A familiar phrase often used when frustrated at the inability to get things gone just the way we want. At first glance, an in-house solution could be the perfect fit – you can create something from the ground up that is built to work with your current infrastructure. But one thing within businesses and organizations remains inevitable and is constant in today’s business world, and that is change. Although you could potentially solve some of your current issues, your business processing and reporting needs would likely change. This is where an in-house system can become problematic. How? In a typical organization, each department seeks tools and processes to optimize productivity. From the business aspect, new legislation could be passed, changing the claim handling requirements; the company could explore new lines of business; new reporting requirements can be introduced. On the technology side, we already see daily changes with respect to data privacy, security, assessments and infrastructure certification requirements.
The problem with building an in-house solution is that its logic and functionality rely on the business case and current processes that affect your business today, and can quickly find itself outdated and unusable. This is the challenge of building an in-house system.
Understanding Secondary Costs
The cost of an in-house solution is often under-estimated since there are a number of factors that come into play. It can become highly challenging to know the total amount of a developer’s time required to build an entirely new application. The initial goal of a claims management system may only be to aide in claims handling practices, but more goals and features can be added on and “Scope Creep” can occur quickly, with the project expanding to include other benefits. If you consider the cost of a qualified business analyst and development team, the costs can add up fast – not to mention the time employees spent away from their core duties when using in-house personnel.
Master of Your Domain
When you build something yourself, you know all its subtleties inside and out and if problems occur, there’s no need to call outside technical support since your programmers can quickly create patches and updates. But this approach is not without it’s drawbacks. What will happen when the in-house experts are no longer with the organization? You’ll find yourself stuck with a proprietary system that no one knows how to use or fix when inevitable problems arise.
On another note, internal expertise is limited to those that have been trained, and once trained a fairly aggressive knowledge transfer process will need to be put in place to ensure that this knowledge survives the resource. In the end, it can be difficult to prevent an in-house solution from becoming costly or impossible to maintain. Hidden costs and future costs of ownership may make you question if this is the right path for you.
Let’s assume that a company, ABC Insurance, needs to develop a claims management solution. They first consider the cost of staffing:
Estimating 6 to 9 months for initial development and testing, the phase 1 employee cost alone can range from $515,000 to $787,500 and the opportunity cost involved in taking developers away from core projects that generate revenue and support the business becomes difficult to calculate.
Now let’s consider ABC’s time-to-market issues. The insurance market is a very competitive environment – XYZ Insurance is nipping at their heels in pursuit of next generation claims service. The difference? XYZ Insurance has chosen to use a third party claims system that can be deployed immediately.
Future years see ABC Company finding themselves less effective, less productive and unable to meet the same standards of customer satisfaction. They are forced to build internal departments responsible for maintenance, system updates, testing and infrastructure security. What started as a cost saving decision has forced them to become a technology business, splitting their focus to keep up with the changes in both the insurance and technology worlds.
In The End
The initial reaction may be to build a solution internally. Building in-house certainly is not always a bad idea when highly specialized requirements exist. However if your organization is likely to face the changes above, then a third party solution merits some further investigation.
A good claims management solution should offer an easy to use interface and a flexible workflow in order to ensure it can adapt to your organizations environment. Your chosen vendor should have a range of experience and offerings, and should be constantly adding to its platform to ensure it will fit your needs for today and tomorrow.
So while it’s true to get something done right, you sometimes have to do it yourself, it’s also true that you shouldn’t have to reinvent the wheel.
Virtual Claims Adjuster was born after 10 years of offering consulting services to many fortune 500 companies. Having the rare perspective of both selling custom development services as well as offering a cloud based claims management suite, has allowed us to analyze the hidden pit falls that are overlooked in the build or buy debate. The good news – we can help you with both. Contact us today: