Opening New Doors

The second type is one brought in to help fashion a particular solution. If it is a consultant brought in for help in deciding whom to engage for a solution, thats more difficult, says Bordages. That consulting firm understands what its been told by the insurer thats engaged it, but it may not ask the same questions we would ask.

Carriers can be placed in a precarious position when they reach a point in their operation where new solutions are necessary, says Janeen Blanton, a principal for the consultant group Align 360. It is important for companies that have not been through the process before to have someone who has been through it to help guide them through, she says. This includes helping carriers ask the right questions of a vendor so carriers become aware of all the different areas about which they need to be concerned.

RFP Comes First
The first step a carrier needs to take when contemplating a software purchase, Maass believes, is submitting a request for proposals from several different vendors; she thinks carriers should examine at least five RFPs. One of the things we look at from the RFP is how many current customers the vendor has, she says. We look at how long it has been in business, its financials, and its credibility in the marketplacedoes it deal with insurance companies, or is it a software company for a grocery store.

The next step is for carriers to meet with some of the vendors customers. Thats probably the most weight we give a vendor, says Maass. She says Companion likes to meet personally with at least two of the vendors current customers. I think customers generally are very open with one another, she says. They are straightforward on whats the good, the bad, and the ugly. We place a lot of faith in references and site visits. Thats what we found that works.

The RFP must come first, Blanton agrees, and insurers need to understand what the project is about, what sort of expectations they should have, and some clearly defined business requirements. I dont think you can ever try to go after software or find a vendor without doing your business requirements first, she says.

How long this process takes depends on the scope of the project. Some carriers are in need of an entirely new system; others are seeking component parts. It can be as short or as long as you want it to be, she says. It depends on the level of detail you want to put into your initial business requirements.
Carriers often follow two routes in this process. One involves establishing high-level business requirements before searching for a vendor and getting down to the nitty gritty, according to Blanton. Others prefer to get the basic framework and then find a vendor they feel can fill the bill before establishing the business requirements.

The success of either approach depends on the kind of solution you are going after, says Blanton. If you are going after a custom solution or a vendor that will allow you to customize its solution, you need to do the high level, get your vendor, and then get into it. However, if you are going after a plain package and you dont want to customize, you really have to go to that detail level before you go and look at the vendor and know whether it is going to fit your criteria.

References, Please
Having satisfied customers is everyones goal, not only for the sake of repeat business, but also for the ability to use those current customers to attract new customers. When Companion began a search for a new image system, it asked one of the vendors for a list of seven companies that were customers of the vendor. From that list, Maass says her company looked for peer companiesother P&C carriers that were roughly the same size or bigger with the same type of lines that Companion offers. The P&C world is a small world, she says. You run into people all over the place at different things. Since she is likely to run into someone with an equivalent title at a conference or a technology show, she feels secure knowing that person wont tell her a piece of software is great when that technology leader knows the statement is not true.

Companion takes a team of people when it visits a vendors references. Maass believes in taking those from the business side, not just the technology people. That way, underwriting managers can talk to other underwriting managers and claims people can talk to other claims people.

Quite frankly, weve found people to be very open and honest with us, says Maass. Its always a red flag if they say, No, we wouldnt change a thing. Everything worked great the first time we put it in. It was perfect. When you hear that, you have to ask yourself, Is this a Stepford company? We know [such perfection] is never the case. I think you can judge whether people are being honest about things or not. We havent had a bad experience dealing with references.

Blanton agrees contacting the business unit people as well as the IT staff is necessary. You may have one person who is called for a reference, and a lot of time that is going to be an IT person, she says. IT may love the way the project went, but you also want to make contact with the user community and make sure it is also pleased with the work that was done and the results.

Maass has found herself being a reference for a vendor as well, and she acknowledges vendors wouldnt be giving out her name if they didnt feel she had something good to say about the product. Acting as a reference, however, was beneficial as ideas and information were exchanged, she adds. I think we are very open and honest, she says. We certainly dont sugar-coat things. We tell people, This is what we feel is the weakest part of the system, but its also where [the vendor] is putting in the most effort in terms of enhancements. We try to be upfront, but we certainly dont work to sabotage anyone. We view it as a win-win situation for everybody.

Before the Ink Is Dry
The best way to eliminate potential problems with an insurer, Bordages says, is to be clear on what the project management plan is before any contracts are signed. It goes into some great detail on business requirements, the project scope, delivery timelines, etc., he says.

Some companies dont enter into such a detailed plan until after the contracts are signed, but Bordages says CSC wants these details to be clear before the contract is signed. That helps to clarify everybodys expectations, he says. We also have a variety of techniques we use for project status reporting along with the customer over the course of the project. We have a project governance structure thats put into place.

No matter how much effort is put in, though, there are some companies that are never satisfied with the efforts of a vendor or a consultant. You have to take stock of where you are at, says Blanton. Some carriers spend anywhere from $200,000 to $500,000 before realizing there are problems. No one wants to stop a project when that much money has been spent, but Blanton says, If youre not going to get what you need in the end, maybe you have to reevaluate.

Not surprisingly, since she is a consultant, Blanton places much of the blame in these cases on the vendor. Most of the problems we have encountered have been making sure the vendor does its part, she says. You can tell [the vendor] what to do and when, but you dont always have complete control over making them do that. Insurers need to ask themselves a basic question, Blanton believes: Even if I sink a million more dollars into this, at the end of the day, do I get what I need?

It is tough blowing off a project once it has begun, but she believes the alternative can be worse. [Problems] really can be avoided by making sure you get thorough requirements before you start, says Blanton. If you spend the time upfront, youre going to have fewer problems down the road.

Beyond the Pitch
Some small companies need consultants, but Maass says an advantage her company has is it is a subsidiary of Blue Cross Blue Shield of South Carolina (BCBSSC), the state's largest health insurer with over one million members in its plan. Companion is a regional P&C insurer in the southeast with $148 million in direct written premium and is one of several insurance companies owned by BCBSSC. While it was searching for the right image workflow product, after the search had been narrowed to two vendors, Companion informed the vendors that it wanted the vendors to meet with technology leaders from its parent company. We wanted them to meet with our chief architect, whos very fluent in imaging, knows all the technology, and knows what would be a future direction from an architectural standpoint, she says. We told the vendors it probably wouldnt be a good idea to bring your salespeople [to the meeting] because these are down-and-dirty technical questions. [The technology team] is going to want to get into the meat and bones of your system, and you need to be prepared. The vendors ended up sending their chief design architects to the meetings, according to Maass.

Not all small insurers have that big stick, she says in describing the Blue Cross connection, but adds it is important to have some outside help, given the cost of major projects. If it is a major investmentif youre looking at imaging/ workflow, an enterprise system, or a Web solutionyou are looking at some substantial dollars, she says. You should go ahead and budget for the consultant or the resources you need to make an informed decision. I dont think theres any software I would buy sight unseen. How do you know its not vaporware?

The New Guys
Both Maass and Blanton recognize the difficulty new vendors have entering the insurance market. It is a market where most companies are more interested in what they know will work rather than the unknown. When carriers dont have the in-house resources, they are going to turn to a consultantto lead a systems selection process. Consultants arent likely to stake their reputation on a new vendor without some detailed knowledge of a new solution.

We have to know new vendors are out there, stable, big enough to provide the support that is needed, and they have a good product, says Blanton. When we have a vendor that is interested in us, we talk with it about its product, the culture, the makeup of its organization, and its support practices. We get demos of the product, and we ask for training on the product and really look into it.

Not surprisingly, carriers view going with a new software system or with a start-up vendor as a higher degree of risk. Companion looked at a software system a few years ago from a young company that hadnt been in the market very long, Maass says. One of the things we said was, If we go with you, we have to know the source code, and we have to know the architecture to make the changes, she says. We had the resources to understand that code so if it did go bankrupt, we were left with software we could at least function with or support.

If a young company would refuse such an offer, Maass says, that would be a no-brainer. Wed say, See you later. There are contract stipulations such as these a carrier can put into the deal. Its what level of risk you are willing to take, she says. Id never look to a start-up company for my enterprise system. Would I be willing to look at [one] for an enterprise for medical bill repricing? Sure, because if it doesnt work I know I can go out to someone else.

Partnership vs. Alliance
Companion has been approached with the prospect of partnering with an insurance technology vendor, Maass says, but it is not something the carrier was willing to undertake. How much direction do you have in the software? she asks. Are you cutting your nose to spite your face? I might say, I want you to do it this way because thats how Companion does business. But that might not be the way to generate new sales. We spend so much time managing our day-to-day life here, I cant imagine wanting to manage a vendor, too.

Finding the right deal for insurers, vendors, and consultants can be a difficult process. While many companies share a great number of similarities, Blanton doesnt believe any two insurers are alike. While some of the problems they face are similar, their solutions to these problems are generally not similar, she says. The companies may be 60 percent to 75 percent the same, but that remaining 25 percent to 40 percent is very different.

Defying Conventional Wisdom

Conventional wisdom might lead one to believe smaller insurance carriers might have a bigger need for outside consultants than larger insurers, but thats not necessarily true, at least in the mind of TowerGroups Jamie Bisker, director of research for insurance practices for the research and consulting group.

For the small carrier, the logic is it doesnt have a big staff, so therefore it is more likely to do something [with a consultant], says Bisker. However, it is also less likely to do the big project. Yes, its a smaller ship; it doesnt have all the resources. But it doesnt need all the resources.

Consultants tend to look to the larger insurers as well, according to Bisker. When they deal with a large carrier, its a large engagement, he says. I think larger players are more likely to use outside consultants.

When smaller carriers consider consultants, though, it is normally a quick decision because smaller carriers are more likely to have their finger on the pulse of their situation than the larger carriers. Its less of a struggle for [smaller insurers] to say, Do we have this resource? Can we do this? Is this group available to do this? says Bisker. Smaller insurers use what they need to use.

The smaller companies are more likely to leverage consulting resources for project management and strategic things rather than for coding because they generally are going to purchase a package solution that fits their needs, according to Bisker.

For larger insurers, Bisker says, consultants and outsourcers are part of a current trend to use outside skills as a cost-savings measure rather than as a way to deal with capacity issues, which is where these relationships originally developed.