Intermediaries are clued up about technology and what they need for their businesses. Software start-ups are failing because they haven't appreciated this, says Manjit Rana
The potential collapse of NMT this month will be another blow to the confidence brokers have in the new generation of broker software houses. These "new" players have invested millions in building technology to compete with the traditional players such as Misys, Sirius, SSP, Cheshire Data and MCS.
The shake-up of software houses is inevitable. The market is shrinking and the average intermediary is on his third generation system. He is a sophisticated buyer and he knows what he wants from his technology solution - to streamline his processes, maximise sales opportunities and deliver management information to help him operate his business efficiently.
NMT was a proposition originally funded by brokers and insurers - because, I assume, they were frustrated by the options available to them from the existing suppliers. But, despite continually raising market expectations and going through numerous "rescues", it has failed to deliver a workable solution that brokers were prepared to move to.
NMT's downfall is simply that it does not have enough users from which it can generate recurring revenue to cover expenses.
Basic calculations show that a software house needs a user base of around 300 brokers to cover its costs - a target that a number of the new players just simply will not achieve.
The vast majority of the new suppliers are run by people who have very little experience of supplying broker systems and they naively ignore the basics.
The starting point should be to at least match what current suppliers are offering otherwise why would a broker move?
It is at that point that their differentiators can be used to persuade a broker to switch systems.
It does not take a rocket scientist to work out that, if you are targeting the personal lines market, it would be sensible to deliver a fully guaranteed quotation engine with point of sale documents and full cycle edit for all schemes that are available on the traditional systems.
Misys currently claims to have over 800 products on its rating engines.
The decision by the Beckett Group to move away from Acturis to a traditional player - Sirius - must be a further blow to these "new boys on the block". I can only assume that as Beckett was one of the four original supporters of the solution it has decided to move away because Acturis has not managed to deliver a working solution in the timescales that Beckett required.
The new players have to take a good hard look at how they differentiate themselves against the traditional players.
It's not about who has the best technology boys, its what you do with it - or rather what your brokers can or cannot do with it that counts.
