By Tom Murray, Head of Product Strategy for Exaxe
Despite one’s best efforts, it is impossible to avoid hearing about “The Cloud” at the moment. Even non-technology based media seem obsessed by it; calling it the number one trend that can’t be missed. So what is it exactly is the cloud and how will it impact the pensions sector?
What is the cloud?
The cloud is the name given to the external hosting of software services that are provided by software providers, obviating the need for installing the software itself on a company’s own servers. This allows companies to use new software without hosting the infrastructure or having to be responsible for maintaining and extending the systems as regulations and market needs change. It also facilitates a pay-per-use scenario that further reduces the cost of ownership of the services.
The systems can be accessed directly from the Internet, allowing business analysts to immediately configure the products and processes directly without the need for an IT project. It even allows providers to configure services utilising a number of external systems and meshing them with their own internal systems.
Cloud systems are put in place by software providers and hosted in datacentres, transferring all the headaches of service delivery and support to experts and allowing the pension providers to concentrate on their area of expertise.
What can it deliver for pensions?
The ever-changing world of technology is impacting every aspect of our lives and the pension’s industry is not immune. As the general population gets more used to using the Internet, mobile devices such as smartphones, and tablets, as part of their everyday lives, their expectation of being able to manage their pension savings using that technology is growing. Subsequently, pension providers and advisers need to provide the type of services that people expect if they want to be seen as part of an individuals’ pension plan.
The problem for most pension providers is that to date their infrastructures are normally based in-house and are difficult to change, having evolved over the decades and been complicated by mergers and takeovers during that time. The result is that many IT managers in pension providers are struggling to maintain existing services across multiple legacy systems in order to provide support for current business practices. This leaves them with great difficulties when it comes to providing the kind of ‘anytime, anywhere’ services that people now expect.
Given the big increase in the number of young people possessing financial products due to the arrival of auto-enrolment, the opportunity to reach this market for further sales is huge, but it will have to be done on their own terms and in a way that syncs with their own lifestyles.
Enter the Cloud
Cloud software brings an end to the restrictions imposed by existing legacy systems and enables pension IT departments to aggregate best of breed solutions to provide new products quickly to the market and to support them with real-time service levels. This will enable them to attract today’s generation of customers who already receive these levels of service from their banks.
How can we utilise cloud solutions?
The question for pension providers is how best they can utilise the cloud to provide the kind of services that will make them stand out from the crowd. The answer lies in re-imagining the whole world of savings and investments in this current age. What will savers want in the future and how can we best provide it?
In the past, the only time anyone requested a valuation of their pension fund was as they approached retirement. Now, they will expect the kind of real-time valuation delivered to their phones, tablets and computers that they already get from their banks. Cloud systems that can access internal policy data will allow this to be provided through proven secure interfaces.
They will expect to be able to make changes that will take effect immediately. They will expect services that allow them to change their investment profiles and switch their investments whenever they want and from wherever they are; as they can get information rapidly from around the globe about the performance of various markets, so they will need to be able to act on that information immediately.
Use of cloud solutions will allow pension providers to provide these new levels of service without the massive investment normally associated with system changes. The ability to trial external software and configure best of breed solutions into new services without major upfront investment will allow the release of new services and will give providers the ability to rapidly customise those services based on immediate feedback from their customer base. Ultimately, cloud solutions provide the flexibility to innovate that has been sadly lacking in the life and pension industry.
Is the data safe?
One of the primary fears about utilising cloud services is the security of the data. The flag-carrier for the cloud-based approach has been Salesforce.com whose sales management services have been adopted worldwide in most large organisations and this has helped calm fears over the whole data loss issue. Most large companies already have their sensitive sales data in the cloud and therefore have already been through the compliance issues involved.
Newer cloud strategies have moved to allay fears even further by allowing the retention of corporate data within the organisation ensuring that data protection is fully under the control of the pension organisation. The cloud services pull the data they need for service provision but do not store it on the cloud, saving it back to the corporate data server instead.
The future is out there
The way forward for life and pension providers is to unshackle themselves from the legacy systems of the past and to make use of the cloud approach to bring new models of pension sales and service that will resonate with the current generation. Cloud-based solutions bring pension providers the opportunity to innovate quickly and respond flexibly to the faster moving more customer-driven market that is evolving.
Those who do not embrace the new model may find that the cloud adopters will leave them standing in the rain without an umbrella.
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