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By CYRIL TUOHY, managing editor of Risk & Insurance®

According to Margot Roth, global director of risk management for Whole Foods Market, the use of risk management information systems software applications by a Marietta, Ga.-based company called Riskonnect, Inc. has cut the time it takes to deliver financial reports to just a few minutes.

Q: How is cloud computing relevant to risk management and risk managers?

A: For us, cloud computing enables us to deliver a better product. Risk managers get what they need faster, more accurately, and with a focus on their business needs instead of worrying if the system is up and running. We deliver everything on the cloud. What that means if you are a software company selling to risk managers, is that instead of spending your investment to build infrastructure, you can instead invest in the problems facing risk managers such as efficient claims processing, premium allocations and accurate information delivery throughout their organization.

We get our platform from another provider, Salesforce.com, a technology behemoth, that invests $400 million a year and has hundreds of software developers; seven global data centers; and best-in-class security. We make the technology work for the risk management market.

Q: Do you pay a fee for that or do you pay a percentage on each transaction? Explain the business model.

A: We pay fees for what we use. I jumped in head first into this business model and it was a big leap of faith. Let's talk about how risk managers can possibly trust their data to a company that doesn't make these types of investments, that don't have the necessary security in place. It is a huge advantage for us to be able to make the claims around security, infrastructure and investments that we make.

Q: How does the cloud differ from the application service provider (ASP) model, also known as the software-as-a-service (SaaS) model, to which many people referred a few years ago?

A: An ASP (or private-cloud) is a great way to deliver software, and it's a great way to deploy software. That's very important for risk managers because risk managers don't get a lot of support from their internal IT departments.

But the cloud computing model represents a monumental shift, not just in the delivery of technology and software, but in the business model of software companies. The amount of the upfront investment, the research and development, that a company like us has to make, is very different with the cloud computing model.

Q: True, but the issue of whether the business model is more efficient or not isn't necessarily the risk managers' concern. What risk managers are most concerned about is for their software providers to generate the data risk managers need to make better risk management decisions. Is the cloud more effective at that than the ASP?

A: One of the issues with our competitors is that they have to design, build and maintain a technological foundation for each of their products. They do not have a single platform. In the end, risk managers are just trying to have a reliable system, with accurate data, that they can get reports out of quickly. Our clients already take that for granted. Everything is fast and available all the time. We are thus able to take that next stepto focus on our clients' specific business problems rather than common, fundamental technology bugs.

Q: Yes, but how does the cloud do that better than an ASP?

A: When you have the ability to say all this baseline capability just works, then we are able to add things like business intelligence, advanced reporting technologies and predictive analytics to the equation. Because of this platform, we are able to focus on taking our customers to the next level. For example, loss triangles run in seconds. This elevates our users from the day-to-day mechanics of crunching data, to being effective and proactive risk managers. If the risk management or audit teams need the data filtered differently, they make the adjustment and rerun the report in seconds. Those reports used to take days to run, literally days.

Q: Is this because they were using an ASP model?

A: Companies not running on the cloud have a few dozen developers and a handful of people running their data center. Those of us using the cloud model, have access to hundreds of developers and people running the data centers. It's just totally different. Salesforce.com has an army of developers, and they run their platform for over a million users. They have something like 50,000 to 60,000 companies using the cloud computing platform. It's just a completely different world, but to do it right, you really need a certain level of investment; otherwise you are struggling with upgrades.

Q: If the cloud is so effective and makes so much sense, why aren't more people using the cloud? Are you saying that ASP systems are the new legacy systems?

A: Absolutely. The ASP model, also known as private-cloud, is a legacy model. This is the transition, and the cloud is the next phase. The cloud model is just a total game changer.

It is a good question, why aren't more companies jumping on doing this? There are companies doing this in other industries. In risk management, though, no one else is doing it--at least not in quite the same way. Geeks write software. They like to build their own stuff. We prefer to deliver solutions to our customers.

Q: With the help of cloud computing and its ability to draw networks of much larger clusters of computing power, you clearly offer risk managers something different in the marketplace. But is there a tradeoff in terms of security?

A: The reality is that the solutions the cloud provides and the security provided with it is dramatically better than what noncloud competitors can offer. Noncloud competitors do not haveworld-class data centers with backup, failover, and disaster-recovery facilities,database redundancy and uptime records of 99.9 percent uptime--that's for years, not just recently. Force.com runs on geographically dispersed, mirrored data centers with built-in replication, disaster recovery, a redundant network backbone and no single points of failure. No company in the insurance or risk management industry, especially not a full-on technology company, can provide the kind of security we have because of our Force.com partner on which all of our applications are built.

The other issue you raise is about capability. We seamlessly upgrade our systems regularly, with no additional costs, no problems with custom configurations, and with superior functionality. The cloud delivers data faster and it offers more functionality that is easier to use. The fact that some noncloud competitors are on Internet browsers is beside the point. Data entry, workflow, as well as complex reporting and analytics are all faster and easier on Riskonnect's cloud platform.

March 1, 2010

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