In this month’s TechExec interview we talk to Alex Zukerman the CMO and Chief Strategy Officer at Sapiens a multi-national insurance technology vendor. Alex talks to us about development of the product and M&A journey Sapiens has been on to create a multi-national digital insurance technology business.
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Greg: Hi Alex, thanks for talking to us. Tell us a bit about Sapiens.
Alex: Hi Greg. In short, we’re a software solutions business, but it’s probably more helpful to start with a bit of history. We started 35 years ago helping clients across industries to build advanced software tools. In the late 90s we shifted our focus from bespoke build to providing products. This also started our focus on the insurance industry. Ten years ago we acquired IDIT an Israeli built insurance platform.
Skip forward a few years and we’re now 3,300 FTE globally, we have implementations across US, Europe, Asia Pacific, and South Africa and are beginning to get traction in South America. The business has grown from less than $100m in 2011 to $325m in 2019. We are traded on the NASDAQ (NASDAQ: SPNS) and Tel Aviv (TLV:SPNS) stock exchange.
Our offering covers life, pensions, retirement, savings, P&C, GI and some Health.
For European clients, we have four core products. Those are: Core Suite for life and pensions, IDIT Suite for P&C, Sapiens Intelligence is our data and analytics product and finally Digital Suite which not only provides our digital engagement layer (e.g. customer and broker portals) but also a very powerful API-layer as well as access to our InsurTech ecosystem with over 20 technology partners e.g. KOVRR for Cyber insurance, Lightico for digital engagement, FRISS for Fraud detection, and many more.
Greg: You’ve been busy on the M&A trail recently. What’s the rationale behind the acquisitions?
Alex: You’re right we’ve been very active with M&A. We’ve acquired ten companies in less than 10 years. All our acquisitions have been very synergistic to the company. When we acquire companies we look for the double whammy: distribution and capability growth. For example, in the US we bought Adaptik and StoneRiver. Both gave us market access but the combination has given us a full-stack policy and claims platform for the US market. In Asia Pacific we bought IBEXI which gives market access as well as a high quality and low-cost centre of excellence for data. More recently we bought sum.cumo giving us a foothold in the DACH region as well as leading edge digital design and transformation capability. We did something similar in Spain last year and are currently using the team’s expertise to take our global products and adapt them to the local market.
Whatever we buy it’s important that we integrate it back into the core Sapiens business. We’re not looking to build a holding company with dividends being funnelled up into it. We acquire for product and expertise.
Greg: What do you think makes Sapiens different from other players?
Alex: When I look at Sapiens and our proposition to customers I see three pillars. Firstly, very powerful and innovative products for the insurance industry, with no proprietary languages. Our history means there is a lot of maturity to our products and immense expertise, combined with an innovation approach. Second, we have a strong delivery capability. We typically don’t outsource deployment to anyone else. Finally, our clients see us as trusted advisors. On top of the product and implementation, we can help our clients with technical consultancy and bringing new products to market.
Greg: Most of the big players like to outsource implementations to the SIs. Why do you keep that in house?
Alex: We consider ourselves a one stop shop for clients. We’re very focused on the client they are front and centre of our view. We feel that if we outsource implementations to a third party you lose that connection. It allows us to be close to our clients so we can see and hear quickly what our clients want from us, and where possible incorporate their needs directly into our core solutions for the benefit of all. It also means we have complete ‘skin in the game’. We’re committing to being the responsible party end to end so we can’t blame anyone else. Some might say it’s ‘one throat to choke’ but we don’t have much experience of that.
Having said that, we are proud of our partnership with several leading SIs, collaborating with them in cases where it provides added-value to our customers (e.g. augmentation of local resources, specific local business knowledge, BPO capabilities and more).
Greg: Some people would argue Sapiens and IDIT is legacy tech. What do you say to those people?
Alex: the fact that we are many years in the business does not mean our IDIT product is legacy tech. With our Digital Platform proposition, that includes configurable Core, flexible API layer, digital engagement (portals, mobile), advanced analytics, and ecosystem hub, we feel we provide a MatureTech proposition – combining innovation with product maturity and high degree of experience in the business. We believe this is very important, it’s a complex industry that’s heavily regulated and you just can’t ignore that. Clearly, it’s critical to get fresh ideas and change but you need to balance that with the experience of the real world. In part, our M&A strategy has been driven by our acceptance that we need to find fresh ideas from outside. We’ve been investing heavily in our digital solutions and in companies like sum.cumo who have deep digital experience.
Our vision is a complete digital first, cloud first company supporting data driven decision making. We don’t have a monopoly on the experience, hence the acquisition roadmap. The last ten years have been about continuing to be leading edge whilst reducing complexity and increasing choice.
Greg: What can your clients look forward to from Sapiens?
Alex: In the short term we’re excited to be announcing our new proposition IDIT Go. This allows a very rapid cloud-based deployment of products using preconfigured functionality with standard industry interfaces. You can deploy from a standing start in 3-4 months. which gives you a tactical but complete full stack solution that can scale out into a strategic one.
We’re also doing massive work around machine learning and AI. We’re focusing on two areas. Firstly embedding AI into operational processes to deliver actionable insight. For example, using machine learning to augment a claims handler’s assessment of a claim. Second, for pricing and renewals serving up decision support such as next best offer and customer lifetime value.
Finally – we’re embedding the next level of user configurability into the platform. We’ve always had a focus on allowing our end clients to ‘drag and drop’ system configuration. Allowing them to update the platform without having to understand the underlying data model. We’re investing heavily in evolving these capabilities, in particular, creating the next generation of our rules editor to increase power and improve accessibility.
On a smaller, but no less interesting note we’ve been chosen by DIA as one of the top 15 digital insurance players to present at their conference, planned for October 2020.
Oxbow Partners View
The M&A approach to client and capability growth is not uncommon but arguably Sapiens pushes this much harder than other similar vendors. Clearly, a big driver of this is the desire for revenue and hence share price growth. However, the logic of balancing internal expertise with new ideas from outside is also sound reasoning for this strategy.
On the point of platform deployment. One of the biggest complaints targeted at established players is the cost and complexity of implementation. By taking responsibility for the implementation Sapiens has the opportunity to avoid that particular complaint. Although they take a personal risk as there’s nowhere to hide if things go wrong.
The connected InsurTech ecosystem is also an interesting play. We see many clients eager to adopt new technologies but not have the resources to sift through the many hundreds if not thousands of players out there to find those that can truly help.
Also, once you have selected partners you have to orchestrate the multiple commercial and technological relationships. By building an ecosystem of players Sapiens solves this for clients both by doing the legwork on InsurTech selection as well as managing integrations and commercial relationships.