Buy Versus Build

One of the most common questions asked of a software vendor is “who do you consider to be your competition?”. Bond-Pro has existed for over 20+ years, completed 10 software development life cycles, released thousands of product enhancements, invested 500,000+ development hours, millions of dollars, and is recognized as a market leader. Yet our number one competitor continues to be Sureties who attempt to create and maintain a homegrown systems internally.

Defying modern, commonly accepted practices (outsourcing, cloud, COTS), insurance companies continue spend on internal IT projects at greater rates than most other industries. Critical business and technical decisions are often based on the combination of flawed notions that:

  1. it is cheaper/faster to do it themselves
  2. they can effectively customize existing systems to accommodate Surety
  3. homegrown systems will enable them achieve competitive advantages

Our best clients tend to be those carriers, brokers and agencies who have gone down this path, learned difficult lessons, and have chosen to focus on underwriting Surety rather than engaging in the arduous discipline of software development.

The following are some of the things to consider when conducting a Buy vs Build analysis of a Surety System:

Surety IS NOT Insurance

  • Even though Surety is underwritten by Insurance companies, it’s assurance – resembling more so a bank letter of credit
  • While some similarities to insurance exist, there are far more differences to take into consideration and gaps that must be addressed
  • The notion that you can simply tailor an insurance system to accommodate Surety is like forcing a square peg into a round hole
  • Proof Point: None of the leading carrier P&C systems vendors (i.e. Guidewire, Duck Creek, Xuber) include meaningful Surety functionality

Surety Is Highly Specialized & Complex Discipline

  • The common assumption that insurance professionals can easily apply their knowledge and experience to Surety is a fallacy
  • Surety requires a large amount of specialized functionality in order to be achieve competitive advantages and user adoption including:
    • Maintenance & Versioning Thousands of Obligee Required Form Templates
    • Hard Power of Attorney Tracking & Management
    • Tracking of Collateral, Reserves & Subrogation
    • Surety Specific Claims Management
    • Special Arrangements (i.e. Fronting, Co-Surety & Reinsurance)
    • Rigorous, Complex Financial Statement & Job/Project (WIPs) Data Collection & Analysis
    • Bond Specific Accounting
  • Proof Point: The scope and complexities of developing and maintaining Surety platform software match that of an enterprise Accounting/ERP system. Internal development of such systems is commonly considered impractical. So why consider developing a Surety System?

The Cost, Time, & Risk Of Internal Development Far Outweigh the Benefits

  • Even before factoring in risk, time and overruns, the internal costs of undertaking such an effort far exceeds the costs of licensing, ongoing maintenance and support of commercial off-the-shelf software (COTS) software
  • The total time required to build a Surety system is longer than its useful life and negates the achievement of competitive advantages
    • Business Analysis, Specifications & Planning – 2+ Years
    • Development, QA, Deployment (50+ Resources) – 3+ Years
    • On-Going Maintenance & Improvements – 3+ Years
  • Sureties are increasing efforts to expand abroad. Globalization (multiple languages, currencies, etc.) exponentially increases the development & support overhead
  • Ultimately, competitive advantages from using platform software are gained from successful configuration, implementation, integration, change management, and user adoption. Not from developing and maintaining the system itself
  • Proof Point: If you are going to develop commercial software, then you should enter the software business. Otherwise, concentrate on your core competencies and utilize commercial off-the-shelf software (COTS) whenever possible. This is the approach favored by the Big 4 & most systems consultants

You Will Ultimately Hit a Brick Wall

  • Agents & Brokers feel burdened by a large amount of data entry as they must rekey and maintain information in multiple carrier systems and within in their own Surety Agency Management Systems
  • The next technology disruption in the Surety industry will be seamlessly embedding your Surety within agency/brokers systems – B2B.
  • Bond-Pro has a large footprint among Surety carriers, brokers & agencies, has overcome both the business & technical hurdles, and achieved the scale necessary to facilitate B2B transactions
  • Proof Point: Even if a Surety achieves the goal of internally developing a system, it will be difficult to:
    1. Gain greater market share when competing against Bond-Pro carriers
    2. Attract new agencies, many who are Bond-Pro clients and prospects

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