COTS or Custom? The Choice Isn’t Yours.

On the surface, the choice seems obvious. Go for a standard repeatable solution and get the confidence of being part of the critical mass, or build your own and lead by differentiation. In reality, the choice isn’t yours at all.

By Michael Brouthers, Chief Innovation Officer, Health Insurers and Payers, CSC

Let’s consider the innovation curve of big insurance IT systems. At the start, the key innovation was having a computer system at all – I know, I was there. Leading edge companies built their own systems from scratch, taking risks and often reaping rewards. Then every organization had computers, systems standardized and the goal became overall cost leadership.

The “online” cycle was similar. Business benefits accrued to those new entrants who exploited the Internet with “online” business models. Pretty soon though, “online” became everyday table stakes and the goal moved back to volume and overall cost leadership.

Post boxesAt each stage, the role of the insurer remained much the same. They handled claims and reimbursed healthcare providers.

The transition we are going through now might be a little bit different. Of course ultimately business economics – effectiveness and efficiency – will be the drivers of success. What’s happening today though is more than changing the way patients engage with the healthcare ecosystem and pay for treatment, it’s a transformation of the ecosystem itself. And with that, the fundamental role of the payer is changing.

Ask one simple question, in the future will the truly successful companies be efficient managers of payments to existing health systems, or will they be consumer-focused information leaders, care managers, fitness and wellness organizations…? Or will they be all of these – and more?

This is unprecedented change, and it demands a new approach. Put simply, existing models won’t work anymore, and rebuilding from scratch isn’t cost-effective.

It’s a challenge that’s reflected in the choices that payers need to make about their core business systems. They can’t go completely COTS, and they can’t rebuild from scratch. What’s required is a hybrid approach, using proven claims “engines”, next-generation service integration, and new consumption and digital engagement models.

IT organizations need to establish a culture and operating model that delivers against a flexible and incremental internal product portfolio, rather than a rigid project pipeline. This makes for easier alignment with evolving business needs, and offers more opportunity for innovation. It also means you can rapidly shift your strategy to reflect changes in market needs and dynamics. Think about your IT approach in the same way software vendors think about their strategic alliances and product roadmaps, and embrace new and necessary hybrid approaches.

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