Guidewire Cloud: Why Hybrid-Tenancy is the Right Choice - Part 1

In 2021, Guidewire published a Smart Approach Blog explaining why hybrid tenancy maximizes business value for P&C insurers moving to Guidewire Cloud. In this blog, we explore why the hybrid tenancy approach makes sense from both a business and engineering perspective. This blog post was originally published on Medium by our Guidewire Engineering team, and has been republished here as part of our “Inside Guidewire” series.

Background

Regardless of whether it serves a horizontal or vertical industry, all cloud software companies look for ways to optimize resource utilization, improve security, and ultimately achieve operational efficiency while controlling cost. In this context, multi-tenancy is often cited as the most effective way to realize economies of scale when deploying enterprise business applications to multiple cloud customers. But advances in technology have now proven there is more to the cloud value proposition than the potential cost savings attainable through multi-tenancy. We’ll explore this in more detail in the sections that follow.

Evolving Software Architectures

Many architectural styles have emerged in the history of software engineering performed over the last half-century. When Guidewire started about 20 years ago, most enterprise software was written as a singular code base containing everything required by the target application domain and deployed as a monolithic, self-contained artifact. This was the style chosen by Guidewire, as it allowed them to replace mainframe systems with a more modern and flexible collection of policy, billing, and claims applications to its customers in the P&C insurance industry. That collection of core applications was called InsuranceSuite, and it continues to deliver tremendous customer value to this day.

Digging deeper into the original architecture of InsuranceSuite, each member of the suite was built as single core applications that are separately deployable so customers could modernize incrementally if desired. For example, PolicyCenter’s core functions included policy management, quoting, rating, rule management and everything else required to handle policy administration for the world’s largest insurers. The decision to build them as single core was partially driven by the technology choices available at the time, but also to reduce the operational complexities customers would face in managing multiple web, app, and database servers on premises.

While there are inherent simplicity advantages in managing all-in core applications, there are also drawbacks like the cost of enabling unplanned capabilities or supporting unexpected transaction volumes. For example, when insurance quote comparators started to appear over ten years ago, policy administration systems started to get 10 to 20 times more quote volume than when the product was first built. Fortunately, PolicyCenter was architected for scalability and capable of handling that demand. However, this required scaling not just the quoting function but all the modules comprising PolicyCenter, leading to costly and inefficient use of computing resources. Later, Guidewire built a high-volume quoting service capable of responding to even higher scalability demands that offered very high availability and a much-reduced infrastructure cost.

Software companies across the industry experienced similar challenges, with new architecture styles emerging to address issues like this as well as adapt to changing market conditions and continuous advancements in technology. Over the last decade we’ve seen architectural patterns like domain-driven design, event-driven programming, microservices, and data streaming become more prevalent to deliver better business value while reducing total cost-of-ownership (TCO).

During this period Guidewire continued to evolve its core applications to include more externalized services to fulfill new market and customer needs. This included enabling modern digital experiences through a front-end API layer to access the core, integrating Apache Solr for full-text search, as well as building new data services for reporting, analytics, and enhanced decision making. These and other services extended the core applications to offer richer functionality and greater business value to customers. But they came at a cost of adding operational complexity, making the customer burden of self-managing Guidewire deployments that much more difficult to operate, maintain, and update between releases. These factors, as well as growing customer needs to improve business agility, extend market reach, and accelerate innovation led Guidewire to further evolve it’s platform architecture — this time for the cloud.

Key Considerations for Cloud Tenancy Model

As describe above, Guidewire has been in the business of providing a suite of core P&C insurance applications for nearly two decades. And while the business drivers for moving to the cloud are unquestioned, it cannot be done at unlimited cost or without considering the needs of our customers first and foremost. The chosen cloud tenancy model must deliver optimum value to our customers while still meeting Guidewire’s business objectives as the leading SaaS provider in the P&C industry. Multi-tenant architectures are great if your only consideration is maximizing cost savings to the SaaS vendor, but don’t always deliver equivalent value to the customer.

Achieving this balance drove Guidewire to take a hybrid approach that allows customers to leverage the substantial investments they’ve made in InsuranceSuite while unlocking new levels of speed, agility, and innovation in the cloud. This meant preserving the InsuranceSuite core to maintain the strict data and process isolation customers demanded, while externalizing ancillary functions as cloud services that could be shared by multiple customers. These and other key considerations for Guidewire’s hybrid tenancy model are summarized below:

1. Core process flows and datastores are considered insurer proprietary helps to remain isolated, and make it much easier for insurers to guarantee transaction integrity (ACID).

2. Datastores for single tenant core applications are completely isolated from the datastores of any other tenant which helps in security as much as scalability and performance.

3. Every ancillary or sub-domain function is and can be further externalized into multi-tenant cloud services on top of the API and business events exposed by the core.

4. Single tenant core applications can interact with multi-tenant cloud services to enable fulfillment of functional needs within an externalized sub-domain.

5. The single tenant core will be increasingly componentized to enable use of the same Continuous Integration/Continuous Delivery (CI/CD) release process as multi-tenant cloud services.

6. Multi-tenancy constructs will be implemented at the cloud infrastructure layer to optimize resource utilization and minimize cost.

Design Principles for Guidewire Cloud

Three years ago with the above considerations fully vetted, Guidewire started executing on a strategy to transform its platform to a cloud service it would operate on behalf of its customers. The end result—Guidewire Cloud—is a complete Software-as-a-Service (SaaS) solution based on Amazon Web Services (AWS) that is highly optimized for use with the InsuranceSuite core applications.

The architectural transformation that resulted in Guidewire Cloud was driven by three key design principles:

API-First:

Guidewire began by componentizing the InsuranceSuite core through a new layer of RESTful cloud APIs. These APIs cover all essential policy, billing, and claims functions and include inbound APIs, outbound app events, as well as client-side callouts to external systems. These APIs are fully versioned and designed to support non-breaking changes so they update-safe and made common across all customer deployments. In addition, the new cloud APIs simplify integrations with InsurTech and other 3rd party systems while also enabling Guidewire to extend or replace select core functions with external cloud services. This in turn enables the second design principle below.

External Services:

While the InsuranceSuite core remains the vital system-of-record for all key P&C insurance transactions, Guidewire’s cloud transformation strategy recognized the opportunity to leverage modern cloud technologies like microservices and data streaming to externalize and optimize existing functions as well as enable new capabilities. In effect, Guidewire combined the best of two distinct architectural patterns to maximize value to its customers. First, it maintained the resource isolation and transaction integrity uniquely enabled by the InsuranceSuite core. Second, it utilized the powerful extensibility, performance, and workload scalability that is best provided by a distributed, cloud-based architecture. The third and final principle was designed to enable cost-effective management and operations of this hybrid platform in the cloud.

Cloud Platform:

Finally, to support P&C insurance customers who wanted to leverage their InsuranceSuite investment while taking full advantage of the cloud, Guidewire designed a unique cloud platform that effectively delivers the best of both. Called the Guidewire Cloud Platform (GWCP), it leverages containerized workloads orchestrated by Kubernetes to declaratively secure, deploy, test, manage, and update core InsuranceSuite applications and cloud services of varying architectural styles. In addition to being deployed on the same runtime platform, these components are all integrated with a common set of cloud-native libraries to unify everything from authentication and observability to configuration and technical properties management. GWCP also exposes AWS managed services in a unified and secure way so core, digital, and analytics applications can all leverage them in a consistent fashion and enable Guidewire to continuously optimize infrastructure cost and simplify operations.

Guidewire Cloud High-Level Architecture

Based on these principles, Guidewire proceeded to build out GWCP as a standardized platform-as-a-service (PaaS) layer on top of Amazon Web Services (AWS) infrastructure that is highly optimized for use with InsuranceSuite and the hybrid architectural approach we had adopted. This “PaaS within SaaS” component is called ATMOS, which leverages AWS, Kubernetes, and Docker to automate deployment, management, and scaling of containerized core applications, cloud services, and associated workloads. A high-level architectural overview of how ATMOS helps standardize interactions between InsuranceSuite and externalized components is provided in the diagram below:

ATMOS also provides Guidewire with a standardized way to address cross-cutting architectural concerns like security, stability, and dynamic scalability. Using ATMOS has helped bring our developer community closer to the GitOps model for continuous deployment, management, and monitoring of containerized applications and cloud-native services at scale.

Continuous Evolution of Guidewire Cloud

Guidewire InsuranceSuite became the leading core application and transactional system in the P&C industry for good reason: It was architected to enable all essential business processes as well as scale to meet the needs of the world’s largest insurers. This same architecture that provided the inherent modularity required to adapt to changing market conditions, allowed Guidewire to take a more balanced, evolutionary approach to cloud transformation.

Now Guidewire Cloud has had three successful releases on 6-month cadence, with more and more customers committing to transition their business to the cloud. But even with those successes, the job is actually never done. Guidewire Cloud will continue to evolve, enabling more automation, achieving greater scale, further improving observability, and introducing new technology innovations that make sense for our customers.

All of this and more is made possible by the architectural choices made in delivering GWCP, including the hybrid tenancy model described above. In our next blog post we will elaborate further on the hybrid tenancy architecture including how Guidewire is enabling cost efficiencies that further enhance the overall value proposition of Guidewire Cloud.

Read Part 2 »

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