There’s a tendency in the tech world to go with the safe bet. Like the old adage says, “Nobody ever got fired for buying IBM.” But not only are insurance companies missing out on emerging opportunities from providers that are truly suited for their organizations, investing in the wrong technology or operations solution–even if it seems like a safe bet–can be crippling in terms of money and time spent.
During our decades of insurance consulting, we’ve seen what works and what wastes time. Here are our tips for conducting a vendor selection engagement that leads to success.
Tip 1: Determine what you want to accomplish
First, start by getting clear on what you’re trying to achieve with this vendor engagement.
- Take a look at your priorities:
- Are you trying to lower costs?
- Grow your customer base?
- Upgrade your user interface?
- Streamline your back-office operations?
Keep your goals in mind during every step of the process. Don’t become distracted by bells and whistles that don’t support the mission at hand.
Tip 2: Assess the big picture before you begin
As part of our insurance consulting intake process, we ask our clients, “If you look at all the pieces that make up your organization, from a tech perspective, where does what you’re trying to buy fit into that picture?” Then we literally draw a picture. What’s usually revealed is that this new piece of technology will interface with many more components than were previously realized. Keep these things top of mind as you proceed.
Tip 3: Gather your functional requirements
These are the actual functions that you’ll need your system to perform. We call them the “Thou Shalts” –as in, “The system shalt do X, Y, and Z…” Identify these items by speaking with staff to uncover areas of frustration, duplicate work or manual processes. Make this list as long as it needs to be and add to it as new requirements become apparent.
Tip 4: Conduct an internal readiness assessment
Take a hard look at your organization and determine if you’re actually ready to tackle a project of this magnitude, as these changes will likely impact every part of your organization. Make sure you have the appropriate staff in place and evaluate whether your new technology will be compatible with your existing teams, or if they’ll require additional training. If it makes more sense to undertake a project of this scope at a different time, adjust your schedule accordingly.
Tip 5: Look for deal-breakers during pre-qualification
Before sending out your RFP to a long list of vendors, be on the lookout for the areas where vendors simply cannot meet your criteria. For our insurance technology consulting engagements, we help our clients develop a pre-qualifying questionnaire that cuts right to the chase. Quickly evaluating at a basic level whether or not a vendor can meet your needs saves you from wasting valuable time on inappropriate partners.
Tip 6: Go beyond simple answers–ask for a narrative
As you down-select from 10-20 vendors, look for more than just simple answers. Ask open-ended questions that require a narrative around how their solution works. Ask vendors to outline their process, providing examples of real use cases and describing their approach to each scenario. You’re looking for a vendor who can clearly articulate how their solution works and how it has performed in situations similar to yours. Don’t be surprised if these responses run into the hundreds of pages.
Tip 7: Replace subjectivity with objectivity
Determine a system to compare apples to apples that eliminates personal or emotional bias. At Perr&Knight, we have created a numerical ranking tool that helps our insurance technology consulting clients evaluate proposals and assign a score. This enables companies to quickly eliminate vendors who don’t meet the minimum score requirements, while the most suitable vendors become immediately apparent.
Tip 8: Script your own demos
Once you have reached 3-5 final vendors to evaluate, write the script you would like them to follow during their in-depth product demonstrations. If not, the vendor will lead you through THEIR demo and focus on areas at which they know they excel, rather than what you need. This also allows you to compare vendors directly since they will each cover the same material. Don’t rush through these demos. Each should take around 2-3 days for you to obtain the complete scope of their capabilities.
Tip 9: Always have a backup
Your final down-selection should leave you with at least two vendors: the winner, and the backup. With so much at stake, keep your second-choice vendor in mind in case your prevailing vendor disappoints you, or to use as leverage during contract negotiations. Don’t close the door on the second-choice vendor until the ink is dry with your first choice.
Vendor selections are long, deeply-engaging processes that generally run at least 6-9 months. Take the time to conduct proper due diligence–on both your vendors and your own company–to make sure that expectations are clear and can be met by all parties.