Build or Buy?

21st Feburary 2018

Should a technology solution be custom built or externally sourced with a commercial, off-the-shelf option? This is a fundamental question across every business, but is currently especially pertinent for the insurance industry, given the focus on new providers of insurtech. For those heading up technology, the objective is to provide systems that bring value to the business. This could mean buying in software written by third parties, building a system from scratch, or a mixture of both.

In a recent Insurance Nexus webinar entitled Raising Insurance Customer Engagement, Monika Schulze, Global Head of Customer & Digital for Zurich Insurance admitted that traditionally insurers have developed everything themselves. She recognises the approach is now changing: insurers are much more open to explore third-party solutions. In her view, many insurers no longer have the expertise or technical resource to meet all the changing needs of their customers.

How do you decide?

So, there is definitely more acceptance in the insurance industry that 'build' is not always the default position. As a software vendor, we are acutely aware that there is no single answer. What is important is that the question is given the attention it deserves. So where do you start?

However, despite the steps above, or sometimes even missing many of them out, decision makers often focus on the significant short-term cost differences between a custom in-house solution and an external solution ... and they decide to build their own to 'save money'. Decisions affecting the future viability of a business should never be made on short term cost savings alone.

Financial considerations of ‘build’

Leaders who decide to build their own solution often overlook the following expenses:

Building custom software in-house can ultimately deliver a significant return on investment. By developing your own software you get exactly what you need: off-the-shelf software is designed with different types of user in mind, your software only needs to be built with you in mind. And if you discover later that you need something, you can choose to add it yourself instead of waiting for a third party to do so. But you need to invest significant money and time to ensure that you have the right resource in place both now and well into the future.

Key considerations of ‘buy’

When assessing external solutions, these are probably the three most important considerations. I have not put price on this list as cost should only be considered AFTER you have decided the system can deliver. My top three considerations are as follows:

Always consider both

At the risk of stating the obvious - you should always consider both options.

Buying when you should have built incurs the cost of learning how to use the third-party system, and only later discovering that you made the wrong choice.

Building when you should have bought risks the cost of countless hours of development time wasted on something that ultimately fails to deliver the desired results.

As stated at the outset, there is no quick and easy answer. The only definitive conclusion is that both build and buy have to be considered in equal measure. Only then can you make the right decision for your business.


Content produced exclusively for Total Systems plc, specialist providers of insurance software for quote; rating; policy administration and claims

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