendor experience, licensing and deployment options can be limited. It is key for insurance CIOs to understand where their P&C core platform vendors are on this journey, and ensure their plans and product roadmaps are aligned with the CIO’s strategic objectives.