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IT services vendors play an important role in the insurance industry. In a world where the Internet makes it easy to have customer service representatives halfway across the world or developers in remote locations, insurance companies, like many other 21st-century organizations, look to vendors to meet their IT needs in lieu of hiring people or buying systems and hardware. IT services vendors provide expertise to insurers in areas such as writing, modifying, testing and supporting software. The vendors help plan and design computer systems that integrate hardware, software and communication technologies. This is especially important with the frequency of mergers and acquisitions. IT Service vendors provide on-site management and operations of insurers’ computer systems and/or data processing facilities. They provide outsourcing of key processes, and they give professional and technical computer-related advice. Celent’s forthcoming report about ITS vendors provides a detailed spectrum of over 30 IT services vendors in North America. The report profiles each vendor in relation to the services it provides, the skill sets of their insurance vertical staff, details of their client base and customer feedback related to the services provided. Celent has other regional reports in the pipeline.

There are several reasons why an insurer may look to an IT service vendor for their offerings. Many insurers, when facing shrinking margins, look to an IT service vendor to improve the efficiency of their operations. ITS vendors help insurers pursue strategic agility. ITS vendors enable insurers of any size to tap into a global labor pool to find the skills they need at potentially competitive rates. Celent’s recent blog post highlights several of the business drivers for outsourcing. For whatever reason they choose to buy IT services, insurers have key reasons why they choose one vendor over another.

Over the years, service offerings have evolved from the labor arbitrage offering to that of a possible partnership. Feedback to Celent in CIO discussions and responses from clients in Celent’s ITS vendor survey shows that the factors related to choosing an ITS vendor are not merely based on price, although price is still a big factor. Based on the Celent survey of ITS vendor clients for the North American ITS Vendor Spectrum Report, clients want a vendor to be responsive to their needs and to really know their business. And overwhelmingly, almost 80% of the clients were looking for long-term partnership potential.

When it comes to knowing the client’s business, for the most part, IT service vendors are meeting the needs of their clients. Nearly 60% of the respondents said that the vendor either knows the client’s business very well or as well or better than the client. The flip side is that almost 40% do not do a very good job of learning the business of the client, or at least to the satisfaction of the client.

What does this mean to the IT services vendor? Get to know your client, its needs, its business and its people. Make sure your proposition matches their requirements, and evolves alongside the client’s changing needs. Those clients that were most happy with their IT services vendor felt they had a true partnership with the vendor. Those that were less happy felt that the knowledge of the IT services vendor should be greater than the client’s, and the vendor should be flexible and willing to going beyond what has been done before. The IT services vendor should have knowledge of best practices, and use the experience they gained from other implementations or projects to improve their project’s outcomes. As this feedback demonstrates, insurers are looking for partners in their delivery of IT, not just low-cost services.

Look for more on this topic in Celent’s upcoming North American ITS Vendor Spectrum Report.

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Karen Monks is an analyst in Celent's insurance practice, and can be reached at kmonks@celent.com.