Rip and Replace on the Ropes?
Insurance Networking News, November 11, 2008
Miami — Surveying the IT landscape in the wake of the financial services meltdown, victors are hard to come by. More prevalent are survivors, including the insurance industry’s ultimate survivors—legacy systems.
At the Innovation World 2008 conference in Miami, the consensus was that as IT budgets tightened, efforts at legacy extension would gain at the expense of costlier system replacements.
“The cost associated with rip and replace is no longer a viable option,” said Joe Gentry, CTO and SVP, enterprise transaction systems for Frankfurt, Germany-based Software AG.
While insurers currently engaged in multi-year replacements are unlikely to abandon them, Gentry said a countervailing trend toward updating mainframe applications with a modern, Web-based interface is growing. The pervasiveness of service-oriented architectures also makes legacy extension more viable, he said.
Gentry pointed to numbers showing that mainframe MIPS (million instructions per second) growth is averaging roughly 20% per year, while the growth is even higher at mainframe-centric businesses.
“Far from being dead, the mainframe doesn’t even have a head cold,” Gentry said, noting that estimates show that 70% of the world’s data still resides on mainframes. “It is a growing platform.”
Likewise, he said COBOL is far from a dying language, with an estimated 200 billion lines of code currently in production. “The fact is that COBOL is still the standard today.”
Arndt Zinnhardt, Software AG’s CFO was just as bullish on the ascendancy of modernization, even in face of the financial crisis. Maintenance contracts, he noted, are a type of life insurance for CIOs. Moreover, Zinnhardt said legacy systems often have a life of their own. They can survive mergers, acquisitions and even insolvency. While Lehman Brothers may be gone, their systems persist under the aegis of Barclays. “You really can’t have better customers than financial services companies,” he said.
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