It's often said that insurers suffer from the "not-invented-here" syndrome, but the fact is: At least in North America, insurers are most likely to look for a vendor solution before embarking on a custom build.In Celent's most recent insurance CIO/CTO survey, more than half of the respondents said they preferred to buy rather than build whenever possible. However, a high level of frustration remains among insurers with availability of appropriate vendor solutions-and identifying and selecting an appropriate vendor partner is still a time-consuming and challenging process.
Part of the fault rests with poor vendor sales practices. In a study last year, we found several important disconnects between what buyers valued in the sales process and what their general experiences were. Insurers frequently encounter vendor sales people who do not spend the time to understand their business problems, and to help the buyer understand how the solution will fit with the rest of their infrastructure.
Many vendors have a flawed idea of what it means to research an account. Many overemphasize secondary research about a company, such as news reports and SEC filings. While these can be useful preparation, they rarely provide insight into the specific business problems of the direct prospect. The best research method is to listen carefully to the initial contacts at the company and try to understand their needs and situation, so that the eventual presentation to the prospects can directly answer their questions.
In addition, vendors must ensure their sales forces are thoroughly conversant with the industry segments they are selling into, the operational areas to which their products are relevant, and the most common infrastructures they are likely to encounter at client firms.
They also need to have enough familiarity with insurance operations and typical IT infrastructures to quickly understand a new business problem or technical environment. If salespeople do not have this knowledge themselves, business analysts or sales engineers who do should accompany them in all conversations.
In addition, vendors frequently provide poor service to the lower-level staff that senior-level executives are relying on to help make decisions. The most frequently expressed frustrations of lower-level staff in our survey were the unwillingness of vendors to discuss pricing at early stages of the evaluation, and to provide them with the support they needed to communicate the value of the vendor's solution internally.
Vendors should work with their initial contacts to help them present information to the final decision-maker. Final decision-makers are primarily concerned about pricing and how the solution will deliver business benefits. By not providing initial contacts with that information, vendors make it difficult for them to communicate effectively with the next level, and create more of an uphill battle for themselves than is necessary.
Still, no matter how much some vendors need to improve their sales practices, insurers must take some responsibility for wasteful and frustrating evaluation processes. It takes two parties to have a bad interaction, and insurance IT buyers cannot lay all the blame for wasted time and ineffective communication at the vendor's door.
Moreover, insurance technology buyers should realize they are clearly in the driver's seat. As the party that controls the outcome of the interaction, they should exercise the same type of control over the beginning of the process as well.
Most IT buyers, especially those at the lower end of the decision pyramid, are too passive about their vendor interactions. If a buyer is sitting through an uninformative or irrelevant presentation just to be polite, that is a waste of everyone's time. Celent strongly suggests that buyers flex their muscles a little and tell their vendors more clearly what they want.
Specifically, Celent advises buyers to take the following steps to improve the value of interactions with potential providers:
Clearly explain your business need before the first meeting. This should enable the vendor representatives to tailor their presentation to focus on the areas that are most important to you. Make sure representatives understand that you expect them to present material relevant to your case.
Tell the vendor what information you need. Do you need technical specifications? Implementation case studies? ROI models? Pricing information? A demo? Whatever you need, make it a condition of the first meeting. A vendor sales rep who will not share pricing models and rough estimates (to within $500,000) does not deserve a meeting. And that salesperson's boss deserves an e-mail explaining that you would like to buy something, but can't get the information you need to make a decision.
Set mutual expectations for meeting mechanics and goals. Tell the vendor how long the meeting will last, who will attend, what information each of them will be looking for and in what format they prefer to review information (PowerPoint, brochures or one-page information sheets, for example).
Let the information flow both ways. Let the vendor know where you are in your evaluation and what to expect going forward, and ask the vendor representative what you, in turn, should expect.
Insurers' frustrations with the vendor community are not unfounded. But because vendor solutions and components are critical parts of any effective IT strategy, insurers' can choose whether to continue to waste time with bad interactions or to take to an active role in shaping their interactions with potential suppliers by communicating clearly and effectively-and demanding the same in return.
Matthew Josefowicz is manager of the insurance practice at research and strategy advisory firm Celent, LLC. This article is adapted from his report "What's Wrong with Insurance IT Sales Practice and How to Fix It." More information is available online at www.celent.com.
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