A Break in the Clouds

It shouldn't be surprising that many insurance execs consider cloud computing to be little more than a marketing term.

Few buzzwords can compete with "cloud computing" for both the volume of use and vagueness of meaning. Sensing an opportunity, vendors have associated the term with a wide variety of sourcing options, giving the impression that the cloud opportunity is more apparent than real, particularly in the financial services industry, where privacy and security concerns make control over data a high priority. So it perhaps is not surprising that more than half of the insurance industry respondents to a recent Insurance & Technology/InformationWeek Analytics survey opined that cloud computing is a marketing term used haphazardly.

It's true that some vendors have illegitimately marketed ASPs as cloud offerings or exaggerated the significance of their use of internal clouds. But still, some of the market confusion about cloud computing has arisen because a variety of offerings legitimately fit within the cloud category. Most analysts agree that cloud computing refers to sourcing solutions that provide services delivered over the Internet within three architectural tiers: infrastructure, platform and application.

The beauty of the cloud, like other sourcing offerings, is that it enables elastic use of services without capital investment in infrastructure. The problem with the cloud, from the perspective of insurance carriers, is that unlike in the case of traditional ASPs, cloud resources are shared among clients. That concern so far has limited insurers' use of cloud options to applications not involving sensitive data.

Similar concerns, however, have been expressed about other highly successful technology approaches, such as virtualization and indeed, the whole concept of e-commerce. Given past experience, it is hard to doubt that in this case opportunity will prove the mother of invention and solutions to privacy and security challenges will be found.

Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio