The Transformational Value of Legacy Systems
Insurance Experts' Forum, June 19, 2014
My body was running toward Grand Central station to catch a train home but my mind was still replaying the meetings I had in Cologne, Paris, London and New York. We attended 18 meetings in 4 countries over 4 days – with 10 insurers, 3 brokers and 2 reinsurers. Practically every executive referred to the company’s legacy systems as “The Problem.” From the CEOs and the business unit heads I heard several variations of the same theme:
“The faster we get rid of these legacy systems, the better off we’ll be.”
From the COOs and CIOs I heard:
“We’re under a lot of pressure from our CEO and the Board to replace these systems. In fact, they are tired of hearing about the legacy systems in the quarterly meetings. They just want them to magically go away!”
I barely caught the 6:50 pm train to Connecticut and my mind briefly sidetracked to “No seats available. Just great,” then it jumped back to Legacy systems. “It’s fascinating,” I thought, “that most of these organizations view their legacy systems as clutter or simply junk that they have throw out. I need to find a way to change their perspectives.”
One month later, I was able to meet with each of these executives again. This time, in addition to helping them re-envision the value in their legacy systems, I was able to help them each develop an approach that would apply transformational thinking to their upcoming implementations. We now term this legacy modernization.
What are legacy systems? They are certainly more than the dated or antiquated set of computer systems that they appear to be. Each legacy system contains many treasures and numerous hidden gems. Here’s a short list of valuables still found in many legacy systems:
Intellectual Property — This is the collective thinking of the business, operations and IT personnel who developed and worked on these systems.
Logs — Records that display organizations, teams and individuals who accessed the systems, their access rights and privileges, team hierarchies and approval levels for the transactions and decisions they made.
Process and Workflow — There is a wealth of knowledge embedded in the processes and workflows that these systems supported, and the Standard Operating Procedures (SOP) they automated.
External Data — Information about the company, its clients, its products and services, and the markets and geographies the company serves is stored or warehoused on these systems.
Historical “Learning” — Most systems house an unintentional (but still valuable) history of failed products and services, conflicting products and services and information on lost clients – all useful for knowing past mistakes in order to not repeat them.
Rating and Pricing Histories – There is real amassed value in previously-used underwriting rate tables, pricing, rating algorithms, policies and endorsements, billing information, and client information – all of which can be mined for hidden correlations and insights, both into the risks that risk professionals were trying to manage, and into how they created products and services based on their analyses.
Business Rules – They may have changed each year as new products and services were introduced, and existing ones enhanced, but those changes are all sources of valuable historical reference when it comes time to create new products.
Archived Data — Much data has been archived within current systems or into external storage systems and tapes – all of which can be mined to find patterns and hidden correlations.
Notes — Unstructured data can be just as valuable as structured data. A good example of this is mining individual data files that contain underwriters’, brokers’, agents’, and customer service personnel’s notes about policyholders or even interactions with others in their profession. Because insurance organizations still operate under unique philosophies, these are the cultural and historical records that can act as organizational gyroscopes.
Forms — Legacy systems also contain simple and practical business elements such as forms that were/are utilized for regulatory compliance purposes and reporting as well as other documents critical to policy administration and interactions with policyholders.
There are many more gems in these legacy systems and they are often uncovered during the legacy modernization or transformation process.
Here are a few examples of how transformational thinking can be applied to legacy modernization to uncover, preserve and leverage these hidden treasures:
1. Utilize business rules extraction software that can crawl through these systems and extract and present business rules that governed products and services, and the company’s decision-making process. The best rules extraction software is able to produce both a business view (in business terms) and an IT view (in technology terms and programming logic) of the extracted rules.
2. Utilize third parties who have insurance domain knowledge and technology knowledge to assist in the rationalization of the business rules. This will help eliminate conflicting business rules, and those that are no longer applicable so that they are not migrated to new systems. Technologists often find ‘dead code’ in this process. These are program steps that are still in the systems but not utilized and no longer needed. Eliminating dead code helps keep the new systems pristine.
3. Leverage tools to digitize standard operating procedures (SOP) in order to ensure that the business rules, business processes and workflows, and SOP are in alignment. This is important for developing end-to-end systems and creating straight-through processing.
4. Leverage business process and workflow modeling tools to help visualize them. This can yield better results when streamlining processes and when it comes time to create training plans and write manuals for new employees.
5. Extract underwriting decisions, sales and customer service interactions and place them in case management systems where they can be utilized to improve decision making and customer hand-holding. This will also be a real asset as a training tool to use with new employees.
6. Extract and migrate only data that is critical to the new systems into the new systems. Extract all other data and place it into formal archiving tools. The best archiving systems provide methods for cataloging data and facilitating retrieval. This will give you peace-of-mind in knowing that you aren’t actually losing anything in your transformation.
7. Leverage third party software to extract and load historical data into data warehouses or data marts where they can be mined by data analysts, actuaries, and modelers (especially catastrophe modelers). Every year, as data analysis tools improve, we are finding that we can to gain hidden correlations and insights into historical data that improve our ability to create innovative new products and services.
8. As systems are modernized, learn to not only Lift and Shift, but to Lift, Sift and Shift. The former focuses on migrating everything from legacy systems to new systems, and then optimizing the systems once historical data is loaded. The latter focuses on sifting for hidden gems as a part of the legacy modernization or transformation.
9. Embed into the new systems information and data “taps.” These are periodic extractions of key information and data for mining and analyses. This facilitates trending, peer group analyses, forecasting, and both predictive and prescriptive analytics.
10. Leverage systems that can create data summarization and visualization, which will improve usability across the corporation.
11. Leverage the hidden gems in making decisions about new operating procedures, approval levels, and access rights and privileges.
12. Use legacy systems and knowledge of how they were implemented to improve how the new systems will be deployed across the company and across geographies, and how to operate and maintain them. There are numerous cases when a relatively unknown and under-utilized legacy system proved to be powerful in another functional area or geography, and even more cases where a legacy system only needed enhancements to provide the scalability and geographical reach being sought by the company.
Each of the executives I met with and their teams were able to create legacy transformation plans that preserved the hidden gems. Some chose to start with a small set of legacy systems, and some chose to start by business unit. Others chose to pursue a company-wide transformation plan. All embarked on their transformation journeys with the right frame of mind – that legacy systems must be properly leveraged. Every year, if not every month, there are technology developments that make legacy Lift, Sift and Shift programs a lot easier. Insurers need to tap into these developments. It all begins with transformational thinking and an understanding that “Legacy systems do contain hidden treasures!”
About the Author
Sam Medina is a global business transformation executive at TCS specializing in advising insurance and healthcare executives on transformational thinking and leadership.
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