Having literally grown up with the computer industry in my profession, there are certain things I’ve come to accept as given. But not everyone has had my experience. Recently, a friend of mine who is relatively new to computers told me he wished he had never bought one, because no matter what he buys, it becomes obsolete within a few years—forcing him to fork over yet more cash for the latest and greatest technology.
My reaction at first was to wonder why this surprised him. When I thought about it, however, it made perfect sense that he should expect the usefulness of products, especially relatively costly products like computer systems, to extend beyond those few years. I wasn’t sure I could argue with his charge of “planned obsolescence” against the technology industry.
Which brings us to the insurance industry, which will squeeze the last byte out of the moldiest systems and platforms it owns before grudgingly purchasing newer technology. Generally, this is known as holding on to “legacy” systems—an idea that has gotten a bad name in recent years. In fact, my colleague, Bill Kenealy, recently quoted a Celent report noting that “insurers are starting to make some real progress” in ridding themselves of the much-maligned legacy systems.
The report, “Still Seeing the Shadow: Groundhog Day for Legacy Modernization,” queried 115 property/casualty insurers in North America, Europe and Asia about the status of their legacy replacement initiatives.
“The movement to tackle the legacy problem in insurers is clearly under way, with almost half of respondents in this survey noting they were well into the journey,” the report, authored by Celent Senior Analyst Catherine Stagg-Macey states. “If we accept that legacy IT is an intrinsic part of any established insurer, and that this legacy is placing constraints on business flexibility, then the imperative of addressing this legacy comes as no surprise.”
I would hasten to add, however, that the reason half of the respondents said they were actively working on deep-sixing legacy systems was just as much about social desirability as it was about actual progress. Admitting that one still has and uses legacy technologies is somewhat akin to being a fan of the Backstreet Boys in an age of Lady Gaga, et al. It just isn’t the hip, “technologically correct” thing to do.
The report goes on to say that “a variety of technology factors, including the maturity of service-oriented architectures and modern software, have made it easier to address the challenge of legacy.” While that is undoubtedly true, it is just as true to note that various forms of middleware have made it easier to hang on to legacy applications, because the middleware allows the old fossils to keep on being productive. In other words, legacy systems may not be cool, but they can still get the job done, especially with help from modern middleware.
And, getting back to my friend’s observation, today’s technology solutions will eventually be eclipsed by newer, faster, and possibly cheaper technologies within the next decade. The advance of technology is incredibly rapid. In 10 years, tech pundits like me may well be looking at today’s cutting edge and wondering why anyone would hold on to those antiquated systems from 2011.
Just like today, we pundits of the future will be making these deprecating remarks about the insurance industry in particular, which isn’t as concerned with being cool as it is with getting the most out of its technology investments. So, while we’re building tomorrow’s legacy systems today, that’s not a problem, because getting value never goes out of style.
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.
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