How can SOA help carriers? That's what Insurance Networking News asked Andy Labrot, chief technology officer for the Innovation Group, Hartford, Conn. Labrot has 20 years of IT experience and leads his company's R&D efforts.INN: As carriers grapple with aging technology infrastructure, how does service-oriented architecture (SOA) address their needs and challenges?
AL: The business of insurance has changed dramatically. Carriers are being pushed—by economics and by customers—to explore new business models and delivery channels. They no longer question that systems need updating. Instead, they focus on how to make the needed changes at a reasonable cost and with minimal disruption.
An increasing number of business and IT executives are discovering that SOA can provide a roadmap for an affordable, evolutionary transformation. SOA allows for incremental replacement, migration, retirement and consolidation of outdated systems onto more flexible, open and cost-effective platforms. SOA allows carriers to introduce technologies that process business requirements-while extracting full value from existing assets.
INN: While some vendors advocate a "rip and replace" strategy, you say SOA allows carriers to leverage what they already have. Why is that important?
AL: A critical factor for success in any technology-enabled organization is the effective use of existing assets. Carriers invest millions of dollars in systems and, naturally, they want to realize the full value. In many cases, the systems still handle core functions but lack the adaptability carriers need to respond quickly to changing markets.
While replacement seems inevitable, most carriers cannot afford to pay the price or suffer the disruption of a wholesale systems replacement. For them, SOA can provide a practical strategy with incremental payouts.
SOA acts as an enabler to the technologies, business processes and systems already in place. It acknowledges the capabilities of a legacy system and embraces the principles of modern technology-including "decoupling" to leverage those assets.
With SOA, carriers can extend the life and value of IT investments, while taking advantage of new technologies to meet immediate needs. More important, SOA paves the way for system consolidation and saves money by using consistent business processes and common functionality across the organization.
INN: Does decoupling break down platform and system dependencies?
AL: It's important to recognize that in a legacy environment the problem isn't always that a particular capability doesn't exist. Often, the capability is there but its use is limited to a specific system, and other systems can't use it. Because of the way the systems were designed, presentation logic is often intertwined with data access logic. Business rules are locked within individual systems and are hard to access.
At a high level, with SOA, business rules are divorced from the back end, breaking down the platform and system dependencies that inhibit applications from sharing and reusing functionality. As interdependence is reduced, the need for duplication is eliminated. The result is a technology-independent, collaborative, flexible and efficient computing environment where old and new systems work together to meet a carrier's evolving business requirements.
Decoupling is a key to this changed environment. As a practical example, look at rating in the insurance industry. In the usual legacy platform, the rating function-while powerful-was locked within the system. Because those functions couldn't be shared, a carrier might end up with duplicate rating functionality for personal and commercial lines or for agent-based business vs. online policies.
Through decoupling, we break away critical business functionality, like rating, and isolate it so that the function can be shared by any number of applications, including the system of origin. As the proven function is encapsulated, the inner workings-the actual code that performs rating-are hidden from any application that consumes the resulting "services." The services themselves become accessible to all applications. To support the shared environment, services are defined with standard descriptions of the underlying business function that is not directly tied to a particular application or platform. The new services can be called by any application, regardless of language or technology, thereby extending the carrier's rating capabilities to new and established applications. The original application, the one that contains the rating engine, calls the rating functionality, or service, the same way other applications do.
INN: What are the benefits?
AL: Several strategic benefits take root here. Aside from the cost savings of using an existing asset as if it were a new investment, carriers gain the speed and agility to meet new business requirements by combining Web-based technologies and other tools with core functionality from legacy systems. Having a common vocabulary for services and using standard reusable components increase efficiency.
The stage is set for an incremental migration from a stove-piped legacy environment to a more efficient, unified technology infrastructure. With more functions processed by newer technologies, carriers can retire older systems. That becomes important because the care and feeding of legacy systems consumes 75% to 85% of the IT budget. Maintenance costs of supporting duplicate functionality are eliminated, and total cost of ownership is lower.
INN: What advice would you give a carrier that's considering SOA?
AL: The insurance industry is in the midst of a radical transformation that will likely continue for the rest of the decade. The infrastructure and strategic systems required to support contemporary operating models, customers and offerings must evolve quickly for carriers to sustain their business.
Change is difficult, but taking no action is not an option. SOA is not a silver bullet, but as part of a transformation strategy it offers a practical, incremental path to confronting the biggest areas of pain while continuing to move the business forward.
Skeptical? Success stories abound. In a narrow window of time, one of the largest insurers in the United Kingdom used this approach to extend its rating capabilities. In less than four months, the system was processing 7 million rating calls a month using the "servitized" rating function.
While SOA has a strong technology component, it isn't solely about technology or architecture. SOA can become the catalyst for evolutionary change, where leaders collectively embrace a strategy that ties investments to specific business and organizational goals, rather than to a specific system, technology platform or work group.
SOA is not so much a new proposition as it is the fulfillment of promises made-but not fully realized-by earlier innovations. However, that technology has evolved. What was once impossible has become reality.
SOA is a practical strategy that presents fewer risks, more deployment options and a healthy payback that appeals to a risk-averse industry.
