Guidewire-Millbrook Deal Signals Value of Data for Differentiation

Guidewire has characterized the deal as providing the ability to help customers to accelerate replacement of their legacy core systems and to improve management of operational data in their policy, billing, and claims functions.

When introducing the Guidewire Live data, content and tools service last October, CEO Marcus Ryu noted that as important as next-generation platforms are, they won't be enough. Yesterday's announcement of Guidewire's acquisition of Millbrook, a data management and business intelligence (BI) solutions vendor for the P&C industry, would seem to underscore Ryu's point.

It's a sign of the maturity of both core insurance systems and data environments that the former are steadily evolving into reliable providers of commodity functionality powered by data filtered through analytics. Modern insurance systems architecture is increasingly centered on data rather than transactional systems, and that data is being leveraged successfully to drive smarter decisions and more efficient processes. As that trend develops, core system vendors will look to differentiate themselves through their ability to embed BI and other analytical capabilities, industry analysts believe. Guidewire has characterized the deal as providing the abiltiy to help customers to accelerate replacement of their legacy core systems and to improve management of operational data in their policy, billing, and claims functions.

[For more on Core Systems Are Not Enough: CEO Ryu Introduces Guidewire Live Network.]

"I think the fact that Guidewire’s first acquisition is in the business intelligence space underscores the critical importance of this area to insurers," comments Matthew Josefowicz, partner and managing director of Novarica. "We’ve seen a number of P&C core systems vendors expand their capabilities in this area recently.”

Guidewire's acquisition of Millbrook is a sign of an overall trend of core insurance vendors strengthening their analytical capabilities, according to Kimberly Harris-Ferrante, VP and Distinguished Analyst, Gartner. "Today there are few vendors, however, with true embedded analytics that support analytics within the business process or that go beyond simple reporting," Harris-Ferrante notes. "Embedded analytics is a characteristic of the next generation of insurance systems and will significantly improve user return on investment and business insight.”

The Guidewire/Millbrook deal can also be seen as simply continuing the trend of core system vendors trying to distinguish themselves by extended capabilities in general, suggests Karen Furtado, a partner at research and advisory firm SMA. "The marriage between core systems and data and analytics consume the highest spend areas in insurance today," she observes. "It will be fascinating seeing the product rollout and the market response."

Considering the deal as a milestone in Guidewire's evolution, the Millbrook acquisition is a fundamental shift for a vendor that has until now sold only what it build itself, remarks Stephen Applebaum, a senior analyst with Aite Group. Applebaum sees value in Millbrook's capabilities giving Guidewire the ability to help clients manage the complex data conversions inherent to system replacement. Productizing Millbrook’s operational data and business intelligence assets will also provide an almost instant revenue — and earnings — boost for Guidewire to help maintain their impressive growth rate, Applebaum asserts.

"The alignment between these two companies is excellent as both exclusively serve the Property & Casualty segment of the industry, both boast a customer service excellence culture and Millbrook’s business intelligence and analytics expertise provides the perfect complement to Guidewire’s core systems suite," Applebaum adds. "If Guidewire can successfully integrate Millbrook - organizationally and technologically - its competitive advantage will increase even further."

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