Q. How are insurers currently leveraging Linux and open source software?
A. Bill Weinberg, Open Source Development Labs: The insurance industry reflects a broad, cross-industry Linux adoption trend. Insurance companies started using Linux in applications such as Web, file and print servers. As insurance industry Linux adoption matures, it is moving into more specialized, enterprise applications in the data center and on the desktop. A newer application for Linux and its stack is Web-based insurance brokerage and direct sales. This new and growing e-commerce segment builds on the solid LAMP (Linux + Apache + MySQL + PHP/Perl) foundation for many sister industries (e.g., banking and financial trading) and allows insurers to deploy a mix of homegrown and off-the-shelf applications.
A. Bill Pieroni, IBM: In 2004, insurers have continued to adopt Linux OS and open source software, though deployments are still limited to select "point" applications. The primary focus to date has been on front-end, Web-based functionality for agents and customers. These applications typically interface with back-end legacy systems in order to support extension to e-business channels. Successful efforts are around Web-based quoting, customer insight for agents and internal customer management processes. Recently, business intelligence and analytics applications, which use Linux-based databases on zSeries, are also gaining popularity as an alternative to a Unix server cluster.
A. Nobby Akiha, Actuate Corp.: As insurance companies strive to retain customers by providing high-quality service, large-scale, secure extranet and Internet applications have become more prevalent and play to the strengths of open source. This is clearly one of the areas in which the industry can gain great return from using open source technology.
Q. Why are insurers choosing to go with Linux and open source software for these applications?
A. Weinberg, Open Source Development Labs: Open source, and Linux specifically, offer a number of advantages, with specific rationales varying with company size, IT history and business model. Common motivators include mid- to long-term ROI, better security and more flexibility with hardware and software.
A. Pieroni, IBM: There are three primary reasons insurers embrace Linux and open source: core business improvement; agent and home office productivity enhancement; and cost-optimization while enhancing flexibility and scalability. Benefits are substantial, and benefits realization is relatively fast - most insurers achieve payback in less than 24 months.
A. Akiha, Actuate Corp.: The two driving factors are cost and time savings. By using open source, costs saved on licensing fees are considerable when multiplied by the thousands of agents and millions of customers being served. Open source technologies will save time in bringing reporting and analysis capabilities to insurers. This will allow insurers to embed reports in existing applications or build enterprise reporting applications that provide customers and agents with reports in easily understood formats. With progression such as this in the open source world, developers in the insurance industry are able to spend less time on reinventing the wheel and more time on the development of critical applications.
Q. What benefits have insurers realized from Linux and open source implementations beyond cost-savings? What challenges have carriers needed to overcome? Are there downsides to open source applications?
A. Weinberg, Open Source Development Labs: Benefits from migration to Linux for many insurers accrue from the legacy base of Unix applications present in the insurance industry data center. Company- and industry-specific applications benefit greatly from Linux adoption by offering shorter paths for legacy migration and more options for preserving legacy investments in software and hardware. Linux and a pragmatically mixed OSS and proprietary stack also offer more options for (re)distributing load across servers and clients, and better scalability. Linux servers can be scaled horizontally with the addition of (inexpensive) cluster nodes, and vertically on SMP machines that build on commodity multiprocessor Intel Pentium and AMD-based systems. Clients don't need to be upgraded as often and are more secure with Linux. And all insurers save through lower incremental licensing costs.
A. Pieroni, IBM: Insurers are drawn to security, reliability and reduced vendor hold-up of Linux and open source applications. Linux has demonstrated that it offers improved security and reliability, and is less affected by viruses or spyware compared to other operating systems. As more applications become open source, the nature of open architecture will allow insurers to have a credible platform to transition to alternative applications.
However, implementation of Linux can create challenges for organizations that lack the skill or appropriate level of funding to support the initial transition or implementation. Moreover, skills and tool sets in the market are growing, but they are still less robust than for legacy alternatives.
A. Akiha, Actuate Corp.: Open source technologies are adopted due to their accessibility and, therefore, insurers are finding that a secondary benefit to open source - on top of the reduced cost - is the availability of knowledgeable consultants. Not only are technical consultants able to gain free access to the technology, but they are able to perform technology due diligence right down to the source code level to understand in detail how the technology works. The openness of the technology promotes widespread adoption and understanding. The downside is that the legal issues around open source technologies are not clearly understood. Having said that, this is an opportunity for insurers, some of whom are planning to insure companies against legal risks of open-source software.
Q. Why has the insurance industry been relatively slow to adopt Linux and open source technology?
A. Weinberg, Open Source Development Labs: The insurance industry appears to be "average" in its Linux-adoption curve, and perhaps more conservative in its ability to disclose that adoption (dealing as it does with personal proprietary data). A given industry (or individual company) will adopt Linux and open source when and if Linux offers benefits to their workloads and can host a reasonable portion of the legacy application stack. Both appear to be happening today for insurance.
A. Pieroni, IBM: Insurance by its very nature is a conservative industry, managed and led by conservative professionals. Historically, insurers have been somewhat reluctant to adopt process, organization and technology innovations. Aside from culture and propensity, there are several factors delaying adoption by insurers: Linux skill availability, third-party insurance-specific applications and relative importance of legacy applications raise hurdles for risk-return requirements.
Relatively lower penetration of Unix presence in insurance versus other industries also contributes to slower Linux adoption. Insurance-specific software vendors have been slow to invest in making their applications run on Linux since most existing insurance-specific applications do not run on Unix. Nonetheless, there is a growing base of software vendors that have developed strong Linux-based insurance applications.
A. Akiha, Actuate Corp.: There may be a natural aversion to being the early adopter, but as insurers see other financial institutions move in this direction, they may feel more prepared to allow the cost and time savings of open source application development to outweigh the unknowns and the risks.
The Experts: Open Source Computing
Open Source Architecture Specialist
Open Source Development Labs
General Manager, Global Insurance Industry
IBM (Armonk, N.Y.)
Vice President of Marketing
Actuate Corp. (South San Francisco)
Peggy Bresnick Kendler has been a writer for 30 years. She has worked as an editor, publicist and school district technology coordinator. During the past decade, Bresnick Kendler has worked for UBM TechWeb on special financialservices technology-centered ... View Full Bio