Bendor alignment is becoming more important in the insurance software field as software developers look to achieve an end-to-end solution that doesnt come in one big box.
In todays insurance world, software developers are looking to do business with counterparts other than just insurance carriers. An increasing tendency in the solutions industry is for vendors to establish strategic alignments that will deliver a quality end-to-end solution, according to TowerGroup senior analyst Cynthia Saccocia in her research notes entitled Insurance Software Vendors: The Logic Is in the Delivery.
Point solutions are not delivering the metrics insurers are looking for, says Saccocia. Strategic alignments were around before the insurance industry began, but Saccocia notes vendors may be moving away from two-party alignments to consider multivendor pacts that offer a full range of solutions. One such alignment is the VeraSure solution organized by DST Output and including Document Sciences, New River, Acxiom, and Edgewater Technologies. When we look at something like a VeraSure alliance, where you have a consortium of vendors coming together to solve an end-to-end process, substantial ROI can be achieved because [insurers] derive the cost savings throughout the process as opposed to just one single area of the process, says Saccocia.
In the past vendors had less formal alliances, but she believes change may be coming. What makes such consortiums compelling to insurers is the solutions providers can speak about solving issues throughout a process rather than solving back-end or front-end problems.
Such solutions usually require one of the vendors to serve as a general contractor to manage the multisolution environment, Saccocia asserts. In the case of VeraSure, she says, The alliance has taken responsibility and provides the insurer with service-level agreements or any of the metrics or contract information needed to make this a successful venture, she says. Its really moving the role of general contractor out of the insurance carrier and into the alliance.
Since larger insurers have the depth, resources, and experience within their IT shops to be able to handle multisolutions providers on their own, according to Saccocia, the best fit for such alliances often is with midmarket insurers.
The multivendor format shows the end-to-end process requires more than just one or two vendors, she points out. Some may claim they can do it, but in this particular instance [Verasure], where were looking at document and content management, its a very complex process, Saccocia adds. These vendors saw a niche.
Insurers need to ask four important questions, she says, when contemplating such a solution:
Is there a formal partnership contract in place with equity terms? Certainly, with an alliance-oriented solution, you want to make sure there is a formal partnership among the vendors, notes Saccocia.
Who is accountable for design and delivery on time and within budget? What a formal alliance comes down to is the insurer doesnt have to hold each vendor individually accountable because the alliance as a whole holds itself accountable, she says.
Do you have any references for a partnership-led installation? Have they installed it and demonstrated ROI? she asks. Make sure it is flexible and tailored to the carriers environment.
Can alliance members switch one or more of the software vendors to other preferred partners? You have to be flexible enough as a group to understand you all dont have to die on the sword together, she says. Giving the alliance member the opportunity to compete for the business probably is the preferred method, but if the alliance partner was not able to compete for that business, the alliance would move forward without it.
Saccocia believes insurance carriers also will continue to rely on their vendor partners for advice and counsel. I think its necessary for carriers to have the expertise of those theyve invested a lot of money with at the table as the carriers construct their strategy going forward, she says. Its really embracing a vendor as a partner as opposed to someone whos just providing the carrier software. Its not always necessary to buy and hire that expertise [from an independent consultant] when you can leverage it as needed from the software vendorsometimes at a price, sometimes for free.
Robert Regis Hyle
60% – Amount of market value that at least one-half of all insurance software vendors expect to derive from alliance-related activities over next three to five years.
Source: TowerGroup
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