Madan Sheina
Oracle sharpens insurance focus
Oracle announced on Tuesday that it is buying Pennsylvania-based AdminServer, a provider of insurance policy administration software. Financial terms of the deal, which is expected to close in the first half of 2008, were not disclosed. The move underscores a more serious applications play by Oracle on the insurance sector, specifically in policy lifecycle management where Oracle is building up a comprehensive end-to-end offering. It could also spark a new wave of mergers and acquisitions in an important vertical software sector that still relies heavily on legacy systems that are crying out for modernisation.Comment: Oracle's buying spree continues unabated. However, this time the applications and database behemoth hasn't acquired just market share. Rather, technology and intellectual property that will bolster its vertical offerings for the insurance sector. AdminServer employs 250 staff and generates modest revenue of around $25m per year. The size of the company and its purchase price (though not publically disclosed) pales in comparison to Oracle's multi-billion dollar buys of BEA Systems, Hyperion Solutions and PeopleSoft.AdminServer will now form the nucleus of a new dedicated global business unit in Oracle, led by its CEO Rick Conners. The unit will focus on developing and selling operationally-focused insurance applications built around the core AdminServer technology which is used by over 1,000 companies worldwide - predominantly large insurance underwriters - to manage multiple product lines like life, annuities and reinsurance. It will feed into Oracle's existing portfolio of products and solutions for the insurance sector, which includes complementary software like Oracle Billing, Siebel Claims and Siebel CRM for insurance.Oracle's swoop is timely, coming at a time when many insurers are looking for flexibility in their underlying systems to support new products and services, manage ever-increasing sales channel diversity and reduce their operational costs. Yet many insurance firms, even the leading global ones, still use legacy policy administration applications purchased decades ago. Their internal processes are also still rife with inefficient paper-based documents. By tying AdminServer to Oracle's modern SOA applications and database stack, presumably via Fusion middleware, for general business and industry-specific functions Oracle hopes to change that by offering a more modern, standards-based software suite to streamline the entire policy processing and management lifecycle.This acquisition is likely to shake up the status quo in the sleepy insurance software segment, and could possibly spark a fresh wave of mergers and acquisitions as Oracle's rivals take stock of the new technology dynamics in the sector. Software rivals SAP, IBM and Microsoft, solution providers like CSC, Tata Consulting Services and Accenture, and private-equity backed specialists like SunGard, Skywire, Vertafore and Fiserv are all angling for big slices of the same market.That's not to say the insurance software market hasn't experienced consolidation in the past. But most have been via financial and tactical investors like Bain Capital and Hall Financial Group. This is the first time that a leading enterprise software maker has bought a specialist insurance software firm in order to strengthen its position. In doing so Oracle now becomes a direct competitor to traditional vertical insurance solutions providers that might have been partners last week.
