Base buying on real need. (E-Fusion Conference: ROI; Technology).

Insurers must keep up with technology but not rush into buying systems without sound business reasons for doing so, two experts advised.

Technology "can be a hammer in search of a nail," said Brian Madocks, senior vice president and general manager of SAP America Inc.

"Clearly define the business problem first," Madocks said. "Then have a clear vision of where you want to go."

Charles Johnston, practice executive for insurance at Dell Professional Services, advised looking at the cost of implementing the software; if it's less than the cost of the software itself, something is probably wrong, he said. More than money is at risk, he warned. The credibility and integrity of the information technology department can be on the line.

Implementation of technology has come a long way, Madocks said. Where once vendors measured success by delivering software to customers, and later by making the software work as advertised, "where we are today is delivering customer success," he said.

Madocks recalled the example of an insurer that wanted new customer-relations management technology to replicate existing processes for its call center. But closer examination revealed a problem with inaccurate and late payments to physicians. The insurer addressed that problem first, and then implemented the new technology, emerging with a 40% reduction in the volume of calls.

The Internet remains vastly underutilized by the industry. Companies that think they can get by with little use of the Internet are "running a risk unless there's something really unique about their business," he said.

Johnston said he's seen small regional companies that feel secure in their home markets simply because they treat their agents well. But they should see a threat in the reach that once-remote competitors can gain by using the Web.

Many insurance companies seem to swing between a conservative approach to buying technology and enthusiasm for jumping on the "next bandwagon," Johnston said. He said that might reflect companies putting off upgrades, then suddenly finding they've waited too long.

"Sometimes the most valuable time for a technology is when it's boring," Johnston said, referring to the ever-decreasing novelty of the Internet. When a technology reaches that stage--highly useful but unexciting, like the telephone--opportunities arise to develop "services that help you tame something," he said.