Cloud Cover in Canada

Digital cloud cover is forecast for the Canadian brokerage marketplace.

Applied Systems, which develops, sells and supports insurance broker management systems in the United States and Canada, expects to be opening a data management centre in Canada sometime during 2012 Q3. The company currently has two data centres in the United States — one in Colorado and one in Virginia — that support the transfer of TAM agency management applications into the cloud.

In Canada, more than 130,000 users in 11,000 insurance-selling organizations use Applied’s TAM agency management system and other broker management software. Applied estimates the Canadian market represents approximately 20% of its revenue.

“Many brokerages don’t want to be in the business of managing their own data centre, because a lot of these businesses are modestly-sized,” says Applied Systems president Reid French. He cited statistics showing that, on average, a smaller insurance brokerage in the United States has an IT support staff amounting to only half a person. “You have larger brokerages of course, like HUB or Western Financial, but many brokerages are smallish in terms of users on the system — five, 10,15 or 20 people. These people [in smaller brokerages] are saying: ‘Why am I buying servers and managing a data centre with half a person?’ Instead what they’ve been doing is moving their applications to the cloud.”

Applied has been moving U.S. and Canadian companies to the cloud for more than five years. This means brokers use their TAM agency managers over the Internet. Data storage centres not only store the TAM application itself, but also policy data, customer data and broker commission data. Currently, 55% of the company’s customers use Applied’s two data centres located in the United States.

“The reason why a Canadian data centre would be advantageous to our customers is that when you transfer Internet protocol across countries, there’s a little bit of an overhead associated with that,” French says. “It’s not bad, but having a Canadian data centre will ultimately give [Canadian brokers] better performance. Secondly, and frankly more importantly, Canadian customers would rather have the data and the application in the country of Canada. We are able to say: ‘Hey look, your application, all of your data, is in the Canadian marketplace in a ruggedized, professional data centre.”

The exact location of the proposed data centre in Canada is still unknown. French says it will likely be housed somewhere in Ontario. An official announcement about the specific location is expected at the end of 2012 Q1 or at the beginning of 2012, Q2, French said.

There are other advantages to using the cloud. These relate to the efficient use of personnel in small brokerages. A June 2011 Statistics Canada survey shows that small business — defined as having between 20 and 99 employees and a revenue of at least $250,000 — makes up 98% of all employer business in Canada. It employs 48% of the country’s total private sector labour force.

French observes that if smaller brokerages indeed have an average of between zero and one IT person, that person is likely involved primarily in desktop support. In other words, they won’t have a lot of time to maintain the infrastructure required for running TAM. Moving the TAM application to the cloud takes that responsibility off their hands. Also, with TAM in the cloud, Applied looks after updates rather than brokerage IT staff. “As with any software application, ultimately new versions come out and you have to have someone who manages that upgrade path,” French says. “If you personally at your home manage the process going from Vista to Windows 7, that’s a gigantic pain in the neck. It takes many hours and it’s not a lot of fun. At the cloud centre, we ultimately do that for you.”

French says the cloud has become a more popular location for data storage as people have become more accustomed to using it in their own business and personal lives. “If you went back five or six years ago, I think people were very concerned about, ‘What does this mean about having my data application in the hands of some other person?’ Today, I think people have got comfortable with that because so many other applications that they use are provided in this way. Five years ago, you didn’t nearly have the adoption of Gmail. Five years go, you didn’t nearly have the adoption of amazon.com as a core shopping platform. As people get more comfortable with the fact that companies really do have their best interests at heart; that they do understand the requirements for these applications; that they understand the data privacy issues and the protection that’s going to be put in place; and that their reputations are completely riding on making sure all of that happens, people are a lot more comfortable with buying an application in that way.”

In one way, French adds, data is actually more secure on the cloud than it is in the broker’s office — particularly during times of crisis, when a policyholder needs his or her information most.

“Something we all forget about at times, or we don’t talk about it enough, is that you really need these systems — and policyholders really need insurance — when something very bad has happened,” French says. “We have a number of customers who have said: ‘I went to the cloud because it made sense and it saved me money and ultimately I got a better service at a lower cost. But I never thought that when the hurricane landed or the tornado hit, my office was going to be incapacitated. When you move your system to a ruggedized, bunker-style data centre, with two accessible power grids and multiple Internet connectivity, you enable [brokers] to access the information for the policyholder at the policyholder’s time of need, rather than saying: ‘Oops, I’m sorry, my office is down, too. I have to get back to you in a week and a half.’ We have great customer case studies in which people, because they had an iPad, laptop or a cellular card, have been able to access the Internet and hit our online system. And it was as if they were in their office, even though their office was destroyed.”