Looking past the functional arms race

In our recent work in Latin America, it is clear that in the process of selecting core systems for countries such as Argentina, Brazil, Chile, Colombia, Mexico and Peru, Insurers have been more focused on delivery and support capabilities than in the product.

All vendors claim quick time to market, low TCO, quick ROI, strong product configuration capabilities and more. And when dealing with the top vendors, there is little material difference in features and functionality. Although functional requirements account for most of the items in a RFP the weight of non-functional requirements including delivery and support capabilities has matched and even surpassed the first. This is an approach that we have been advocating in other regions.

Functionality is now an arms race. Insurers, even in emerging regions like Latin America, must invest more in evaluating service and delivery capabilities.

With a plethora of new vendors in the region offering solid solutions proven elsewhere in the world, regional insurer have three important questions that vendors need to address:

1 . “Will the vendor have the capabilities to deliver and support the product in this region? “

2. “What will I need to change (people, process) in order to take advantage of these new highly configurable systems that promise to put everything, well almost everything, in hands of the business users?”

3. “How do I really validate that the product will support our lines of business, the products we sell and the channels and processes we want to have in place to better serve our distribution channels and customers?”

In response to these questions, there are several interesting points to make.

It is clear that vendors in the region bring a wide range of different business models. Insurers in most Latin American countries have been used for decades to have local/regional support from vendors which acts as a high entry barrier for new participants. While some of the new players have decided to work through system integrators or implementation partners, they still need to demonstrate how successful those relationships can be to deliver in the short term and to supersede in the long term. Insurers are looking for credible relationships (between vendors and partners) and processes in place in advance for knowledge transfer. Domain expertise, sufficient trained staff and delivery capabilities in similar projects are key aspects they will consider when evaluating the local/regional partner. Finally, how involved is the vendor going to be in the implementation process is also under consideration. Vendors who are amongst the first to prove some track record in the region will be the vendors who succeed in the future.

When it comes to validating the product against the insurer business model, Celent points insurers to the process of the RFP. There are smart ways of validating and engaging with vendors early in the review process to strike a balance between what the solution is capable of and the organizations willingness to change its business model. This new approach focuses more on system review in early stages of the process and making stakeholders and users engage in the quest of understanding what is possible and the transformation required within the organization since start.

This focus on service delivery and business transformation over functional requirements is the new reality in Latin America and one that Celent will continue to support.