Return of the Guru

The Mainframe Remains a Viable Option for Insurance

Ara Trembly
Insurance Experts' Forum, September 1, 2011

There is certainly no shortage of opprobrium these days when it comes to the problems created by “legacy” systems in insurance environments, and such systems are usually identified with mainframe computing.

Thus it may come as a surprise to many that the mainframe market is not only still breathing, but actually responding to customer needs by providing the latest technology capabilities. IBM reports that in the second quarter of this year, IBM Hardware sales rose by 17 percent to $4.7 billion—an increase driven mainly by a 61 percent increase in its mainframe server products.

“Not only have product sales soared, but also the actual use of IBM’s System z Mainframe Computing leaped by 86 percent,” said IBM. “During the period, IBM has brought in 68 new mainframe customers that, in turn, helped the company to accelerate global hardware sales.”

How can this be? Don’t mainframe systems lack the technological sophistication, mojo and functionality to support modern initiatives like cloud computing? The answer, obviously, is no. While it is certainly true that older mainframe systems have required patches and middleware to retain their usefulness—and that even then they may not deliver on the level of modern systems—newer mainframe hardware seems able to provide all that an insurer might need.

In fact, IBM is touting the flexibility of its mainframe offerings, along with an enhanced ability to “manage risk.” Other key messages from IBM’s marketers include references to “a world of virtualization, workload automation and better business process management capabilities” as delivered by the new breed of mainframe.

Unfortunately, the mistake many of us made was to believe that “legacy” and “mainframe” were identical terms. When we trashed the whole mainframe concept as hopelessly out of step with modern computing needs in insurance, we neglected to dream that such needs could in fact be met by a newer generation of big iron.

Of course, buying a new mainframe is not an inexpensive proposition, especially in these horrible economic times. Mainframe hardware will probably cost you $100,000 at a minimum, so acquisition cost is a concern. Yet the mainframe offers a host of advantages that make its total cost of ownership more appealing, including far better data security—a feature which should be at the top of insurers’ priority lists.

In addition, IBM says mainframes can save on virtualization/consolidation and reduce power consumption. A 2007 interview in IBM Systems Magazine with “the head of a large insurance firm” claimed that consolidating underutilized Intel technology-based server workloads onto a mainframe yielded “a 50 percent reduction in monthly Web-hosting costs; an 80 percent reduction in data center floor space needs; significant power consumption savings; and huge savings in middleware costs.”

Clearly, however, any move to replace legacy mainframes with newer hardware will have to be made with the idea that ROI will take place over many years, instead of over the next six months. In this era, we are much more likely to look for the quick ROI to impress our bosses and our stockholders—and perhaps to keep our jobs. That said, some may be willing to take the short-term cost hit in order to secure the considerable long term gains.

Ara C. Trembly (www.aratremblytechnology.com) is the founder of Ara Trembly, The Tech Consultant, and a longtime observer of technology in insurance and financial services.

Readers are encouraged to respond to Ara using the “Add Your Comments” box below. He can also be reached at ara@aratremblytechnology.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.

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