Articles - The legacy dilemma: Is there a third solution?

  Over time, they have proven to be generally solid and dependable. However the market is changing and competitors are springing up without a legacy system to their name. A recent report by the London Marketing Group and Boston Consulting Group, London Matters, stated that London does not enjoy a strong position in emerging markets in particular. Its share of business in these areas has declined by more than 20% - from 3.2% in 2010 to 2.5% in 2013 1. Now is truly the time to recognise the presence of tech savvy competitors as a serious threat.

  

 Technological advancement is a boon for any business. The banking sector has blazed trails in demonstrating how a focus on technological innovation – through evolving advances such as online banking – can be a real game-changer. So why is the insurance sector trailing behind?

  

 This year, the Economist Intelligence Unit conducted a global survey of 321 senior executives at insurance companies for a State Street report. They found that 59% of respondents admitted to spending considerable amounts of time addressing legacy IT issues2. But the bottom line is that for many organisations, replacing legacy systems is viewed as impractical or improbable. You want up-to-date systems for your enterprise, but you also know that a rip-and-replace job could be expensive, disruptive, and risky. So you’re faced with a true dilemma – put the brakes on and be left behind, or accelerate at potential risk.

  

 But what if there was a third way that offered the benefits of cutting-edge systems while minimising risk?

  

 Before we get to that, let’s explore the factors traditionally considered in the legacy debate.

  

 Make do and mend?

 The first challenge is simply that systems which aren’t broken don’t get budgets allocated towards fixing them. And if your legacy system is doing the job, why invest in a new one? There often isn’t a business case to perfect or improve every part of a business operation.

  

 But what of the cost involved in maintaining these behemoths? Let alone the resources needed to find and train staff to use them?

 Secondly, the fear of disruption causes many to cling on to old ways. Legacy systems often date back to the 60s and 70s, and over that time, have amassed a wealth of data which your business will rely on. Moreover, they are woven into the fabric of the application architecture. Taking out old systems and replacing them with new ones brings a raft of risks to business continuity.

  

 Yet on the flip side, the creaky systems in themselves are fragile liabilities.

  

 On a relationship management level, it can be hard to get buy-in from the board. Often senior executives who are far removed from IT are reluctant to buy in to technological changes. Reasons range from a naively optimistic ‘it will do’ mentality – that current systems are good enough, and that cracks can just be plastered over – to, in some cases, a behind-the-times attitude towards technology. Many still believe the function is a backroom operation that has little to no impact on business productivity and success. A drive for behavioural change is critical to bringing legacy systems to the top of the agenda at board meetings.

  

 But perhaps the most fundamental reason to update is a modern shift in the global insurance landscape. Whereas historically London has enjoyed a leading position, it is now losing international market share to more flexible and agile performers. You may not know it, but you are likely to be losing out already due to your legacy technology. The State Street report found that 78% of respondents believed that changing customer demands will be a major driver of technology investment 3. High-level customers increasingly want innovative products and solutions, and they want them from credible and agile companies.

  

 A third option

  

 The good news is that it needn’t be a “damned if you do, damned if you don’t” scenario. There is another option.

  

 Rather than replacing legacy systems in one fell swoop, you can implement the process step by step, in a componentised way. This means you are able to work on updating the system by business area or territory for example, without the concerns associated with swapping the whole system in one go.

  

 Specialist insurance management software that offers end-to-end solutions built as truly componentised functional parts can provide early wins and benefits by allowing you to phase out legacy rather than just to rip it out.

  

 Forward thinking businesses understand that clinging on to older, bloated systems cannot be justified when reputation and revenue is at risk. Restrictive functionality will only constrict success. It’s time to prove that the world of insurance is shifting, saying goodbye to legacy systems, and forging ahead with a catalyst for change.

  

 London Matters: The competitive position of the London Insurance Market
 Joint study of the London market group (LMG) representing its London market insurance members and the Boston consulting group London, November 2014

 Platforms for Growth: Technology Innovations in the Insurance Industry
 State Street 2014 Insurance Survey, September 2014
 http://www.statestreet.com/vision/insurance/documents/platforms_for_growth_research.pdf

 Platforms for Growth: Technology Innovations in the Insurance Industry
 State Street 2014 Insurance Survey, September 2014
 http://www.statestreet.com/vision/insurance/documents/platforms_for_growth_research.pdf