JA: Robin, you've been ebix CEO for about two and a-half years now. In that time you've significantly reduced ebix expenses and made the company profitable. You've also created a consumer insurance mall, made significant improvements to core software products, purchased Insite from AT&T, released ebix.ASP, and have made the company a global insurance technology player. On the other hand, your annual sales, under $13M, are modest in relationship to the number of businesses you're in. How can you manage so many small business elements successfully? How can you afford to do simultaneous development in so many different directions?. What business is ebix in? I can't quite follow it all.
RR: When I took over ebix, then known as Delphi, in September 1999 our annual expenses were $31.5M and the company was doing little real development. This last year our expenses were about 60% lower and yet we did more development than Delphi had seen in years — perhaps ever. While we lowered our costs sizably, we still managed to grow revenues year over year by almost 10%. This effort was managed by our senior management team that's stayed unchanged during this transition period over the last three years. To keep this momentum up, recently we've strengthened our management team with the addition of a 30-year insurance veteran, Jim Satterfield, as executive vice president.
One important way we've attacked the expense problem has been to move our software development effort offshore, to India. It provided us access to a team of expert engineers for whom software development is a passion. With India being 11.5 hours ahead of the US, we now have access to a 24-hour day with developers in the US being supplemented by their Indian counterparts in the evenings (in the US). Also, the infrastructure was planned in a manner that allows us to expand or contract our development team month to month as needs dictate.
We've found we can get more done in a shorter period of time, yet spend only two-thirds of what we would have to in the U.S. That's important because I believe that insurance software in general and agency software in particular is much too expensive given the value it has delivered in the past. Agency management systems have never delivered the value they should to agencies — and I include our legacy systems in that group. In fact it's been especially hard for me to understand why agents have put up with all the vendors who still continue to sell fifteen-year-old technology with a new face every few years. These vendors charge a lot and deliver so little. We're going to change the equation with ebix.ASP. It only costs $65 a user per month and so is affordable to virtually every agency.
JA: Let's come back to the question of what business ebix is in. Is ebix primarily an agency management system vendor? Are Applied, AMS, and perhaps DORIS your competitors?
RR: Ebix's business focus can be defined in one word, Convergence. Ebix is in the business of providing convergence between all the three channels of insurance - consumers, agencies and carriers. Our focus is unique, so I don't see us as really being in the same business as Applied, AMS or any other agency system vendor. We have a much broader view of insurance technology and the problems it's intended to solve. Agency management systems are primarily accounting and policy administration systems. But the insurance process is much broader than that and includes the marketing process, the sales process, the claims process, and so on. ebix.ASP, our new product, is only one element in a broad set of interrelated services we offer.
U.S. management system vendors focus on the domestic market. We see insurance technology as a global market. We've got systems installed in 37 countries and are adding more each month. We've got a major initiative going in the U.K. that will expand into the E.U. later this year. We're working on opportunities in Mexico, India, Japan, China, and other parts of the world
JA: Help me understand how ebix.Mall fits into the picture. It's not obvious how it relates to the agency management system software business.
RR: ebix.Mall is one of the most popular insurance consumer sites in the world. We have about one million visits per month - with perhaps 10% coming from insurance professionals. We know that some of the consumers revisit the site each month so we think that we have 600,000 or more unique consumer visitors each month. They come to learn about insurance and to request quotes. We profile each quote request and then send back real-time quotes when relevant and delayed quotes when that's appropriate. We've created a rating tool kit that carriers and agents can use to host real-time rating through the mall.
ebix.Mall is a public service, in a sense, but from our point of view it's a highly focused lead source to our customers and a revenue generator for us. We'll be adding a yellow-pages directory soon that agents and carriers can subscribe to so that when consumers come to ebix.Mall looking for insurance services in their geographic area, they'll be able to find them in our yellow pages. Through quoting, yellow pages, and other ways, ebix.Mall is the front end of the insurance process and can funnel business from the Internet to our management system customers.
ebix.Link is another element of the picture. It's an exchange that helps agents define and place commercial risks through the Internet. That's typically not an element of any agency management system but it is a key part of the insurance process for agents — so we provide a solution to this problem as part of a comprehensive set of solutions. ebix.Mall provides us referral fees, while the Link service provides transactions fees — a different business model but one that's appropriate to the function provided.
Soon we'll be offering e-mail marketing and campaign management services for agencies and carriers. We can distribute 250,000 e-mails an hour now and, in fact, use that capability to e-mail our daily newsletter.
JA: OK, the picture is getting clearer. ebix.ASP — and EbixOne for that matter — are intended to fit together with the Mall, Link, and other services. Where does Insite fit in? If I'm not mistaken, it focuses on interface solutions.
RR: That's right. The Insite acquisition gave us access to tools that allow carriers to download data into 40 different agency systems. This ebix division has eight carriers and approximately 7,000 agents as users. The division is profitable today, but we have been working on expanding this venture sizably by introducing a Microsoft.NET exchange to provide real time upload and download services Today, we think we can provide services that are better than IVANS at 50% lower costs. Later this year we'll begin to become more public about competing directly with IVANS. We think we have a great deal to offer carriers who want to interface with their agents and want more flexibility, better quality services and lower prices than IVANS offers.
We also provide services like claims inquiry, billing inquiry, policy inquiry and change for hundreds of agencies and a few carriers. This business has a transaction model as well and provides a key part of the total insurance solution.
Let me mention some other elements of our business environment as well. We provide flexible insurance software and service packages, but we're also very much in the custom solution business. Because our software architecture is inherently international - supporting multiple languages, currencies, and policy structures - it's easy for us to adapt it to special circumstances. And because we have a very flexible, scalable development staff in India, we can provide custom solutions very quickly and at a fraction of the cost that our competitors would charge. AON, Willis, HSBC, Marsh and other international brokers use our software in many countries, in part because of the customizing we can do.
And as you probably know, ACORD has asked us to design and build their new Web site. We just finished designing, developing and launching a turnkey end-to-end online quote-to-bind-to-claims system for Motor Truck Cargo insurance for a European carrier doing business in the US. In addition we're helping design an exchange for a consortium of personal and commercial lines U.S. carriers. No other insurance technology supplier provides the breadth and depth of services we do.
JA: It all makes sense in a way, but it seems awfully complicated to me. How can you manage so many different business elements, do a good job, and make money at it?
RR: It really isn't so complicated. You can see how these pieces fit together though that might not have been obvious to most people, especially in the past. We've been creating a foundation for a comprehensive, Internet-based, insurance technology business for the last 30 months, and now we're ready to capitalize on the foundation. Ebix intends to be the CISCO of the insurance industry. That is, we'll be the background infrastructure, like routers for the Internet, that facilitate and move insurance transactions.
Ebix is a highly automated business that requires a small staff given all that we do. For instance, as you know, we now publish a daily Internet newsletter. Using a conventional publishing approach would be time-consuming and expensive, but we do it automatically using just a few minutes of staff time each day. It looks like a lot and it does a lot, but it's automated. I'm an engineer by training and I always look for ways to automate any repeated operations. We invest by automating processes rather than just hiring more people. That might be slightly more expensive at the front end, but it really pays off quickly. Each one of our business units stands on its own and is profitable. They play a strategic role in the larger vision but are not a cash drain on the enterprise.
The real core of Ebix is a very efficient and effective insurance software development factory with a global reach. We develop for our existing customers and our own use, but ultimately we see ourselves being a software supplier to the global insurance marketplace, even to competitors who will private-label and sell the software we provide. Unlike other technology suppliers, we use a totally open software model so that we can interconnect with other software services. That's a great advantage to our customers and a big improvement over the proprietary environments that can trap agencies into inadequate solutions and high costs.
This concept of a technology back office to the insurance industry means that we'll be selling through value-added resellers, joint ventures, large insurance carriers and others who have a customer and prospect base but need solutions. Some-times, these products would be sold using the ebix name and sometimes they would be completely privately labeled under our partner's name. By partnering with others we can leverage our core value, insurance technology creation, without having to invest heavily in the development of massive sales and support organizations. These partnerships require private labeling and sharing of revenue proceeds, with some upfront payments by our partners to ebix for that. And by the way, these partnerships have allowed us to do fully funded development - so we haven't had to dip into our capital to do development on speculation.
JA: Your overview has helped me understand what ebix is up to and how the pieces fit together, but I don't think it's obvious to the rest of the world. Why hasn't ebix made more of an effort to explain the big picture?
RR: Too many software companies talk about the future and then don't deliver. We deliver first and then talk about what we've done. Now that we've got the elements in place and working, we'll begin talking about the Ebix vision. It's very important to me that we do things right. That's why I don't want to promise anything until it's actually ready and high quality.
JA: Good luck. Even with lots of automation, offshore development, and value added resellers, it seems to me you've got your hands full. But I have to applaud how you've breathed new life into ebix by managing expenses, creating a 21st century vision, and actually delivering product.
RR: Thanks for coming by for a visit. I've enjoyed having a chance to tell our story. And by the way, I don't claim for a minute that we accomplished all our goals. We got a good start, our costs are under control, we've got a strong vision for the future, and have completed a firm foundation. But we still have an a lot of work to do.
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