Having made a big splash in the insurance technology world following its October 2000 debut, Toronto-based P&C policy administration system vendor lapsed into dormancy following a series of troubled implementations. The vendor has now reemerged, powered by an equity investment and partner relationship with New York-based global financial services technology vendor i-Flex Solutions, which has become Castek's majority shareholder through the deal.
Castek became a victim of its own success when the appeal of its component-based, platform-independent offering led to more business than the company's service resources could handle. Adding to a recipe for disaster, the insurance industry saw some of its hardest times following Castek's heyday.
"We simply sold too many companies at one time and couldn't ramp up fast enough to meet the demand. We were spread way too thin," acknowledges Yung Wu, Castek's CEO. It didn't help that the vendor had released the product early -- in version 0.8. "We hadn't yet worked in implementation accelerators," Wu adds.
Wu sees the i-Flex relationship as the occasion for a "second chance," citing his partner's ample resources -- the vendor enjoys roughly $1 billion in annual sales -- and proven track record in financial services. Under the alliance, i-Flex will serve as Castek's services and global sales arm. "This allows us to be a pure product company and to scale up," Wu comments. "We always had a killer product, and now we have killer implementation resources."
It's just as well that Castek tacitly acknowledges its poor service record and offers an alternative through i-Flex's contributions, opines Chad Hersh, a Dallas-based analyst with Celent Communications. "The market is unlikely to ever forgive them for over-extending their services," he remarks.
The Castek/i-Flex approach is novel in that it comprises a known insurance vendor's attempt to reenter the industry and a vendor not well-known to make its initial entry into the market. Whether that approach will be successful remains to be seen, but Castek enjoys the advantage of its technology approach no longer being seen as untried, according to Hersh. "It's a system based on technologies that are now more mature and yet are pretty sparsely used in policy administration," he comments. "There are other systems that use these technologies, but not many that use 100 percent newer technologies and are platform independent."
Time will tell whether the industry will give Castek a second chance, now that i-Flex has pumped new breath into the company. Nevertheless, says Hersh, "few would argue that [Castek] was good technology and still is."
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