Many insurance firms are expected to take advantage of the cloud to handle their mission-critical operations over the coming months and years. Rebecca Lambert reports

The cloud computing market continues to grow at a significant pace. According to Gartner, by 2016 cloud computing will become the bulk of new IT spend, and, by the end of 2017, nearly half of large enterprises will have hybrid cloud deployments.

In recent years, many companies from all industries have taken the opportunity to leverage cloud computing, and, as a result, change the way they store large amounts of data, and architect, provision for and deploy applications. Some rushed to be early adopters – keen to take advantage of the chance to increase compute capacity or add capabilities quickly without having to invest in costly infrastructure, and instead pay for that infrastructure on a subscription, pay-per-use basis. Others have bided their time, waiting to see how the technology would develop.

The insurance industry, by its very nature, is risk aware. While a long-running user of IT and business process outsourcing, the industry has been perhaps slightly more reticent than other industries to embrace public cloud computing, at least initially. But this is changing – and fast. Insurance firms are already using public clouds for non-core office and support functions, such as e-mail, financials, HR and customer relationship management. According to the December 2013 Novarica ‘Hot Topics For Insurers’ report, more than half of insurers surveyed already rely on software as a service for these types of applications.

Others have taken the next step and are writing applications to the cloud, using cloud-based infrastructure to support their core applications – including policy administration, claims and billing systems. They are running their actuarial analyses against cloud-based high performance computing grids too. Even more are considering doing the same over the next few years. Novarica reports that around 20% of insurers have active or planned cloud pilots.

“The reality today is that many insurers are held back by their legacy IT infrastructures,” explains Tony Jacob, Microsoft’s managing director of worldwide insurance. “Much of their IT budgets go towards maintaining their core systems, and these budgets are being reduced. They have limited resources left over to innovate in areas such as distribution channels or new product development.

“The nature of risk and the regulatory environments are changing too, yet insurers often do not have the internal compute capacity to react to these factors,” Jacob adds. “For example, when it comes to quarterly close-outs, it can feel like Groundhog Day as insurers work long days, wait for hours for their models, and ultimately base decisions on risk and valuation data that may be 14 days old. The cloud, though – in this case, as a source of elastic compute capacity – is giving carriers a new opportunity, and one that’s just too good to ignore. We now ask insurers, ‘What would you do with quarterly close-outs that take less than half the time to complete, with near real-time data, greater accuracy, and millions of dollars less in infrastructure and process costs? What would that mean to your business?’”

Cloud maturity

Cloud providers have been doing everything they can to give their customers reason to trust in the services they provide and their ability to store data securely. Microsoft in particular has continued to make some significant advances to its public cloud platform, Microsoft Azure, to prove it’s a truly viable, world-class alternative to on-premise IT infrastructures for enterprises.

Security – always a big concern for those considering moving to the cloud – is one area that Microsoft has made huge investments in.

“We recognize how critical data privacy is to enabling our customers to move to the cloud, and Microsoft has been a pioneer in offering privacy protections for its enterprise cloud services,” the Microsoft Azure team said in a blog post. “We were the first to offer contractual commitments for customers subject to the European Union (EU) Data Protection Directive and US HIPAA laws, which call for safeguarding personal data, and have continued to strengthen data privacy through technical, operational and legal protections.”

Most recently, Microsoft’s cloud contracts have been validated by EU data protection authorities as they meet the rigorous privacy standards that regulate companies operating in EU member states. “This ensures that customers can use Microsoft services to move data freely through the cloud from Europe to the rest of the world,” said Brad Smith, general counsel and executive vice president of legal and corporate affairs at Microsoft on The Official Microsoft Blog. “Microsoft is the first – and so far the only – company to receive this approval.”

As cloud offerings continue to mature, industry regulators have also started to take cloud usage more seriously, and identify ways that insurers can take advantage of it and remain compliant. Now, it seems that the real risk associated with cloud computing is the opportunity cost to insurers if they choose not to leverage the cloud.

“Perceptions towards cloud computing are changing,” says Jacob. “Companies understand the value it offers, and they are realizing that this IT consumption model aligns with many of their business priorities – lower cost ratios, add agility, enter new markets, or introduce new initiatives to grow premium or improve pricing performance. The cloud allows them to respond quickly to changing conditions or opportunities in the most cost-effective manner.”

In the following months and years, as early adopters succeed and confidence rises, it is expected that insurers’ interest in the cloud will increasingly turn into deployments.

Cloud-based core systems

According to research by insurance strategic advisory firm Strategy Meets Action, 61% of carriers report that their current policy administration system does not respond to new market demands, which results in lost business opportunities. In addition, 60% report that their current system technology restraints are a problem for their business.

The Microsoft cloud is already being shown to help loosen the constraints. If used as the server infrastructure to support core systems, it lowers IT costs and can add agility. If used for pre-production environments, it can help insurers more quickly and cost effectively stand up new core systems. And if used as the platform for the core systems, it can help insurers get out of the software business and focus more on the business of insurance. In short, companies are using the cloud to build highly scalable applications without having to invest in costly infrastructure. “They’re moving from a capital-intensive approach to a more flexible, pay-as-you-go business model,” says Michael Witt, Cloud Products lead at Accenture Duck Creek, a leading provider of property and casualty insurance core systems. “The costs for running applications in Microsoft Azure are very attractive – and they’re predictable.”

In a cloud-enabled organization, business and IT project implementation timelines are dramatically reduced. This is because the infrastructure is available upfront and it can scale according to business needs. As a result, insurance companies gain the opportunity to bring new products to market much more quickly and, at the same time, have the lowest possible impact on IT staff and capital expenditures.

“One of the key areas that insurance carriers struggle with today is aligning their business and IT,” says Witt. “Moving to a software-as-a-service consumption model really helps tackle this issue. What they’re able to do is gain capacity with a predictable price for scalability. This helps them to successfully forecast business outcomes.”

Microsoft partners such as Accenture Duck Creek are now offering their core insurance systems via the cloud – and demand for this type of service is rising. Companies are realizing that they no longer have to make huge upfront investments to upgrade their IT infrastructures, and they are able to implement a solution that satisfies business needs without overburdening their IT department.

For those not ready to move their core systems to the cloud just yet, there is another option. “Insurance companies can also take advantage of the cloud to carry out all their pre-production application development, testing and staging operations,” says Jacob. “So even if they don’t necessarily want to run their core applications in the cloud, they can at least take advantage of its elasticity to spin up test environments before they go into production. This offers cost and agility benefits, and allows development teams to gain experience working in the cloud without going all the way to deploying core systems in the cloud.”

Risk analytics

Many insurance firms find the entire effort around quarterly/end of year close incredibly onerous. “To run the required simulations, businesses face a huge demand for computing power,” says Microsoft’s Jacob. “With an on-premise infrastructure or traditional hosting provider, these compute-intensive actuarial and reporting tasks can be a massive drain on IT resource and can be very costly to support, especially during peaks in demand.”

Because these tasks are only carried out a few times a year, many insurance companies have had to make the choice between whether to spend more on providing enough IT resource to handle peaks in demand or provide a level of capacity that is more cost effective to run on a long-term basis but cannot cope with usage spikes, leading to delays obtaining results.

“With IT budgets strained enough as they are, many businesses have had to compromise on computing power,” says Jacob. “This has a negative impact on the business in terms of productivity, but also on the quality of data used in risk assessments and for setting reserving levels. Imagine what a difference it would make if they were working with more accurate and real-time data. Could they optimize their reserving levels? How much money could they put back into the business? How much better would they be in the eyes of the regulators and in the markets?”

According to Cindy Saccocia, director of sales and marketing for Integrate at Milliman, an actuarial firm that provides both software and consulting services: “There is a critical need for insurance firms to have access to ever more computational capacity to address a growing suite of challenges, while satisfying all audit, governance and control requirements. Replacing old tools and protocols with cloud-based solutions delivers substantial benefits in cost, time and labor savings.”

“By taking their financial and actuarial models, and running them against high performance computing grids in the cloud, insurance firms have access to virtually unlimited computing power when they need it, and they can turn it on and off like a utility,” says Jacob. “This allows companies to handle the peaks and troughs of compute demand in a cost-effective and agile manner.”

This year at the annual IASA Conference in Indianapolis in the US, Microsoft will be exhibiting alongside its partners to demonstrate how the cloud can help insurers scale their business, drive innovation, gain actionable insights and connect their workforce – all while saving costs.

“As we can see, there are many ways that insurance carriers can take advantage of the cloud today,” says Jacob. “They can use it for non-core office and support functions, and development and testing, but in the coming months and years we expect to see more companies use the cloud to achieve a dramatic pay-off in their mission-critical areas too.”

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Last year, global banking standards association the Banking Industry Architecture Network (BIAN) completed the development of its latest standardised IT architecture design for banks – Service Landscape 4.0. Designed by the likes of Microsoft, SAP, IBM, UBS, PNC and ABN Amro, BIAN’s Service Landscape 4.0 aims to define the standard business capabilities that make up a bank and provide a framework to help banks update or replace their core IT systems. Using this reference structure, BIAN hopes that they will be able to tackle the problems associated with legacy IT and drastically cut the cost of technology integration.

Discussing some of the key differences between the new Service Landscape 4.0 and its predecessor, Hans Tesselaar, BIAN’s executive director, explains that his organisation has made some big improvements, particularly regarding the number of service definitions it has developed. Between this latest version and the last, it has added over 1,700 new service operations. It has also increased the number of business scenarios to over 200. “We’ve completely rewritten the guidelines with this latest framework,” he says. “Following many years of development, we believe that we have created a simplified industry solution that banks can rely on to update and replace their core IT systems, and overcome the legacy issues they may face.”

This is all part of BIAN’s goal to promote a more integrated approach to managing banking processes and encouraging banks to break down siloes across their corporate, business and consumer functions.

“If we don’t have the service definitions in place, it’s very difficult to see how the landscape is constructed,” explains Tesselaar. “We are defining services and reacting to the need in the industry to deploy messages. Our definitions are the starting point of message definitions.”

Alongside its new framework, BIAN has also published guidelines about how to use the landscape. Over 4,400 unique users have downloaded the material so far – and rising. “There’s a great deal of interest in what we’re doing at the moment,” says Tesselaar. “Our membership base continues to grow – in the last few months we’ve had the likes of Fiserv and Avaloq join our network. We’re also about to host our first official North American chapter meeting as more US banks see the benefits of what we’re trying to achieve.”

Looking further ahead, BIAN is striving to develop the industry’s most complete framework. “Our focus will continue to be on delivering more business scenarios and working to understand the dependencies between different parts of the landscape to help banks modernise their services and enrich their client offering by embracing the latest in digital innovation,” says Tesselaar.

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This article was first published in Prime Magazine. Prime is the authoritative source on Microsoft software and services for discrete and process manufacturing. The magazine explores the key issues facing firms in the industry today and covers all the latest technology trends.

BP has one of the largest and most successful energy trading organisations in the world, known as Integrated Supply & Trading (IST). As the single trading face of international oil and gas company BP, IST does business in over 140 countries and has a global portfolio of around 12,000 customers and suppliers. Its success comes down to its ability to build strong customer relationships, which it has been developing over many years. But in the last few months in particular, the company has taken some major steps to ensure it is doing this more effectively.

At the beginning of 2013, IST kicked off a two-year project to transform its customer relationship management (CRM) processes. Its main priority is to evolve the business in line with its customers’ demands and to be able to serve them in a consistent manner from any touchpoint – whether it’s from an office in Singapore or in Moscow. This involves having visibility of all customer relationships across all facets of its business and having the tools in place to facilitate effective organisation-wide collaboration.

As Marcel Kooter, IST’s global marketing and customer director, explains, achieving this is no mean feat. “We are a global organisation of more than 3,000 employees, managing the commodity flows of BP on behalf of our upstream and downstream segments,” he says. “IST is core to BP. To give you an idea of scale, more than 80% of BP Group’s turnover flows through our supply and trading business. We sell all the oil, gas and gas liquids that BP’s Upstream operation produces. We procure all the crude and feedstocks for our refining system, and all the products for our retail sites and airports not served by BP’s own refineries.”

The company also performs price risk management and hedging for BP’s operating units, and handles the traded aspects of the treasury’s activities, such as foreign exchange and interest rates. It offers similar services to third parties that lack the scope and scale to do this for themselves.

All these activities are managed across IST’s main offices in London, Singapore, Chicago and Houston. It has additional offices in Dubai, Calgary and Moscow, as well as many regional offices across North and South America, Europe, Asia and Africa.

While IT has long played a key role in IST’s business, helping to deliver business value and improve agility, the company still has areas of its business that aren’t fully automated – its CRM processes being one of them.

“We had different CRM applications in place in some parts of the business, but they didn’t necessarily work together,” explains Kooter. “Other parts of our business had stuck to manual processes. This held us back from providing the best customer service we could. Many of our customers are used to operating in a global market and it’s our responsibility to ensure we have a global view of their activities and understand how we are already engaged with them. We realised that we needed to adopt a unified CRM solution across the entire organisation to achieve this.”

IST began looking for a suitable CRM solution in 2012. It evaluated several systems available on the market and in early 2013 it made its choice – Microsoft Dynamics CRM.

“At BP we follow a rigorous process when it comes to selecting new IT,” says Kooter. “First, we appraise the situation, and then we find and select the right solution. Having experience with various CRM tools and implementations in the past, I realise the importance of having business tools that are easy to use and fit seamlessly with users’ day-to-day activities. Generally speaking, sales and trading people like operating independently and do not naturally like to work with IT tools. If any tool slows them down or isn’t easy to use, it will be rejected or won’t be taken advantage of fully. As Microsoft Dynamics CRM is fully integrated with other Microsoft products we already use in the company, it isn’t perceived as a foreign solution and it’s quite intuitive to work with. Basically, if you can manage your Outlook e-mail you can start using some of the functionality in Dynamics CRM without much effort. I believe this makes a huge difference when it comes to successful organisation-wide adoption.”

Bill Moffett, manufacturing industry senior product marketing manager for Microsoft Dynamics, agrees. “The most important resource for a manufacturer is their people,” he says. “These employees want and need easy-to-use tools that are built in the context of their role and designed with their needs in mind.”

Business technology consultancy Avanade – a joint venture between Accenture and Microsoft – was employed by IST to help roll out the solution. BP already has a strong working relationship with Accenture and knew it could rely on Avanade to support this particular project.

“IST has an ambitious implementation timescale and, to ensure the solution was rolled out on time, we decided to supply a small, highly-skilled team to join IST for the duration of the project,” explains Annette Giardina, senior director of CRM at Avanade. “This team is made up of a solution architect, a business analyst and two developers, and they’re working within IST to provide the necessary technical expertise and support. In essence, this is a BP team supplied by Avanade.”

IST is managing the implementation project in stages to minimise disruption to its business. The first stage, which involved building the solution and rolling it out across its Global Marine Fuel business, took just six months.

“We completed the first phase very rapidly,” says Giardina. “The team started off very small – it was just the IST project manager and Avanade’s solution architect. In the first three months they worked together on the solution’s design and established how it would fit the company’s requirements. More people were brought on board as the project developed and then, between April and July 2013, the solution was rolled out. I’m pleased to say that it was implemented on time and within budget. The success of this first phase has really helped to steer the rest of the project.”

As Moffett explains, the flexibility of Dynamics CRM was a key factor when it came to ensuring a smooth implementation. “Agility is essential for any manufacturer and systems need to match this,” he says. “Having a tool that can adapt to a company’s operational requirements easily leads to quick deployments, while enabling a low overall total cost of ownership.”

“I really like the configuration and extensibility capabilities of Microsoft Dynamics CRM,” adds Ali Ferling, global managing director of Oil and Gas, and Mining Industries at Microsoft. “They really help to improve business relevance and fit, so that any company can make the solution work the way it wants to and configure it in unique way that helps it focus on competitive differentiation.”

IST is now well underway on its migration journey to Dynamics CRM. “It was a great achievement getting the Global Marine Fuel business up and running on the solution within just six months,” says Kooter. “Our European Gas and Global LNG business units were also live by the end of the year. Throughout 2014 we will continue rolling Dynamics CRM out across the remainder of our business.”

Today, around 200 IST employees are using Dynamics CRM on a daily basis. “We hope to increase this to about 600 by the end of the year,” adds Kooter. “We’re finding that as the database is becoming more populated and, therefore, more useful, more people are keen to get access.”

It is still early days but IST is already realising the benefits of having all its customer-related data held in a single database. In particular, it is now in a position where it can properly understand its business and get useful information quicker. “Already we are able to generate sales analytics with the press of a button,” says Kooter. “Previously, we might have been able to perform the same analysis, but it took us a lot of time to collect all the information from different sources and create an aggregated picture. Now, the tool performs this task for us and does it instantly. Having the ability to centrally store all information and not lose this information when people move on is also hugely valuable.

“What I particularly like about the tool is that it allows us to think globally and locally at the same time,” he adds. “We have one global platform that brings our entire organisation together, but we can configure the tool to meet the very different needs of our individual business units. This is really helping Dynamics CRM to be accepted and embraced by each business.”

Looking ahead to when Dynamics CRM will be live across the whole of IST, Kooter expects to see real progression in the area of key account management. “We have many different interactions with our customers and partners, and we will be able to use the solution to build up a detailed contact map that shows all the ways we’re engaged with them. Our partners and clients expect us to offer them a consistent level of service. Dynamics CRM will allow us to work as one global team and, by being better connected, we can deliver real value where it matters.”

Moffett at Microsoft is confident that the functional capabilities available within Dynamics CRM and the fantastic delivery by Avanade will ensure IST’s ongoing requirements are fulfilled. “When you combine this with the ability to leverage the full stack of Microsoft products and the R&D investments we continue to make year after year, it’s truly a great return on investment for a customer who has future growth needs,” he says.

“So far, we have worked successfully with Microsoft and Avanade to get the most out of the application,” concludes Kooter. “What I really appreciate is the agile way we are working with the CRM project team. As we are learning more about what the solution can do, we are able to continuously develop it and improve our functionality. Dynamics CRM allows us to implement changes in a very flexible and dynamic way.”

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The Spring 2015 issue of OnWindows is out now, providing you with everything you need to know about enterprise technology on the Microsoft Windows platform.

Wanting to be more than just simply providers of basic connectivity in today’s digital world, telco companies are searching for new ways to boost their profits and attract new customers. As revenue from traditional services such as voice and texts continues to fall into decline, telco providers are shifting their focus to developing new offerings, while lowering operational costs and delivering more engaging customer experiences.

Research firm Analysys Mason estimates that between 2013 and 2017, voice revenue for the telecommunications sector is set to drop by US$38 billion. On the flipside, data revenue is set to grow by US$128 billion in that same period.

“Telco operators are constantly having to balance their revenue streams and keep up with the latest customer demands, and that means they’re having to adjust their business models and deliver new services,” says Rikke Helms, managing director of Global Telecommunications at Microsoft. “As their traditional offerings become increasingly commoditized, telcos are having to find new sources of income and ways of holding onto their customers, and that requires a completely different outlook.”

Much like in other industries, telco providers are finding that they need to move away from a product-centric model to a customer-centric one. “Retention is one of the telcos’ biggest issues, but it’s something that they must tackle to ensure a sustainable business,” says Helms. “It actually costs a great deal more to attract new customers than it does to hold onto your existing client base. That’s why customer service is now considered a top priority within the industry.”

In particular, telcos are finding that they need to deliver a consistent level of service across multiple channels – from in-store to the call center to online – so that whenever a customer interacts with the company, the person on hand to serve them has access to all the information they need to deliver a personalized and relevant experience every time.

With the raft of mergers and acquisitions taking place in the industry at the moment – BT in the UK is currently in the process of acquiring mobile network EE in a deal worth a reported £12.5 billion – having the right tools in place to capture customer information from disparate sources and consolidate it is becoming more and more critical.

“Microsoft has a big role to play equipping telco providers with the productivity, communication and customer relationship management tools they need to better serve their customers and gain the business insights they need to succeed in future,” says Helms. “From SharePoint and Dynamics CRM to our enterprise-grade cloud and BI tools, we have the end to end suite required to meet their specific needs.”

What has become clear is that it’s the customers, not the telcos, which will dictate how the industry will look in the coming years. And that could mean that rather than delivering the same products and services – which they’ve been doing for the last decade or so – carriers could end up diversifying, focusing on cloud services, the internet of things, TV and media, and so on.

At Mobile World Congress in March, Telefónica announced that it had entered into a joint initiative with Microsoft to deliver TV content over the internet to Windows Phone devices, building on the success of its already popular Movistar TV Go service. Speaking about the move, Michael Duncan, CEO of Global Video Unit of Telefónica, said: “The availability of our television services on mobile devices increases the attractiveness and potential for enjoyment of the content we offer to our users, and places Telefónica at the forefront of video products with an offer of TV everywhere, which is increasingly diverse.”

As Helms notes, it’s critical that telcos keep up with new technologies and have insight into their customers’ demands to ensure they continue to meet their expectations. It is therefore expected that telcos will go far beyond providing a basic level of connectivity, and will look to new revenue streams, whether that may be reselling services such as Office 365 or bundling services to include TV and music.

To help telcos keep up, Microsoft is finding its own relationship with them changing too. “We’ve got a long history supporting the telco industry,” says Helms. “But until recently we have primarily sold our Windows productivity tools for their own consumption. Now, we are finding that we’re selling to them, with them and through them.”

From a sell-through point of view, Microsoft is seeing huge growth in its cloud business, driven largely by the telcos’ desire for more sophisticated cloud services, which they can not only use themselves but resell to their customers. “We’re seeing greater demand for our Azure platform and hosting capabilities,” says Helms. “Rather than building their own cloud infrastructures from scratch, it’s much more cost effective for them to use ours. It’s all about efficiency and taking advantage of the existing infrastructure out there.”

When asked what will distinguish the market leaders from the laggards in the coming years, Helms is convinced that great service is key. “It’s about understanding customer needs and having the ability to move fast to keep up with their demands,” she says. “Price is no longer enough of a differentiator; customers expect a great experience and access to the most innovative services and technologies. It’s up to us to work with the telcos to bring these new services to market as quickly as possible, in the most cost-effective manner.”

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