Making Vendor Relationships Part of Your Insurance Company’s Digital Strategy

In the insurance industry, digital strategy doesn’t stop at technology. Are these megavendor tactics holding your tech transformation back?

Researchers like the team at Deloitte say the insurance industry is leaner and more in tune with customer needs than it’s ever been. But relationships with prospects and current customers aren’t the only ones in need of attention. As organizations look for ways to bring their insurance modernization plans to the forefront, reevaluating enterprise software OEM policies and practices can inform ongoing digital strategies and offer the potential for millions more dollars for innovation.

How software support renewals factor into insurance digital strategy

The software megavendors you buy from have plans for your digital roadmap and how much money you plan to invest in their services. Your own plans should reflect that knowledge. Assuming everything the OEM says at renewal time is non-negotiable can cost your company a lot of money and take control of your digital strategy out of your hands.

Many enterprise software vendor tactics focus not on the software itself but the ongoing availability and cost of associated support. Examples include:

• Software bundling tactics. When it comes time for renewal, insurers and other companies often see their associated support costs increase unless they add new products – which they might or might not need – to the new agreement.
• Diminishing support levels. The further the software product is from release, the less proactive support becomes. After one, three, or five years of service, insurers can expect to move to defect-based support, which only accounts for known bugs and issues.
• Forced software upgrades. When a software product moves to end-of-support (EOS) status, customers must upgrade to a new version to keep receiving vendor support if no Extended Support option is available.

Discovering that you’ll have to upgrade your software or overpay for the support you were already receiving can throw your entire roadmap into question. The good news is OEM support isn’t the only option.

Independent software maintenance vendors provide SLA-backed support and maintenance services for IBM®, HCL®, and VMware® software products, meaning insurance companies can keep their current software for as long as it suits their digital strategies.

Mitigating the ongoing risk of software license audits

Software audits are designed to bring the customer company’s usage in line with the terms of its enterprise license agreement (ELA), but they’re also a billion-plus-dollar revenue source for the vendors that leverage them. Multiple triggering conditions and the high potential costs they inflict on noncompliant insurance companies make audit activity a persistent concern in an industry built around risk mitigation.

Predictably, audit findings are also used as a pressure point to keep accounts locked to a contract. For example, a noncompliant customer who is happy with its current software portfolio might be presented with the option to upgrade to a cloud-based version (and thus lose their current, perpetually licensed software) in return for waived audit penalties.

Though sometimes there are actions an insurance company can take to reduce the risk and financial impact of a software audit, the best defense is proactivity. Documentation and insight into how current systems are used are both essential. Working with an outside partner that understands software license audits and the associated tactics at an expert level – but doesn’t abide by the same revenue-extracting strategies of a large vendor – can result in millions saved if they are brought on early enough in the process.

Want to learn more?

Our e-book “Future-Proof Insurance IT: Navigating IBM Software Roadmap Complexities” breaks down challenges insurance companies face as they search for ways to keep using their current software without the enterprise software vendor relationship getting in the way. Get a complimentary copy and sidestep the business complexities that make holding onto your software more difficult and expensive than it should be.

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