The growth roadmap for Commercial off-the-shelf (COTS) product vendors

If you have followed the analysts' reports and some of the recent news on the IT trends, I suppose the writing on the wall is very evident - that a turbulent time is ahead for the traditional Commercial off-the-shelf (COTS) vendors across industries including insurance.

While leading SI partners of SAP modules are struggling with lesser sales numbers, the Celent report on the Build Vs Buy debate version 2015 for insurance industry also indicates and validates that there is no growth expected for the insurance companies on choosing a COTS products to meet their requirements.

The reasons are many - from a highly modular approach taken by almost all matured insurers in modernizing a specific module/function instead of the whole system in a big bang approach to a firmed up belief of the insurance companies that their business model is unique which differentiates them from other carriers in the market and also a subtle fear that their best practices will be shared with other potential carriers in terms of new functions and features in the forthcoming version releases.

From our experience in the developed markets, we have seen that choosing an established COTS product to meet the legacy modernization requirement often comes as a last option in the list of possibilities for insurance carriers, while most of the carriers look for an external support in terms of development partners to augment their IT team in building a system component exactly suiting their requirements.

I know there have been ample, often never ending debates on the pros and cons of a COTS products implementations. Let me share my thoughts on the possible roadmap. In my opinion, on our part, we need to do the following:

Engage with the customer to identify the pain areas and jointly brainstorm on the ways of coming up to a solution that caters to the organization's growth objective. This may include one or all of the following:

Offer thought leadership and dedicated consulting services in:
1. Business model consolidation and thus improving operational expenses ratio while maintaining and increasing top line
2. Business process reengineering
3. Product rationalization exercise and Product framework designing to cater to demands of the dynamic market, and do away with the redundancy to improve the Underwriting efficiency
4. Leveraging innovative technology and platforms as a main differentiator in opening new channels in business and products addressing the market needs
Analysis of Enterprise wide IT landscape and critically evaluating each component on its purpose, utility, and then come up with the future state enterprise architecture with the following approach:
1. Cost benefit analysis on behalf of or jointly with the carriers towards any modernization initiatives.
2. Unbiased build vs buy evaluation to meet the specific challenge/requirement
3. Timeline of each of such modernization initiatives and decommissioning plan of the existing applications
Help float RFI and RFP
Helping the client in conducting a detailed Due diligence to understand whether any product in specific is suitable to meet the need from a set of products chosen initially with the initial research
Help product companies to come up with a more accurate estimate and timeline
Complete end to end support in implementation in terms of both the client and product vendor management to meet the timeline and cost and also the maintenance

Simultaneously on the part of the product vendors, the following initiatives are expected:

Constant and systematic investment in the product, based on inputs from research
Leveraging the SI partners to understand the areas of improvement and work accordingly
Do a critical evaluation of its strength and weakness followed by:
1. Focused marketing and sales strategies to increase the market share in the areas of strength
2. Critically evaluate whether it's worth investing to bridge the gap in its weak areas or get into a partnership or acquire a new product/component to cater to the need
Focus on modularization of its components
Strong focus on regional functionality and features adoption as per the target market, given the fact that business functions vary widely even within the same line of business with respective to different regions within same geographical spread
Focus on adopting new technologies like Usage based insurance, catering to SaaS deployment model
Do a more detailed job in estimation, and come up with an honest timeline and pricing, given a fact that most of the product companies fail to meet the initially promised implementation deadline

Last but not the least, let us keep in mind that any transformation journey is not complete without active and equal participation of each of the stakeholders in every phase and the more detailed the joint planning and risk analysis followed by mitigation plans are in the preparatory stages, the more will be the gain in the implementation phase in terms of cost, delivery timeline and related quicker ROI achievement.

About the Author

Pinaki Ray works as a Senior Consultant in the Product and Platform Group of the Insurance Vertical of Wipro Technologies. Prior to this he has worked in TATA Consultancy Services in "TCS BaNCS" product management and implementation team and also at ICICI Lombard general Insurance Company Ltd. He is a Fellow of Insurance Institute of India and possesses over 12 years of experience in Business analysis, Requirement analysis and consulting in P&C and Health domain after his Post Graduate Diploma in Business Management. In this role he is engaged in various consulting opportunities like Business process analysis, optimization and re-engineering, product evaluation, Product consulting (Insurance commercial off the shelf products), transformation from legacy to cutting edge product migration across US, EMEA and APAC market. He is also engaged in research for suitable product partnership and defining GTM strategies. He is an avid reader and has keen interest in Indian Classical music as well.

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