IT Services is changing – how will it affect insurers?
The IT services market is changing which impacts the vendors’ opportunities and value propositions
I read today that an IT services firm CEO resigned. According to one person quoted in the article, the CEO was “trying to change the way [they] do business" because the CEO was trying to make the company innovation-driven company moving it away from the commodity type work they have done in the past. In researching the vendors in this market and having discussions with many of them as I finalized their profiles for my report, it was evident that the IT services market is changing which impacts the vendors’ opportunities and value propositions. Digital business imperatives, cloud, intelligent automation, and more innovative business solutions are just a few of the trends that are forcing vendors to rethink their offerings. In a competitive market like IT services, a vendor has no choice but to become innovative and find ways to make their clients more competitive.
Yesterday’s Digital Insurance headlines included insurtech, artificial intelligence, IoT, and data science. Yesterday was not an unusual day for headlines. North American insurers also are working on projects related to growth, process optimization, and digitalization. They often need external expertise to help them reach levels beyond their own capabilities because they are busy running the business. Process optimization is at the backbone of North American insurers’ digital transformation initiatives and emerging technologies such as Robotic Process Automation (RPA) have traction in insurance because they help achieve the desired level of automation. North American insurers need support - and often request this support from IT services firms – to automate all sorts of processes. This can include digitizing communication with distribution and business partners or speeding up the underwriting decision or improving the new business submission process. It can also include finding ways to compete against or partner with upstart insurtech firms.
Through this research Celent finds that IT services vendors are positioned to support insurers in all their initiatives if they think like an innovation-driven company. The services offered by many of today’s IT services firms are not only extremely comprehensive but more importantly they are complementary to what insurers need. If companies today don’t change with the time, they will be left behind.
My research into the IT services vendors, including BPO vendors, solidified the importance of the vendors in the insurance industry. With a rapidly changing market, it is expected that insurers can keep up with consumer and distributor needs. IT service providers are striving to be the link that allows insurers to do that while keeping their business running. Of the vendors profiled in North America, all but one of the 24 profiled vendors offered digital consulting. In 2014, just over 75% offered it. Similarly, not even in discussions in 2014, all but four of the IT services vendors now offer the ability to design and define automation strategies, implement RPA tools, and build RPA capabilities. IT services vendors are picking up skills and IP in areas needed by insurers.
This is significant in regards to the impact it will have on the insurance industry because these vendors become trusted partners of the insurers. The most successful partnerships insurers have with IT service vendors are the ones that are not just about replacing staff or lowering costs. Really the best partnerships are those that are long-term, strategic engagements, where a vendor is leveraged to bring in new expertise and adds both technology and domain knowledge to the business. Although the report shows that vendors offer similar services, each brings a unique value proposition to the industry. It is worth getting to know the vendors capabilities and work with the one that can bring the most value, innovative thoughts, and competitive boost that is needed in today’s market.