By R. Christopher Haines, President and CEO

This post is likely to get me written off as being biased because we sell hosting. Maybe I am biased. On the other hand, we wouldn’t sell anything I didn’t believe in. And one thing I don’t believe in is insurance software purchased from the software company in a SaaS model.

I have a bunch of friends at software companies. Right now, I’m sure they’re saying, “What the heck, Chris?” But a lot of people know I’ve never been a fan of this.

Is it a benefit for the insurance company to have this all bundled in one contract at one cost from one vendor? Maybe. Can software vendors build out their staffs to serve their customers as well as managed service and hosting providers? Many of them aren’t doing this too well right now, but it’s safe to say they’ll continue to improve.

My concerns have always been the same, and they’re now getting some attention. Who owns what? Do you have unlimited access to your data and the ability to do anything you want with it? This is all fun and games when everyone is in love. But what happens when things go bad? When the software company unexpectedly shuts down? When their downstream provider shuts down? When your relationship falls apart and you want to move to another system?

I’ve seen SaaS contracts from policy admin vendors that don’t address any of this. Then people talk escrows. How are you logically (and affordably) going to escrow data that’s changing every second?

I understand the SaaS model, but I would argue it almost never works, for any software. Even something as simple as your accounting software. If you buy it in a SaaS model, and then you want to change software in three years, how do you get your historical data? Do you have a right to it? What if the vendor goes out of business one day and just shuts down? Where’s your data? If you want to convert to a new system, do you think your old vendors is just happily going to assist?

It’s no accident that vendors are trying to sell SaaS systems. At this point in this post, you can see how hard it is to get away from them once you’re trapped into a SaaS model.

So back to insurance core systems, such as policy admin: What’s the solution? For me that’s never changed — an independent third party to host and manage the system. Buy the system in a traditional model and put it with the host of your choice. I’m not advocating going back to the old days of building out your own datacenter. There are too many people doing this better than you can, cheaper than you can. But with a host under contract to your insurance company, not the vendor, you’ll have better access to your data. You may even sleep a little better at night.

I’m not sure this SaaS situation is close to divorce, but I would say the honeymoon is over.