Legacy modernization projects are notoriously large and complex undertakings. Before a project can proceed in earnest, a number of hurdles must be cleared including crafting a compelling business case, finding the correct vendors and securing executive buy-in for the need for change. Indeed, the need for insurance IT departments to clearly express the goals and expected business benefits of a project is critical but difficult, according to a new report from Boston-based
Authored by Celent Senior Analyst Catherine Stagg-Macey, the report, “Still Seeing the Shadow: Groundhog Day for Legacy Modernization,” says given the constraints legacy systems can place on a business, doing nothing is not an option for most insurers. “The scope and impact—on both the organization and technology—of legacy modernization programs can be significant,” the report states. “Such is the impact of replacing core systems, which has been compared to changing the wheels on a moving train. The CIO and the IT department must be able to articulate the case for change, and to have the skills and knowledge to manage and drive this change in collaboration with the business.
Yet, the report, based on a survey of 82 life/health and annuity insurers, found that the most oft-stated reason for replacing a legacy system—achieving better businesses agility—can be the most difficult to quantify. “Quantifiable hard benefits will remain out of reach for many insurers that predicate the case on business agility,” the report states. “While the benefits of increased underwriting efficiency through workflow, rapid product design, or improved customer service are instinctively clear, it remains difficult to attach hard dollar/euro benefit to these points.”
The report also examines the range of options from wrapping legacy systems in a service-oriented architecture, to outsourcing, to full replacement that an insurer must consider. The choice individual insurers make will depend on a variety of factors from internal staffing to risk appetite. “Given that this is a risk-based industry, the degree of risk mitigation is not surprising: 70% of respondents reported choosing a strategy because it matched the corporate risk appetite; 56% of respondents choose an option for cost reasons; and 41% choose the option because it matches internal skills and resources,” the report states.
