Coming of Age in Finance Management
The greatest pressure vendors face today from their clients is to Web-enable their products. Larger carriers ""want to deploy more information to more people over great distances, whereas smaller companies are looking to the Web for controlling costs.""
For some insurers, the Internet provides a means of handing off some of the responsibility for managing the technology supporting the financial function. According to Jim Mayhall, executive vice president of sales, marketing and product development at Princeton Financial Systems (Princeton, NJ), ""Because of globalization, we see interest from a lot of companies in moving toward an ASP strategy, where we would host their data for them.
""There is so much emphasis on profitability, particularlybecause of overseas competition, that companies need to focus on core competencies,"" Mayhall says. ""Particularly for smaller companies, the cost of keeping pace with change in the technology arena is becoming overwhelming. By switching to an ASP strategy, they can eliminate cost and make their expenses predictable.""
The need for integrity, accuracy and promised delivery in the financial/investment function will encourage greater use of outsourcing, says Mayhall. ""For those in the investment process, we're all focusing on the need to be 'T+1' ready—that is, the need to trade and then have that processed within one day,"" he says. ""Currently we're at 'T+3,' so the transition is going to be difficult, particularly for those firms with high trading volumes. If you don't settle in time and the trade fails, that can be particularly expensive. We've been helped because the need to be compliant has been pushed out to June 2004. Nevertheless, the need for additional connectivity should make outsourcing all the more appealing, with vendors providing the necessary services and providing the infrastructure.""
Many financial systems vendors say they are concentrating on the ""holy grail,"" making their products Internet- and intranet-ready—a great opportunity for insurers to streamline treasury and finance functions and create seamless operations.
KPMG's McDonnell says the Internet should encourage the movement from ""fat"" to ""thin"" ledgers—a positive development, he says.
""We see the need for data warehouses and marts that supplement basic financial system software, and that gets into this question of the thin-versus-fat ledger,"" he notes. ""Historically, people have put a lot of information in their ledgers, but we talk today about the need for thin ledgers, where you complement those and your accounts payable system with reporting and management information systems that help move the information in and out to wherever you want it to go.""
Nevertheless, according to Lawson's Plunkett, ""it's a double-edged sword. On one hand, people will be able to move information anywhere, any time, but at the same time there will have to be integrity in both the systems and information, as well as security and confidentiality.""
Whatever the concerns about security, vendors expect pressure to continue to build for pro-ducts to become Net-ready. That's the case at the Freedom Group (Cedar Rapids, IA), which says all of its general ledger and annual report products—as well as support for them—will be Internet-enabled early this upcoming year.
""Agents working for our insurance clients are getting requests from policyholders to see their account information online,"" according to Ann Happel, vice president of financial sales at the Freedom Group. ""They want to see accounts payable and claims information, and there has to be a way for the accounting people and the agents to broadcast that to their customers. The Internet will be that means.""
Lawson's Plunkett believes pressure to cut costs through effective financial management can only continue growing. ""Mergers just won't add that much profitability,"" he notes. ""Acquisitions are a risky way to grow, particularly if you're rewriting an entire book of business and repricing product. So we all must make the Internet and other technologies work effectively as soon as possible. There is no other way.""
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FINANCIAL SYSTEMS: KEY TRENDS & CHALLENGES
--Need to support dissemination of critical financial information.
--Shift to more strategic investment/financial management strategies, driven by array of business and regulatory factors, including demutualization, drying up of traditional income sources, globalization, M&As.
--New methods of tracking profitability: by department, product, channel, sales agent.
--Reconsideration of asset management, budgeting, performance management processes. Analytical flexibility is a must.
--Financial systems become Web-enabled.
--Move to T+1 settlement drives systems integration.
--Outsourcing, ASPs become a more attractive option
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FINANCIAL SYSTEMS: SOLUTIONS PROVIDERS
CMS, Los Angeles
The Freedom Group, Cedar Rapids, IA
Lawson Software, St. Paul
Oracle, Redwood Shores, CA
PeopleSoft, Pleasanton, CA
Princeton Financial Systems, Princeton, NJ
SS&C, Windsor, CT
SAP, Walldorf, Germany
SunGard Insurance Systems, Atlanta
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