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The Outlook for Insurance Software Spend in 2010? More of the Same

Ellen Carney
Insurance Experts' Forum, January 28, 2010

North American insurers have been immersed in big software programs over the past few years. Many P&C insurers have new or upgraded policy admin and claims systems now in place, and last year were getting ready to move onto underwriting and billing, if Forrester client inquiries are any indication.

Meanwhile, the Tier 1 life insurers came to life in December, with huge and sudden interest in life underwriting and new business processing applications. In many respects, thanks to these big company-disrupting (and largely industry-wide) core app projects, the software industry was able to keep its chin above water during the Great Recession. With economic recovery moving from glimmer to a bit brighter glow, how will the beginning upswing get translated into new software investments?

At the end of 2009, Forrester surveyed 101 North American insurance IT executives, and asked them how their firms’ total software spend was going to change in 2010 when compared to 2009.

For most, budgets would remain largely flat, but there were a few bright spots. No surprise, the perennial software favorites—platform and infrastructure, software development customization and application maintenance—are expected to garner the biggest spending increases. Also not surprising is the drop in software staff salaries and consulting spend, due to fewer new projects, minimal salary increases and the pressure applied on consultant day rates by those especially persuasive folks in Sourcing and Procurement. And despite the ardor associated with software vendor pitches around all things in the cloud, options like apps delivered as some flavor of service are least likely to change, with spending increases cancelled out by equal spending decreases.

Still, the industry is past the point the point of no return on many of their big software initiatives, and budgets are firmly in place to finish them up. For tech vendors looking to extract additional software dollars out of insurer wallets, it won’t be easy, since even the stock messages about cost shifting and speedy implementation in cloud pitches aren’t translating into additional spend.

Readers are encouraged to respond to Ellen using the “Add Your Comments” box below. She also can be reached at ecarney@forrester.com.

Ellen Carney is a senior analyst with Forrester Research, serving B2B technology marketing and sales professionals targeting the insurance, banking, and securities industries. In addition to publishing research focused on the strategies, best practices, and trends in how the financial services industry researches, procures, and deploys business technology, she is responsible for developing the global forecasts for IT budget and spending forecasts for insurance and banking. Ellen can be reached at ecarney@forrester.com. You can follow her on Twitter at: http://twitter.com/ellenmcarney

The opinions of bloggers on www.insurancenetworking.com do not necessarily reflect those of Insurance Networking News.

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