Cloud-Native vs Cloud-Hosted Insurance Software: Six Questions to Ask Vendors
Cloud-native and cloud-hosted are often used interchangeably, but they’re not actually the same thing. Cloud-native describes how software is built and released, while cloud-hosted describes where software is hosted. The difference is checkable by a non-technical executive with only six questions.
What’s the difference between cloud-native and cloud-hosted?
Cloud-hosted is traditional software that is hosted in the cloud, a network of remote servers that store, manage and process data that makes computing resources and software accessible over the internet.
According to the Cloud Native Computing Foundation (CNCF), cloud-native is building, deploying, and managing software in cloud computing environments; “characterized by loosely coupled systems that interoperate in a manner that is secure, resilient, manageable, sustainable and observable.” This is software that was designed for the cloud.
The benefits of cloud-hosted (versus on-premises servers) are:
- No hardware to buy, house, power, or refresh
- Predictable subscription costs
- Provider handles the security, power redundancy, network for the data centres
- Access from anywhere
- Backup and disaster recovery come with the infrastructure
- Capacity can be added easily
Cloud-native has all the benefits of cloud-native, plus:
- No per-customer versions (known as forked instances)
- Fixes reach everyone at once
- True elasticity (services scale independently)
- Real release cadence
- Configuration instead of customization
- Resilience by design
- API connectivity
- No version locks
Why are forked instances becoming the next legacy system in insurance?
Forked instances, or having a per-customer version of the software, are not becoming legacy system because they’re “old.” It becomes a legacy system when the cost of changing it exceeds the value of the change. Forking instances accelerate this as:
- Customization is written as code, not configuration
- Divergence compounds – every release must be merged into your instance and each one gets harder because the distance is greater
- Upgrades stop being routine as they’re a bigger and bigger lift each time
- You become the sole tester of your own version – unique bugs that are only found by your staff, in your live production environment.
- Security patch latency can lag
- Your data model drifts from the original platform – custom fields and per-customer schema changes mean you may need a data project before you can take advantage of analytics or AI capabilities
- Key-person risk sits with the vendor, not you – the people who understand your specific instance with your software provider
Your custom instance will require more effort and budget to maintain and upgrade for both you and your vendor.
Six Questions to Ask Your Insurance Software Vendor About the Cloud
Here are six questions to ask your insurance software vendor to understand if they’re truly cloud-native:
- How many distinct versions of your product are in production across your customer base today?
The answer should be one or, at most, a few. This may trip up some less technical salespeople, so make sure to understand how they’re definining a version of their product. - When you ship a fix, how long until every customer has it?
They should receive it all at once or very nearly all at once. There may be some regional disparities, but ideally, it can be pushed to customers simultaneously. - Do clients choose when to upgrade?
A yes is a red flag and speaks to forked instances. However, there’s a difference between choosing to use or add a feature and choosing to upgrade. Clients should not choose when to upgrade, but configurability can mean they choose whether or not to ‘turn on’ a feature. - What was your release count last year?
You’re looking for a regular release schedule more than a few times a year. - Where does the data live?
They should be able to say the cloud, but also indicate where the data centres are located.
None of the six questions require a technical background to ask, and that is deliberate. “Cloud-native” is a claim. Version count, release cadence and upgrade optionality are facts. The distance between what a vendor says and what they can evidence is where the next decade of your operating costs gets decided.
If a vendor answers all six comfortably, you are looking at a platform that will still be current in five years. If they hedge on the first and the third in particular, you are being offered a private copy of the software with your name on it, and the clock on that copy has already started.
There is a second half to this question, and in Canada it is usually the half that gets asked first: where the data lives, and whose law reaches it. This may be an important factor for your business and if so, you should ask about it as well.
Looking for other questions to ask about insurance software or a policy administration system before you buy? Visit our guide to evaluating and purchasing insurance software.