There has been a lot of talk from insurers and vendors about legacy transformation or modernization in the past several years, along with a rush by many parties to Web-enable existing business applications and processes.

But for all the discussion and expenditure of resources to “make it easier to do business with us,” little has fundamentally changed.

Indeed, so little has changed with insurer processes that there has lately been a resurgence of interest in “lifting and shifting,” or moving applications intact from one platform to another–Go directly to platform B, do not change anything, do not pass “Go,” do not collect $200.

In the industry's defense, the obstacles to legacy transformation remain the same:

o Monolithic systems with intertwined user interfaces.

o Persistent storage and application logic.

o Inflexible application architectures.

o Poor data quality.

o Poor or nonexistent business rule documentation.

o Incompatible stove-piped business processes and applications.

o Poor system documentation.

o Ineffective and/or duplicate code.

o A dwindling resource pool that understands the applications.

“Lifting and shifting” remains largely a myth, since the logistics of modifying or translating source code, operational and process changes needed to run in the new environment, and adjusting employee skills accordingly can easily outweigh the perceived benefits and/or savings of moving to another environment.

These issues have combined to create a climate of stagnation and a heightened fear of change. Transformation, which connotes a significant and fundamental change, has become a dirty word.

Legacy transformation, as currently practiced, is not really about the fundamental change insurers seemingly distrust but about re-implementation of older applications on new platforms to reduce operational costs and provide access to the technical benefits of newer technologies.

An entire IT industry has sprung up around legacy transformation, with dozens of tool types, hundreds of tool vendors and as many consultant organizations willing to assist with the process of analyzing, documenting, modeling, structuring, re-engineering, upgrading, migrating, integrating and managing legacy transformation.

A secondary market for tracking all these offerings has also arisen so insurers have some way to differentiate between competing solutions.

But, little has changed. Is it the nature of our industry to avoid risk through procrastination, or is the pain of inflexibility not yet severe enough to force us to act?

Today's business climate will not stop evolving to allow insurers to catch up. The longer we fail to act, the bigger the gap between the current tangle of aging applications and half-automated processes that exists behind the firewall of every insurance company and the flexible and dynamic business model that would allow the industry to respond to volatile market conditions and seize competitive advantage.

Companies across industries are being pressured to move back-office functions and data into front-office systems to improve service to customers, facilitate collaboration with stakeholders, improve transparency and regulatory compliance, and reduce operational costs. This cannot be done without some of the fundamental process changes we fear.

If our industry does not transform itself, it will ultimately become the victim of transformation warfare as organizations with better, more innovative business models, products and delivery take advantage of our inaction.

Merely moving to new technology platforms will provide only a stopgap solution as we quickly exhaust the capabilities of newer technologies to tweak our old applications and we make Band-Aid modifications to our associated core processes. Small, incremental changes to the legacy will only move us so far and no farther.

No IT-driven project can, by itself, fix this situation, just as no quality methodology alone can improve business performance. It takes a strategic understanding of where the company is, where it wants to go, and what needs to happen for it to get there. In other words, it takes management commitment and participation to provide a business context for IT-enabled change.

Three-to-five-year business plans, handed “over the wall” to the CIO, often do not articulate this vision–at least not in any way useful to creating a technology strategy. It is not surprising, then, that business units are often disappointed in the type and timing of the IT capabilities they receive.

This disappointment is likely to grow as the business user, technician and management knowledge base that created the legacy applications and processes continues to walk out the door and into retirement. At some point, the messy quagmire of systems with which we operate will solidify into something completely impervious to change.

“The next guy,” who was going to handle the problem, will have little choice but to pursue a highly disruptive “rip and replace” course of action. And he will only be able to do that after management has finally buckled down and done the hard thinking about the business vision they have been so conscientiously avoiding.

As much as we would like to believe all the hype about preserving the value of legacy investments and avoiding the business impacts of system change, some of the old stuff will have to go and some of the embedded legacy business logic will not be reusable if the company is to move toward its business objectives.

What will have to go and what business logic will be dispensable will only become apparent when compared to an articulated business vision.

Articulating this vision is not the job of industry reformers like Eliot Spitzer. It is also not the job of the CIO, the vice president of applications, or the company's chief technical architect.

Given this vision, however, they can reasonably assess what to transform, what to replace or acquire, and where to start.

Unless, of course, this vision consists of “we are going to do business like [insert competitor's name here].” No new technology or enthusiastic IT professional can fix that problem.

In that case, management should gird its collective loins and prepare itself for transformation war. A new vision–and the capabilities to implement it–will be coming at them from somewhere.

Special Reports /

Insurers Must Walk The Walk, Not Just Talk The Talk, On Legacy Transformation

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