The Hybrid Core System Explained with a Parable

With the launch of Guidewire Live and Live Inside, you may have heard us talk about the advent of the hybrid core system; that is, a solution that combines the power of “instant-on” apps embedded within the workflow and decision making of a best-of-breed core system.

When we refer to the Guidewire Live app as being “instant-on” for our customers, what we mean is that we have taken care of all the integration work, for both the data and the systems. That’s because all Guidewire customers share a common data model and technology platform. Instant is a relative term; but compare the hours it takes to setup the Live data feed against the lengthy high-cost projects required to integrate most cloud and data services, and we think it’s an apt description. And based on feedback from our first twenty participating companies, they seem to agree as well. Moreover, we believe that “instant-on” is the future - it’s the way things ought to be. There is an assumption today that every technology or data investment requires a massive integration project - because it typically does.  

What does the insurance technology world look like with “instant-on” apps? Perhaps the best way to illustrate it is with a parable.

The parable of the gas and the groceries.

A man goes out to buy groceries for his family. His shopping list contains about 20 items, totaling $200 for the week’s worth of food. He jumps into his car and finds that he’s out of gas, so his first stop is to the gas station to refuel. Unfortunately the cost of gas has increased to $10,000 per gallon. He sits at the pump for a while to think about his options. He doesn’t actually want fuel but it’s the means to the end:  gasoline can’t feed his family, but he needs gas in order to drive to the store to buy food.  

A rational man, he thinks to himself, “I need to take fewer trips to the store.”  So he reconstructs his shopping list to buy more food per trip. He chooses not to make trips for small items and instead tries to bundle small items with larger items. He buys a bigger car to transport his purchases. He buys a bigger refrigerator to store his perishables. He buys a couple of barns to store his dry goods. He buys more real estate to fit more barns. And in a perverse twist of fate, he learns that there is no financial justification for living simply or buying on sale. The high cost of fuel makes the price difference between caviar and fish sticks look like a rounding error. In short, he can only afford to buy the most expensive items!

Grocery store visits and the infrastructure to support them have now become a rather large investment!  So the man goes to visit his financial planner who provides him with a simple way to evaluate how often he should go to the store:

 

 

Interpretation of the parable

I hope you’re laughing because the story is absurd. Yet this is the absurdity that insurance companies must navigate every day. Insurers need external services and data like families need food - it provides them with health and knowledge. But the integration projects (the gas) cost orders of magnitude more than the services or data (the groceries). So what then do insurer IT departments do? They only do what is rational: They minimize the number of projects (trips) required. They only buy the most valuable and expensive services and they leave all the minor projects behind; because even if a minor project has a positive ROI, the cost and risk of the integration means that the project is unaffordable.

Stop the madness!

One of our goals with Guidewire Live is to stop this madness. “Instant-on” for us means that our customers can now evaluate external services based on a simple formula: does the nutritional value of the service exceed its subscription cost?  If so, then turn it on.  If not, then don’t.  It should be that easy. And with Guidewire Live, now it is. It’s like we’ve returned the cost of fuel to $4 per gallon. Hoarding is no longer required. I wonder what you could get for those extra refrigerators on eBay?

Reposted by the Insurance-Canada.ca blog, The Intersection, January 18, 2014.