The Technology Behind STP
Integration Servers Link Partners
Interoperability is a big piece of STP, which means that systems integration is a big piece of interoperability. Integration servers were originally used to address enterprise application integration (EAI) initiatives and to help companies leverage and extend their existing systems, as well as to integrate the disparate applications of companies involved in mergers and acquisitions. More recently, as companies have sought to use the Web as the channel for transactions, B2B integration has emerged as the way to create the necessary links to the systems of partner organizations.
One challenge is the wide variation of systems that can exist across the partner organizations, many of which may be proprietary. Moreover, it can be next to impossible to get a large network of value chain partners to agree on standards for database architecture, network protocol, and process automation. No one wants to make significant changes to existing systems—systems that invariably represent a huge investment, not to mention a company's most vital IT assets.
Integration servers enable this B2B application integration, integrating systems beyond an organization's firewall by adapting the systems of member organizations into a larger system that enables information to flow unimpeded. Integration servers do the heavy lifting: linking the back-office systems of multiple organizations with the transactional commerce front-ends that interact with business partners and customers. What is more, they allow an organization to leverage its existing global network infrastructure and back-end legacy systems.
Vendors of integration servers are now developing cost-effective pre-built solutions for the insurance industry. Some of the notable players in this market are Vitria (Sunnyvale, CA) and SeeBeyond (Monrovia, CA), vendors that are working closely with customers and industry organizations to make such solutions a reality. With insurance a key vertical market for these vendors, we expect other insurance industry-specific solutions in the near future.
At the heart of STP is Web-based, business-to-business collaboration across a wide set of partners. Web services is a distributed computing model that simplifies global business-to-business communications, allowing organizations to sidestep the integration hassles of EDI and B2B integration. In contrast to approaches that require companies to develop, implement, and maintain technology platforms with their partners, Web services offers the option of loosely coupled integration with a wide range of partners, enabling a company to connect with many partners for many types of interactions.
Web Services
Based on XML, Web services are platform-independent and data-model-independent application components, thereby making joint systems development unnecessary and allowing for a far more flexible infrastructure. Web services architecture allows programs written in different languages on different platforms to communicate with each other in a standards-based way.
Today, Web services expose the functionality of applications to other applications, and potentially to other Web users, through a standard Web protocol, the Simple Object Access Protocol (SOAP). SOAP is an XML-based communications protocol for passing messages between systems over the Internet, enabling application-to-application communications across different platforms and different development technologies.
Some integration solutions make the creation of SOAP-compliant application components a single-click operation, while others force developers to do a little more work. However, relative to traditional development techniques, SOAP is straightforward and easily understood because it is based heavily in XML.
For insurance companies, the big advantage is that Web services allow them to extend their legacy applications to the Web, promoting application component reuse. Web services can also be used to replace manual, forms-based business communications with automated, XML-based connections. Several forward-thinking insurance companies are using Web services; however, widespread industry adoption is probably a year or two away.
Clearly, most organizations in the insurance industry will need to assess their infrastructures and make some technology acquisitions to ready themselves for STP. Where should a company put its focus as it moves toward upgrading its technology infrastructure to enable the efficiencies of STP?
The Role of Standards
First and foremost, we advise our clients to develop a business case for the value STP will bring to them. They should analyze the specifics of the key business processes they want to streamline, and estimate the time and effort that will be saved through automation. They should also start to model their business processes to see if efficiencies can be gained and to identify bottlenecks in the process today. Organizations should also determine what standards they want to support, along with the skill sets they can bring to bear organizationally to design, build, and maintain the STP applications. Other firms may decide to outsource the effort, and will need to determine what service-level agreements they require.
The message should be clear: Standards are the prerequisite to making straight-through processing work. ACORD has been a strong advocate of the standards movement, supporting XML and more recently undertaking eMerge, the ACORD Global Standard Initiative—which seeks to offer a single set of XML-based data standards for insurance and other financial services.
For an industry such as insurance, where processes have traditionally been highly paper-driven, the benefits of STP are the ability to automate and optimize business processes, reducing manual processing and the associated errors, as well as the ability to do business with a larger set of partners.
But the insurance industry has also tended to be highly risk-averse. Security will be a major concern—as will the need to standardize business processes, portions of which may now be proprietary.
The impetus to standards may well come from an external source. For the financial services industry, the impetus has been regulations requiring T+1 (""transaction-date-plus-one"") settlement of financial transactions, with the Global Straight Through Processing Association (GSTPA) pushing STP.
With continued deregulation and the consolidation of the securities, banking and insurance industries, however, is likely to come increased impetus for adoption of cross-industry standards. It is to be expected that ACORD, and similar groups in other segments, will be playing a major role in providing industry direction and promoting standards that ensure the full array of cross-industry benefits.
-----------------------------
Gautam Desai is vice president of research, and Linda Andrews is a senior technical editor with Doculabs, Inc. (www.doculabs. com), an analyst and consulting firm that helps companies select and optimize technologies.for theirbusiness strategies.
Tweet This