If you’re an insurance company using mainframes, you may believe some common misperceptions about the platform, and may need a refresher on its virtues.
The mainframe remains the most secure, lowest cost and best performing computing platform on the planet. According to IBM, all of the world’s 10 largest insurance companies continue to run mainframes. These platforms process roughly 30 billion business transactions per day, including most major credit card transactions and stock trades, money transfers, manufacturing processes, and ERP systems. The mainframe retains a unique distinction as the mission-critical heartbeat of the digital economy, supporting cutting edge web and mobile transactional applications.
Some argue the mainframe is old, and needs to be replaced with a (supposedly) better, more “modern” distributed environment. However there have been far too many examples of organizations attempting to “rip and replace” their mainframes, only to find that it is way too costly, time-consuming and expensive. In fact, Gartner found that only 42 percent of migration projects in the insurance industry meet the original budget and 82 percent take longer than expected, or are never fully completed. These organizations would be much better served by focusing on rejuvenating versus replacing; modernizing and better managing their mainframe environments.
The mainframe is key to the future of insurance
The ability to roll out high-quality software quickly, to thousands or potentially millions of worldwide users, is a key competitive differentiator in the digital economy. For years, the insurance industry has been told it needs to innovate - creating new, more convenient ways to support basic processes such as policy payments or submitting claims. There is vast potential for insurers to differentiate by better meeting evolving customer demands, particularly in the mobile realm.
Mobile transactional applications ultimately connect through mainframes, and these systems therefore play a key role in supporting cutting edge innovation. The speed, frequency and quality of this innovation depend on developers being able to manipulate mainframe code and data, quickly and without mistakes. Put simply, to compete in the digital economy, insurance companies using mainframes must make these systems more agile.
Related: 5 top insurance tech trends for 2017
Case in point: Ameritas
Ameritas provides an excellent example of a company that has successfully implemented generational changes needed to evolve the mainframe. When Mike Wells was recruited from a Fortune 500 Company to be Director of Software Development at Ameritas, a mutual life-and-health insurer with $35.6 billion in assets, he had a big mission: to help Ameritas achieve competitive advantage in an increasingly digital marketplace.
There was just one problem. The majority of Wells’ software development experience was on distributed platforms; yet about 70 percent of his developer workforce at Ameritas was mainframe-focused. Coming from a background where automation and visibility were at the forefront of every Java developer, Wells realized that this presented a challenge in the mainframe arena. He was skeptical about whether their tools and processes could provide the speed and agility Ameritas needed to thrive in a fast moving marketplace.
Then Wells had a dramatic revelation. The tools and processes that provided the world’s java teams with automation, visibility, and insight into code quality could also help modernize development processes on the mainframe. By aggressively adopting better processes and tools, Wells and Ameritas have rapidly become leading practitioners of mainframe “mainstreaming”—which empowers developers to work in the same agile manner across languages and platforms.
As a result, Ameritas can better fulfill its ambitious mission while avoiding the cost, disruption, and risk of re-platforming its mainframe applications and data. Wells is also driving significant increases in developer productivity and software quality.
Insurance companies using mainframes have a distinct competitive advantage in the digital economy. (Photo: iStock)
Performance and cost-efficiency
Besides delivering needed agility, the mainframe is also the only platform capable of handling the ongoing increase in computing power that the digital economy demands. The IBM mainframe released in 2010 improved the performance of single system images (e.g., mainframe clusters) by 60 percent, while keeping within the same energy envelope when compared to previous generations. Two years later, IBM unveiled an update, with up to 50 percent more total system capacity, as well as availability and security enhancements.
The most recently announced mainframe, the IBM z13s, is the most powerful computing platform ever — capable of handling the load of 100 Cyber Mondays every day, 365 days a year, combined with encryption. Who says the mainframe is out of date and can’t keep pace? Clearly, the mainframe’s capabilities have sequentially evolved to meet rapidly expanding IT needs, and then some.
Not only can mainframes meet these demands, but they do so while providing a significant cost-advantage. Studies have shown that costs at server-intensive IT shops are 65 percent higher than those of mainframe-intensive shops — and mainframe-intensive companies earn 28 percent more profit per IT dollar spent than server-centric companies. This is because reductions in commodity server pricing have not kept pace with the dramatic uptick in computing volumes driven by mobile.
Consider IBM’s own initiative dubbed “Project Big Green,” which involved consolidating 3900 servers onto 16 mainframes. This project enabled IBM to decrease energy and floor space by more than 80 percent. The electrical power and cooling costs for these mainframes were also significantly less expensive than those of distributed servers handling a comparable load. IT leaders who disinvest in the mainframe won’t be able to take advantage of these compelling economics.
Conclusion: Learn to embrace legacy systems
Popular logic might lead insurance IT teams to believe that legacy systems can’t support innovation; that they must completely overhaul these tried and true systems and replace them with less sufficient alternatives. But these arguments are just not true. In fact, even calling the mainframe “old” or “legacy” is a misnomer. Today’s mainframe is new; it has been revitalized by stellar IBM hardware and new innovative software that takes advantage of it while making the process easier, faster and more cost-efficient.
Insurance companies using mainframes have a distinct competitive advantage in the digital economy — a platform for innovation that also delivers unparalleled cost efficiencies, computing strength, application performance, reliability and security. Savvy insurance IT teams will not replace mainframes, but rather realize their unique strengths and implement generational updates to extend the power of these tremendously valuable investments.