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What Insurtech Doesn't Like To Talk About: Vaporware

April 05, 2022 |
By Todd Greenbaum

Maybe you’ve heard the term “vaporware” – but can you identify it? How sure are you of what it means for your business? Not having the software you need to run your business effectively can lead to very serious consequences. You need to be confident in your vendor’s ability to deliver the platform you need. Vaporware is the gap between what the software vendor tells you they have (or what they build) and what they actually have (or can actually build).

What is vaporware?

Vaporware is software that is marketed as a finished product or is said to have certain features, but the software itself or those certain features you need only exist in partial form, or in some cases, they don’t exist at all. You only have the vendor’s promise that they can make it happen. Throughout history, software vendors have pitched software platforms or features that they don’t have, in hopes that a capital investment from a client will push the project into its completed state.

The business costs associated with investing in a piece of software that’s not all there are significant.

...software vendors have pitched software platforms or features that they don't have, in hipes that a capital investment from a client will push the project into its completed state.

Why is my exposure with vaporware?

Carriers today tend to have very old and complex legacy core system environments that are no longer fit for purpose. The industry paradigm shift forcing either the replacement of all or portions of these legacy systems with a modern platform is a weighty decision, coupled with a subsequent medium to large investment.

Getting it wrong will have serious consequences for the longer-term strength of the business. Investing in a service or a platform that doesn’t do what was promised can, and often does, lead to millions of dollars in extra expenditures, significant upper management resource drain as the problems are identified and many months (and in some instances, years) of delays – all while the company has deficient systems or services that cause client attrition until the gaps are fixed.

In short, it can be a very, very expensive mistake.

How do I spot vaporware?

Identifying vaporware is not difficult but you need to know what to look for.

The effort to peel back the layers with a software vendor to determine what they actually have in place, and what they need to build, can be extensive. But it is well worth the investment in time and energy.

If a vendor tells you that they have a certain feature, ask them for a live demonstration of it within their software or service platform. If they can’t show you, if they make some excuse, or if they hesitate, there is a chance they are not being honest about what they have.

Vendors know this and in some cases will build a PowerPoint(™) presentation that looks like a feature within a live application, but actually has no back-end functionality. Make sure to ask for a live demonstration within the software platform.

The ultimate test is to ask the vendor if you can access their test site and “play” with the system yourself. Some vendors will allow you to do this, but some will not. It's important to understand that just because they deny this request doesn’t mean the software doesn’t do what they say.

This request can be denied for other reasons such as the preservation of intellectual property and/or the desire not to share trade secrets with competitors or customers that are just fishing for information (a common occurrence).

Investing in the evaluation process and taking enough time to be sure you get this right is totally justified. Getting to properly understand a system or service, as well as the vendor, before cementing a decision into a long-term commitment is critical.

Investing in a service or a platform that doesn't do what was promised can, and often does, lead to millions of dollars in extra expenditures.

How to make a decision about a vendor

There is nothing more important than honesty. Stretches in feature-set can be tolerated if the vendor is truthful about what they can and cannot do today and truthful about when they can deliver what they don’t have.

Ask questions, ask about other implementations - what worked and what led to problems. See how willing the vendor is to sharing their experience. If everything they tell you is rosy, “We never have any problems with our implementation,” or, “We can get that done in a few weeks,” you should probably dig a bit more. Ask for customer referrals. Ask them about the last problem they had in delivering a solution, what led to that problem and how it got resolved.

Agreements can be established which require the vendor to complete elements of the project before getting paid. This can be helpful but there are complications. Bespoke systems rely on customer input in order to be built correctly. There are clients that lament about a failed implementation without realizing that they didn’t give the vendor the information they needed or within the requested timeframe. The client must deliver their piece in a timely manner. If you are the customer, know what your obligations are and be prepared to deliver them.

Final words...

Just as it is important to understand the character of a prospective employee before you invite them to join your team, one must understand the character of a vendor before you place them in the critical role of building a technology solution for your business.

This is easier said than done and there are scores of companies that have had their solutions delayed by years because they were given half-truths, and even more that launched with very poor results and paid the price in lost customers.

Take your time. Ask your questions. Look deeply into the solutions. Talk to other users.

Make sure you trust the vendor.