Friday, August 19, 2011

Insurance Company Moves into the Cloud

At a conference I recently attended, I was delighted to hear the CIO of a major insurance company report that he has been leveraging cloud computing for speed, efficiency and reduced cost. For the last several months the Cloud Computing Consortium at Stevens Institute has sponsored several committees studying various aspects of this innovative form of computing from a business perspective. I have been on the committee examining the value proposition including the economics and benefits that can be achieved.  We have almost completed our first report and constantly look for real world examples to support and illustrate some of our findings.

Hypothetical situations can help explain what may happen, and theories are useful to discuss as well. But nothing drives home a point quite like a real world story. Here was someone talking about actual use of the cloud.

One key example of the value that can be derived is the unique ability for these cloud based services to provide a flexible burst of computing power. Months ago I heard Tim Chou, noted author, tell an audience that a scientist in the cloud computing model would have the ability to acquire 30 minutes of processing time on 10,000 computers. This kind of compute power is not economically or logistically feasible for most companies. It is too expensive to install and operate this number of computers for one project, and even if you could justify the expense, it would take weeks or months to put in place. But in he cloud model you can simply buy as much or as little computing as you need when you need it. It was an interesting story but simply an illustration he made up.

The insurance company CIO described how an important business process required to compute their actuarial models had been reduced from taking over eight hours to complete to approximately one hour. The in-house system had been replaced with cloud based resources exactly as Tim Chou had described - only this was for real.

As if this wasn't exciting enough, the CIO later revealed their plan to move electronic mail and office automation to a cloud based service as well, citing dramatic reductions in operating costs. He estimated the service was to cost the company less than half of the current in-house system.

In a sidebar following the presentation I asked how the CIO had managed to convince management that the cloud was secure. Security is the number one issue that keeps the cloud from being adopted. He explained in his company security was governed by a separate organization outside of IT. Every system or project had to meet their stringent requirements, but if they did, management would have no issue.

There were several other interesting presentations, some great stories and an extensive vendor exhibit at this conference. But hearing this particular success story had me on cloud 9.

Captain Joe

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