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© 2012 CELENT, a Division of OLIVER WYMAN CONFIDENTIAL
Jamie Macgregor, Celent
DISRUPTION IN ACTIONA WAKE-UP CALL
22© CELENT
The pace of change in technology is not getting any slower
Verizon launches 3G in US
Quantum link for Commodore 64
2012200219921972
IBM Mainframes around since 50’s
Apple II released
First IBM Compatible PC
Commodore 64 released
PC link for IBM PCs
AOL launched
Mosaic Browser launched
Encarta launched
Apple iMac on sale
Linux runs on IBM Z
Mainframes
Internet Explorer ships with
Windows 95
Salesforce.com founded
64 bit mainframes
Amazon webservices
launches
Facemash.com
Thefacebook.com
Three network launches 3G in
UK and Italy
Youtube
Mozilla open source browser Google
Apps
Amazon S3 and EC2 cloud services
iPhone
Facebook 100m
iOS App Store
Wikipedia
Data.gov and data.gov.uk use open linked data
Encarta shut down
Facebook 500m
Facebook like button
Windows Azure
iPad
900m
NASA shuts down it’s last mainframe
4G service advertised in
US cities
FastWeb (Italy) offers 10MB fiber optic home broadband
Hadoop BigData
0.14 released
First Intel Pentium released
Advent of personal
computing
Start of connected communities
The rise of the world wide web
Mobile, social , web, ‘as a service’ - enabling new
models
“In two years, we sold 67 million iPads. It took us 24 years to sell that many Macs and five years for that many iPods and over three years for that many iPhones.”
Tim Cook, Apple CEO, Earnings call Q12012
44© CELENT
Three key technology themes will change the competitive landscape by 2022
1 Ubiquitous data
2 User expectations of simplicity and technology doing more of the work
3 Industrialisation of IT at scale
55© CELENT
It’s not just people sharing more and more data
2012 2008
Source: Cisco, 2011
20032010
20152020
Connected things
People
20 houses today generate more traffic than the entire Internet did in 2008
The number of things connected to the Internet is greater than the Earth’s population
66© CELENT
Insurers face a torrent of location tagged data
Fashion
Sports
Fashion
Sports
Fashion
Sports
Fashion
Sports
88© CELENT
Three Mega Trends impacting expectations: Social, Local, Mobile
Social media influences the life of an increasing number of people
Number of Facebook usersBN
Increasing urbanization elevates the importance of digital interaction with the environment and other users
Megacity inhabitantsMM
Proliferation of Smartphones and other intelligent mobile devices will increasingly influence user behaviour
Smartphone Penetration(%)
+216% y/y+30% y/y
+86% y/y
1. Over 50% of usage time already topics other than telephone calls and textSource: United Nations, Frost & Sullivan, Trefis, Kleiner Perkins Venture Capital, Informa Telecom, Oliver Wyman
SOcial LOcal MObile
9© CELENT 9
1970-1995 Single System
1995-2012 Distributed Systems
2013-2022 Distributed Data
• Vertical application • Bespoke build• Transaction oriented• Single channel• Internal user focused• Hosted internally• Employed internal team
• Multiple distributed systems• Mix of package and bespoke• Service oriented/open• Multi-channel• External / internal user
focused• Hosted externally• Mix of insourced/outsourced
team
• All applications are treated as external services
• Business processes orchestrated across heterogeneous services
• Software moving out of the way in favor of data
• Service selection is a joint business/IT responsibility
Moving from inside-out to outside-in
11© CELENT 11
201120101985 1989 1993 1995 1997 1999 2001 2003 2005 2007 2008 2009 2012
The UK auto insurance industry is no stranger to disruption
Disruptivefocus
Female
High risk
Web-only
Cards
Aggregators
General
Low risk
Business
Telematics
12© CELENT 12
A fiercely competitive market
Source: AXCO, Celent
Co
mb
ined
Op
erat
ing
Rat
io (
%)
Year
UK Auto Insurance
2011:~$960M
loss
Source: Deloitte, Reuters
13© CELENT 13
Enter telematics and
• Targeted at 17-25 year old drivers
• Researched in 2010, piloted in 2011, launched in 2012
• Developed with Cranfield University and Williams Formula 1
• Rapid growth– $1m GWP written in 3rd month of trading– Targeting $4m/month by Dec 2012– $85m forecast in 2013
• 25 full-time employees
• Privately funded, underwriting capacity provided through 2 international insurers
14© CELENT 14
Reflection
• Underserved niche of 17-25 year old drivers
• The technology is an important enabler. However, it’s also about:– Young driver engagement – Incentivizing the right behaviors
• Expertise and execution agility can be found in nurturing the right partnerships
• The result is a business model that delivers a fresh approach at a significantly lower cost
Options for incumbents: Emulate, partner or withdraw
1515© CELENT
Striking the right balance
Do more of… Do less of…
• External/Business focused innovation
• Investing in new skills and relationships
• Configuring business services
• Procuring data and services from the cloud
• “Best of breed” partners, targeted outcomes
• Capacity planning attuned to business cycle rather than peak demand
• Protecting own information assets
• Internal development/bespoke build
• Reacting to business demand
• Effort on procuring commodity back-office core insurance applications
• Large-scale “all encompassing” long-term IT outsourcing deals
• Focusing the IT agenda solely on delivering efficiency and compliance