We notice some cost increases immediately. All it takes is a trip to--or even past--the local gas station to see how prices fluctuate at the pump. Other price hikes are not so quickly noticed--or so painful. These seem to garner our attention only after a series of incremental increases brings an expense to a certain point. That's when we stop and do something about it.

This awakening occurred for me during a recent midyear budget review in our agency. One of the items I assessed was our total cost of automation. I looked not only at the hardware components, but at software and related costs as well. And I viewed our expenses in the context of revenue over a period of years.

Initially, what I found did not surprise me at all. Automation has been profoundly beneficial for our agency. Since 1998, we have increased gross revenues nearly 400 percent, with most of that gain coming from new business, not just price increases. At the same time, on a head-count basis, we increased our service staff by just 200 percent.

A closer look at the numbers shows that the vast majority of our productivity gain came from the use of automation. Most of that improvement can be attributed to both the use of our agency management system and the deployment of improvements such as real-time interface and imaging capabilities, which our vendor has made available.

High Licensing Costs:

The other top cost we incur is for ongoing licensing for operating systems and office-suite technology, which our staff regularly uses as they manage word processing, e-mail and, at times, spreadsheet functionality. We pay bi-annually to maintain the licensing of these programs, in the form of a "software assurance" program.

What gave me pause is that the amount of money that we pay for these operating and office-technology product licenses each year is actually more than what we pay for our agency management system.

So, I found myself asking the $64,000 question: "Do we get as much value for the money we pay for these licenses as we do for what we pay out to our agency management system vendor?" For me, the answer is a resounding "No!"

Perhaps a more relevant question is: "How much longer will we have to wait until all agency management system vendors agree to support their products in conjunction with 'open-source' products?"

This will give agents the power to choose between an increasingly cost-prohibitive, bloated platform and office products, and what are called open-source products.

(Open-source products have an open-source code, are written by the worldwide community of people that use them, and are sold by companies that provide extensive testing and customer support.)

Open Source Benefits:

Without a doubt, these products are much cheaper, and for many, they seem to be more reliable and secure. They don't regularly impose unwanted upgrade cycles and the resulting learning curves on our organizations.

By enabling agencies to work with these open-source products, vendors would allow principals and tech leaders to manage their networks and desktops on their own terms.

I believe the tide is, in fact, turning against traditional software products and that open-source programs will eventually win the war.

For several years, for instance, the operating system of the open-source universe has been used on the majority of the world's Web servers. It now is being quickly adopted into network environments, and even has a small foothold in the desktop platform.

Programs designed to replace more traditional, commercial office suites are spreading like wildfire as more individuals, schools and companies refuse to pay the high initial price and ongoing costs of other, widely available products.

For the average independent insurance agency of 12-to-15 employees, moving from traditional products to an open-source platform would not only reduce ongoing costs associated with licensing; it could also reduce an agency's exposure to security and virus threats, since the vast majority seem to be targeted at vendor-specific products, not open-source products.

Check Facts, Then Act:

While there never is a time when agency principals should ignore their expenses, the soft market poses a special challenge. Because of where we are in the market cycle, now is a perfect time for all agencies to review their cost of doing business and evaluate their dependence on traditional platform and office-suite products.

We retain our relationships with our agency management system vendors because they continue to improve their products in ways that reduce our overall costs of doing business. But we must urge them to start leveraging open-source products, as it will help us further reduce costs.

After all, the power to choose is what being an independent agent is all about.

Robert "Robby" E. Dunn III is vice president and agency manager of Hotchkiss Insurance Agency in Houston, as well as president of the Applied Systems Client Network (ASCnet) agency management system users group. He can be reached at [email protected].

Quotebox, with mug:

"By enabling agencies to work with open-source products, vendors would allow principals and tech leaders to manage their networks and desktops on their own terms."

Robby Dunn III