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Carriers Wise to Consider Software-as-a-Service

March 1, 2008

Technology pioneer Bill Lowe says insurers can reap many benefits by opting for a hosted infrastructure.

One of the most intriguing issues facing the IT community is the concept of Software-as-a-Service (SaaS). To get a sense of the concept’s present and future, Insurance Networking News turned to a technology visionary. Early in his career, Bill Lowe led the team that developed IBM’s personal computer. Lowe subsequently held top positions at IBM, Xerox, and Gulfstream Aerospace, and has extensive experience working with Tier 1 insurance carriers. Currently, Lowe is CEO of Salem. N.H.-based NEPS LLC, a provider of communications management services to the insurance, financial and health care industries.

INN: How do you define SaaS?

BL: While it’s commonly referred to as Software-as-a-Service, it’s probably more accurate today to refer to it as ‘SaS,’ or Software-as-Services. Either way, the two key components here are hosting and subscription. In a hosted model, the software runs on the provider’s infrastructure. The customer pays for access to the infrastructure on a subscription basis, and therefore avoids upfront capital outlay. In addition, since the providers’ infrastructure, support and customer service costs are shared across more than one client, each client benefits from economies of scale.

SaaS appeals to IT because of the lower number of resources needed for implementation and support, and to business groups because they’re able to get their needs met more quickly. The subscription pricing means fewer budgetary issues get in the way of procuring new applications—and, often, applications can be linked together as components one at a time. It’s no surprise then that SaaS is often referred to as “on-demand software.”

INN: How do the SaaS and ASP models differ?

BL: Many companies and analysts use the terms interchangeably. I’ve seen a number of articles stating that “ASP is now known as SaaS.” Taking a historical view, I believe that the Application Services Model (ASP) primarily consisted of software vendors putting HTML front-ends on their software to allow remote users to rent access to the server back-end. It is still comprised of hosting and subscription, but SaaS applications tend to be natively engineered to take advantage of use via the Internet instead of putting “lipstick on a pig.”

Having watched the industry evolve over many years, my take is that it’s best to ignore the acronyms, which will change next week anyway, and look at the actual hosting model and the level of services being offered by the provider. It boils down to a hosted infrastructure that can be either shared or dedicated, and services that can range from “ping, pipe and power” to fully customized applications for a particular industry, managed on a 24/7 basis by technology experts fluent with the specific code. If you’re shopping for software, services, or software as services, you have to look beyond the packaging.

INN: What are the key benefits of hosting instead of buying software?

BL: The simplest rule of thumb is if something appreciates, buy it. If it depreciates, rent it. Software and hardware depreciate, so hosting wins out on this one. But there are many other, often overlooked benefits to hosting beyond direct cost avoidance. Applications, such as SaaS, that are designed to enable remote connection from customers are typically also engineered to enable connection to other software and services. For example, a vendor providing hosted document assembly services can easily link up with a hosted e-delivery provider or a hosted archive vendor, allowing a best-of-breed solution for each customer. In addition, since many hosted service providers rent on a per-application basis, a customer can choose the best solution for each application (account statements versus policy assembly or online correspondence) rather than trying to force each application to run on the software product they happen to already own.

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