Top 5 Issues to Consider When Choosing a Vendor
Insurance Experts' Forum, August 2, 2011
Companies are replacing core automation systems at a frenetic pace. Competitive pressures, ongoing operating costs, dwindling specialized talent, and outright obsolescence are driving this phenomenon. Have you noticed the corresponding number of technology vendors now in the market?
How will you ensure that the vendor you choose will stand the test of time and will truly become your strategic business partner versus just a technology provider? The considerations go far beyond just features and functions.
A number of factors can determine a vendor’s success or failure. These include client satisfaction, functional and technological strength, financial stability and management, and long-term vision. While these are certainly important, other variables influence whether a company achieves staying power and industry respect, which can be one predictor of success. These include:
- Product strategy.
A bunch of wish-list items from a few key clients is not a product plan. Market trends, customer business challenges/opportunities, regulatory developments, consolidations, competitive intelligence, and market stability are but a few non-function-and-feature drivers that should influence product strategy. Do the vendors you are considering gather this information? Do they serve on industry boards, work with industry consultants, and conduct focus groups? Are they active contributors to trade associations? Do they combine all of this into inputs for a rolling, multi-year product roadmap? Whether or not your organization needs the resultant functionality depth, you do need a product and a vendor partner that stays ahead of the market.
Getting a unique message out to the industry is what keeps a vendor top-of-mind with prospective clients and with selection consultants. If a vendor isn’t visible in the market, they probably aren’t being invited to many dances. By selecting a vendor with little or no market presence, you run the risk of the vendor becoming insular and getting feedback only from the few clients they currently serve. And just because a vendor buys industry notoriety through advertising and trade shows, doesn’t mean they truly have an industry presence. The best ways to get meaningful presence is through independent analyst reviews, industry councils, articles in peer-reviewed journals, and client references, to name a few.
- New clients.
When you look at a vendor’s client base, what is the sales trend? A vendor may have fifty customers, but if none has been signed in the last two years, dig deeper—it could indicate a problem with the vendor keeping pace with the market. It could also mean that you and a few other dependent customers could end up funding that vendor’s future.
- Strong leadership.
Is the vendor’s leadership team truly focused on long-term success—both theirs and yours? How do they see their company evolving in the future? Do you see strong leaders at multiple levels of the organization? Could you see yourself serving on an industry task force with the vendor’s leaders to solve an industry problem? A “no” to any of these questions might be a red flag.
- Client focus.
A vendor’s relationship with their clients reveals a great deal. Do their clients see them as industry leaders? How has the vendor worked with their clients to solve challenging business problems or capitalize on opportunities? For example, a great vendor-partner will offer flexible license terms that enable client growth and expansion. Has the vendor brought industry insight into their client organizations, or are the clients always leading the vendor? When a client is in the position of always leading the vendor, it is a sign of a limited relationship.
When you choose a vendor, you might think of it as hiring a key employee or entering into a business partnership. It is a dynamic and mutually beneficial relationship that should go far beyond “system functionality.” While it is tempting (and faster) to simply focus on the technology, today’s unforgiving market—and your stakeholders—won’t abide that simplicity.
My thanks to former Nolan team member, Terri Mullaney, for her earlier contributions to this article.
Rod Travers is EVP at The Robert E. Nolan Co., a management consulting firm specializing in the insurance industry.
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