Enterprising Developments

Legacy Modernization Tops List of 2011 Challenges – With Good Reason

Joe McKendrick
Insurance Experts' Forum, January 5, 2011

By now, I'm sure you have had your fill of lists—both end-of-year and new year's predictions.

But a list sent over by my long-time colleague Henry Stimpson caught my eye. The list of top 10 top IT challenges for the insurance industry, compiled by X by 2, an insurance IT consulting group, ranked “legacy modernization and replacement” as the No. 1 industry challenge for 2011.

Should it be the No. 1 concern—one more prominent than cloud computing or social media initiatives? As the consultancy described it, “The emphasis will continue to be on forward-looking IT value-adds to companies in the areas of agility, responsiveness, and analytics—things that legacy systems weren’t designed for. Insurers face critical decisions on whether to continue to modernize old systems or replace them.”

This certainly is a non-trivial task for many insurers; as gigabytes worth of data and millions of dollars of investments are wrapped up in many mainframes or other legacy systems. There is always confusion about exactly what constitutes a “legacy” system—for the sake of argument here, I would define legacy as a mainframe or large-scale proprietary system more than five years old.

The ability to move legacy systems into the mainstream will shape every other top 10 challenge the firm identified, which include the following:

1. Legacy modernization or replacement

2. Cloud computing

3. Mobile applications

4. Social media and collaboration

5. Next-generation analytics

6. IT as revenue driver

7. Innovation

8. Industry and technology sustainability

9. Virtualization

10. Rich media

Legacy systems weren't designed for agility, responsiveness and analytics, but there are a number of tools and approaches that will bring legacy applications and data into the Web- and service-oriented worlds.

Worthy of note is No. 6 on the list as well—“IT as revenue driver.” IT is increasingly being looked upon as more than the folks who keep the data center up and running—they are the people that keep the entire business and running. Furthermore, all new innovations, products and services insurers design to reach new market segments will have a technology foundation. As we emerge from the recession and kick into rapid-growth mode, which looks like will happen in 2011, businesses will be leaning heavily on IT for competitive advantage. Forget all the talk about IT-business alignment—IT is the business.

That's why it's imperative to get moving on item No. 1. We know mainframes can take a pounding from an almost unlimited number of users and applications; they just need to be responsive and Web-aware as well.

Joe McKendrick is an author, consultant, blogger and frequent INN contributor specializing in information technology.

Readers are encouraged to respond to Joe using the “Add Your Comments” box below. He can also be reached at joe@mckendrickresearch.com.

This blog was exclusively written for Insurance Networking News. It may not be reposted or reused without permission from Insurance Networking News.

The opinions of bloggers on www.insurancenetworking.com do not necessarily reflect those of Insurance Networking News.

Comments (3)

Just a thought on the previous comment. While it's true that IT does not, generally speaking, create and own the strategic business plan of an organization, it's also increasingly true that IT creates and often envisions the business capabilities that an organization's startegic plan is composed of. In that context IT can be either an enabler or inhibitor of business capabilities, and consequently of an organization's ability achieve its strategic goals and objectives. Progressive IT leaders understand that the IT/Business relationship needs to move past alignment (translation: "tell me what you want and I'll do it") and into the realm of IT collaborating with business to envision and yes, in some cases lead, product and capability strategies that contribute to bottom/top line revenue for organizations.

Posted by: Frank P | February 24, 2011 1:37 PM

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While it might be the case that legacy systems were not originally designed with "agility, responsiveness and analytics" in mind, enhancements to mainframe middleware mean that these are very much characteristics of today's systems. CICS Transaction Server, for example, has support for invoking legacy applications as web services (as well as invoking web services from CICS), for non-invasively emitting events from CICS applications which can give business insight and be used in analytics, for REST-style interfaces and for developing situational applications using dynamic scripting languages. All of which, and much more, place CICS systems very much in the web-based, service-oriented and event-driven worlds, and allow CICS-based applications, and the businesses they support, to respond quickly and with agility to new opportunities or competitive pressures.

Posted by: Catherine M | January 11, 2011 1:39 PM

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If I could add a few additional thoughts to my earlier comments, IT doesn't create the business plan nor the products it sells. Yes, IT is increasingly more important in delivering or servicing the business than ever before. But, to say that "IT is the business" is more marketing buzz than reality. No. 6 is really a businessIT alignment model.

Posted by: Dennis S | January 10, 2011 9:04 AM

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