Regardless of company size, lines of business, distribution channels and even capabilities of in-house IT staff, best-of-breed solutions–picking the best systems that are available for each function–can increase speed-to-market and address specific pain points without requiring a costly, multiyear system replacement.

End-to-end core systems promise a “one-stop-shop” for every need from billing, claims and policy administration to product development, rating and producer portals. In reality, the convenience of a fully integrated suite can mean significant trade-offs in functionality.

The likelihood any single vendor has core competency across all facets of an insurer's business is slim. Integrated suites tend to be good at one thing and merely average at others.

This is not surprising, given the evolution of most suites. Many began life as best-of-breed solutions. Over time, some vendors cobbled together full-fledged suites by acquiring systems from other vendors, or bolting on additional functionality after the fact. This approach often results in an unnecessary overlap of functionality and unfortunate gaps in integration.

Additionally, since the user interface was likely developed for one component of the suite, it may not be well suited to handling functions driven by other components.

Hindsight may be 20-20, but that won't help you recover budget dollars when it becomes evident after implementation that the suite's performance is subpar in a critical area. Single vendor lock-in and the time, cost and risk required to rip and replace the entire suite means many insurers must simply live with the deficiencies for many years to come.

Make certain when buying today's integrated suite that you aren't creating tomorrow's legacy system.

When choosing between an end-to-end suite and a best-of-breed strategy, speed-to-market is a major consideration. A suite may take three-to-five years to fully implement. Market conditions and company-specific requirements can change dramatically over that time.

In contrast, a best-of-breed solution takes less time to deploy, enabling insurers to achieve a more rapid return on investment.

Because a suite touches all facets of an insurer's operations, the risk of business disruption and implementation delays is much greater. With a best-of-breed strategy, it is easier to precisely target pain points, such as improving claims efficiency, optimizing underwriting, or automating product development.

By identifying high-value areas where efficiency and competitiveness can be increased, insurers can rapidly deploy best-of-breed solutions to help achieve quick wins that create competitive advantage.

A best-of-breed strategy allows insurers to minimize risk through a phased approach to core system replacement. Insurers can implement a best-of-breed solution for one line of business and prove its value before rolling it out to other lines.

This approach also protects an insurer's capital investments by providing the flexibility to replace key system components based on changing business needs.

The key to a successful best-of-breed strategy is partnering with the right solution provider. Insurers need vendors who live and breathe open standards such as J2EE, .NET, Web Services, open APIs and service-oriented architecture.

By choosing a solution built on a flexible, open architecture with multiple integration options, insurers can avoid the costly mistake of purchasing a legacy solution masquerading as best-of-breed but actually wrapped within a thin veil of Web services or a slapped-on Web interface.

Insurers should also seek a vendor that demonstrates a commitment to the insurer's flexibility and self-sufficiency through configurable business rules and tools and, in particular, the ability to quickly and easily configure products.

Insurers investing in the same packaged suites as competitors will have difficulty differentiating themselves in a crowded market. Visionary companies investing in a best-of-breed strategy will be much better positioned to succeed in the long term.

Keith Inouye is senior vice president and chief operating officer of BlueWave Technology (www.bluewavetechnology.com). Gwen Lannaman is vice president of Marketing at Camilion Solutions Inc. (www.camilion.com).