The Insurance Industrys Inspired Frugality: Use It Up, Wear It Out, And Make Do
Insurance Experts' Forum, October 14, 2009
When you think about the three segments of the financial services—insurance, banking and capital markets—a few words come to mind for each of them. When it comes to banking, we might think “hip” or “cool,” thanks to solutions like PNC’s Virtual Wallet that targets the hot Gen Y demographic segment. And, fairly or unfairly, when it comes to capital markets, “innovative” and “meltdown” are two words that go hand-in-hand, because of the events of the last two years.
But when you play the word association game, “conservative” and “cautious” get matched up with “insurance” pretty quickly. These qualities have actually made the insurance industry a lot sexier (now, there’s a word that probably wouldn’t come to mind for many people) to technology vendors, as tech spending pretty much evaporated this year in those hip, cool and innovative financial services segments, but remained largely constant in the insurance industry.
In a recent Forrester survey we asked 65 insurance and 70 banking IT decision-makers in North America to tell us about their IT infrastructure priorities for the coming year. Static insurance IT budgets are under pressure to fund stuff like business innovation, compliance and streamlining, so it’s no surprise that North American insurers are turning to old-fashioned Yankee thrift to get through the recession.
When asked about the priority that each segment placed on extending the life of hardware and infrastructure that might well have been fully depreciated but still working, it turns out that insurance IT shops are all in when it comes to extending the useful life of their hardware (48% stated that this was a critical or high priority), especially when compared with third of bank IT organizations indicating this same priority. (See Figure 1)
This isn’t the greatest news for tech vendors looking for the once-easy revenue spike that comes with refreshing the hardware on which the insurance industry depends—personal computers, servers, and routers and switches. The industry’s frugality is a call to action for direct and third-party maintenance vendors, managed service providers and yes, those hardware tech vendors who can argue their business value with solid evidence, including how employees, policyholders and agents will be impacted if the old hardware can’t support the carriers’ company-changing core application investments.
Ellen Carney is a senior analyst with Forrester Research. She focuses on how the financial services industry researches, procures and deploys business technology, and is responsible for developing the global forecasts for IT budget and spending forecasts for insurance and banking. She can be reached at firstname.lastname@example.org. Follow her on Twitter at: http://twitter.com/ellenmcarney
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