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Recent conversations with insurance, biotech and hospitality companies highlight growing interest in open source models for industry vertical apps.  These firms are considering opening up and sharing parts of their core business applications, not just infrastructure or common enterprise systems like HR or financials.  While none of these examples are straight-forward open source where all of the code will be freely accessible and the code development is crowdsourced, they liberally borrow from the ideas of libre and gratis.

In the insurance case, a deal is far from done, but it’s a big deal to even have this kind of conversation in a very conservative industry.  Here’s a little more context around one of the open source alternatives.

Insurance Carriers Consider Open Source Development

Insurance carriers use three primary systems - one that evaluates and prices risk (underwriting), one to keep track of customers and policies (policy administration) and one to process claims (uh…claims!).  There are also a few other important systems used to research and set pricing, to create and configure new products, but those are the basic three.

As is the case in many other industries, there are only a few large software players (CSC, IBM, etc.) who have more established offerings but tend to be slower to include new ideas and architectures.  There are also a handful of upstarts who tend to bring more innovative capabilities but who are largely unproven.  When it comes time for a carrier to upgrade one or more of the three core systems or to add one to support a new business line or geography, they are faced with the age old question: larger/slower/known vendor or smaller/faster/unknown vendor.

We have three insurance clients who are currently asking this exact question - each of them are adding new products and/or markets and think that going outside to a smaller/faster/unknown vendor will give them speed advantages.  Interestingly, they are all looking at the same vendor, which got me and my partner Mark Purowitz thinking.  Could there be a way to share more across these companies who are competitive in at least some markets?

We have started to discuss the idea of an open model in which, with unanimous approval, extensions to the core vendor software would be developed once and shared across the three (any maybe more) firms.  Some call this model “open periphery” since the core is proprietary but the extensions on the periphery could be made open.

It’s great to see this kind of co-opetition (a word first coined in 1913, per wikipedia) around a complex problem like complex industry application development.  Hopefully, they can get past the lawyers and make it happen.

cc licensed flickr photo shared by Daquella manera

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