An old joke comes to mind: "Question: How do you get to Carnegie Hall? Answer: Practice." Suddenly, the carrier is supposed to be capable of pulling off a Carnegie Hall performance having spent years playing "Chop Sticks." So while the vendors, who practice for Carnegie Hall on a constant basis, are much more capable, their clients by and large are not. Fifteen years of maintenance, bug fixes, regulatory changes and rate increases do not prepare a carrier for the rigors of core legacy replacement. This fact is reflected in some important ways.

Wrong- headed thinking. Some carriers still feel that having contracted with a vendor, that vendor will run the project and somehow make the project a success. Carriers must recognize that the vendor is responsible for only a subset of the project, which does not include such crucial activities as defining requirements, testing and validating the software, planning and executing data conversions, training staff on the new system, planning the rollout of the software, and planning and organizing the overall project, including coordinating with the vendor. In a recent publication Blueprint for Success: Core System Decisions SMA Partner Karen Furtado states: "An examination of the total effort involved in a core system implementation shows that approximately 30 percent of the time expended involves the actual core system software. The remaining 70 percent of the effort is spent developing requirements, dealing with systems integration, managing the data, and testing and deploying the system." This 70 percent is almost exclusively the responsibility of the carrier.
Carriers lack expertise. Most insurers lack discipline and the infrastructure necessary to successfully execute a core system project. Furtado again: "Insurers need to assess their implementation readiness … A project management discipline is mandatory—one that gives transparency to the project… Experienced project managers…. that have experience with a number of software implementations is critical. Another crucial area…. business analyst resources that have expertise in quality assurance and testing methodologies…" And of course these key resources are the very people that every project wants, and they are also the people who keep the business operations running. Many carriers mistake project administrators for project leaders and fail to grasp the important fact that if the project leader does not viscerally understand the goals of the project they may drive it to the wrong destination. Similarly those key business analyst resources may know the business but they may not know how to develop and execute a formal test plan.
Still lacking. Furtado again: "Experienced project managers are key resources. The knowledge of those that have experience with a number of software implementations is critical. Another crucial area for most insurers is the staffing of implementation projects. Key business analyst resources that have expertise in quality assurance and testing methodologies are needed". And of course these "key resources" are the very people that every project wants, and they are also the people who keep the business operations running.
Think differently. Carriers need to start to think about these transformational projects in a different way. The real objective of most core system replacements is to create a new, flexible platform which can support and even facilitate the growth of the carrier for years to come, and yet our usual criteria for success is a list of business function requirements. Another aspect of this mindset issue came out in our webinar on implementations when a colleague of mine, Ralph Vagnoni, stated that carriers need to realize: "Budgets and timelines are based on estimates and assumptions, not facts." The implication being, for example, if the assumptions change so will the timeline and the budget. Rational as this statement is, it raised eyebrows and voices. Carriers, it seems, still want these huge undertakings to be defined as delivering a list of identified functions on an unchanging timeline for a fixed budget. Hardly a recipe for success. I am not suggesting we throw discipline out the window but even the best-run projects grow and change for good reason and it seems that rigid thinking is sometimes mistaken for disciplined thinking.

Carriers face real challenges born of the Carnegie Hall principle, in executing core system projects, but the ongoing dismal results of surveys like the PwC report cited above may be simply how we look at and think about these projects.

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How Do You Get to Carnegie Hall?

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