Forever Young: Keeping Legacy Systems Breathing

However, handling "new" is something "old" legacy systems don't often do well. "Insurers' biggest problem is they're hearing more and more complaints from the business people that systems are stopping them from moving ahead with new-product development strategies. It's not just about high maintenance costs, it's about not achieving business goals," Harris-Ferrante says.

Replacement of legacy platforms always has been an option, but it is not a guaranteed cure. Additionally, there are valid reasons for keeping a legacy system in place.

"All legacy systems are not created equal," says K. Ram Sundaram, principal at X by 2, a consultancy that specializes in application and enterprise architecture in the insurance industry. "There is 'legacy' legacy–PMSC batch systems with data center operators running JCL. There are real-time systems, but they incorporate some inflexible data on the back end. There are mainframe COBOL/CICS systems that companies have put some thought into rearchitecting and repurposing over time with modern relational databases and parameterized back-end logic. And there are legacy client/server systems, as well."

Therefore, the first step in bridging the gap is assessing a system to see whether it is a legacy asset or a legacy liability. "There are systems that are beyond hope. There's only so much duct tape you can wrap around some systems, and at some point, they will need to be replaced to get the modern flexibility and the modern processing you want," says Celent senior analyst Jeff Goldberg.

"But oftentimes the legacy systems do parts of their job well," he continues. "They're scalable, stable, and serve as an excellent system of record, but they can't do the complex things, such as sell package policies. For instance, a carrier might be happy with its system but want better ways to present products or deliver additional sales options or present information to the user in different ways."

If the strategy is to keep the legacy system in place but extend its capabilities in support of new products, it follows this is accomplished through a process of addition: deploying new front ends, rating engines, product configurators, and other systems to take some of the load off legacy. It's a strategy Sundaram has seen put in place with some measure of success at insurers.

"Companies have been able to use stand-alone front ends with some service or file-based exchange of data with the back end as a bridge and to get away from the shackles of legacy systems," he says. "At those companies, marketing and sales live almost entirely in the front end. The back end is the system of record, handling servicing, renewals, reinsurance, stat reporting, and other administrative tasks. In these cases, there is an asynchronous feed of data, but it achieves companies' new-business quoting and go-to-market objectives for new and existing products."

This front-end strategy is not just putting the proverbial lipstick on a pig; it's finding ways that truly extend both the capabilities and life of legacy technologies by shifting transactional tasks to the presentation layer. How much is shifted away from the legacy depends, in part, on the capabilities of the legacy and, in part, on the preferences and tactics of the insurer.

"Most carriers will try to tackle a presentation layer project in a way that gets them quick quoting and inquiry. In that case, the logic in the front end can be relatively minor. But you will see carriers doing more complex logic in terms of downstream processing. Presentation layers can do that, as well; it's just a matter of the evolution of development at insurers," says Wendy Corman, president of Corman Consulting.

A BPM APPROACH

"In many cases, we are seeing insurers attempt to modernize their legacy systems by adding BPM [business process management] solutions on top of them to extract and manage business rules and workflow," reports Harris-Ferrante.

For instance, Auto-Owners Insurance Company is using Pegasystems' BPM platform to extend the reach of its legacy systems in commercial lines. Like many large and established carriers, Auto-Owners contends with a complex legacy environment. The company has more than 65,000 COBOL modules and uses a commercial lines administration system that dates back more than 25 years. "We've been off vendor maintenance forever," says Robert Buchanan, senior vice president of information systems and technology.

The company, which sells P&C as well as life, annuities, disability, and long-term-care insurance, does business exclusively through independent agencies. "Our goal is to have as much of the work at the point of sale as possible, so we are designing our front-end systems for our agencies," Buchanan says. "The reality today is more and more of the work is being done at that access point, so that is the focus of our Pegasystems projects as well as our other legacy modernization efforts."

The insurer is using Pegasystems' toolkit to build Java-based, distributed applications for agencies, under the umbrella moniker of A-O Web EZ, delivered through its www.aoins.com agency portal. "We are using Pegasystems to create the screens, the workflow and business rules, and the interfaces to legacy systems," Buchanan says. "After the rules are built, they are compiled to create Java code. Although the applications currently run on our distributed platform, we intend to run them eventually on the mainframe."

The company is beginning development with its business owners program and intends to expand from there into commercial package policies (CPP) and claims. "Agile development is part of the Pegasystems' development process," Buchanan says. "Because of reuse, much of the infrastructure we need for CPP already is done."

The work Auto-Owners has done in commercial lines complements modernization on the personal lines side, where the company has used IBM's Rational Developer for System z to create Web-based applications as well as bridges from agency management systems in auto, home-
owners, and mobile homeowners.

"As we've been able to reuse components and have gotten better at development, we've improved our time to market with new products on A-O Web EZ in personal lines," Buchanan says. "For instance, we'll have Dwelling Fire completed in all our 25 states in less than 12 months, whereas it took us 12 months to get one state rolled out for automobile when we first started."

The company's efforts are part of an overarching system modernization effort called BEST (Best Enterprise Systems Today), something the company believes will not only help it achieve its product goals by being easy to do business with but also enable it to attract new graduates and other recruits to IT.

Although the quoting process in commercial lines has been Web-enabled for agencies, back-end commercial processing at Auto-Owners still is highly manual. "When a piece of business is written, there still are a lot of paper transactions sent to our branches that need to be entered into our legacy systems. Making changes to those systems is still a balancing act. Ultimately, our plan is to rebuild core processing systems in all of P&C," Buchanan says.

While Auto-Owners' goal was to expand its product reach through its existing distribution channel, other companies are looking at serving additional channels with new or existing products–and getting there faster.

"Over time, the definition of speed to market is changing," Corman explains. "It's not just about getting products to the market, it's about getting products to new distribution channels."

UK Insurer LV= (formerly Liverpool Victoria) is a direct writer that provides P&C, life, and retirement products. The company sought to expand its product reach in the online demographic.

"Rather than emphasizing our call center, we've tried to shift our business more to the lower-cost lv.com channel," says Paul Wishman, group e-commerce director for LV=. The company also wanted to shift the transactional load for quotes and customer inquiry from back-end processing systems.

"The more we grew, the more we ran into capacity problems with our systems and their inability to accommodate the growth," Wishman says. "Our mainframe works, it's just that making changes to it is difficult and expensive. It's running PL/1, and as we put more business volume through the pipeline, MIPS costs were going through the roof. In particular, we needed to take the new business quote engine off the mainframe."

The company added a new rules-based quote system and put in an SOA-based presentation layer solution from Edge IPK, called edgeConnect, in early 2008 after an eight-month development project. For LV=, it was important the solution truly deliver a layer of abstraction from the mainframe.

"A lot of companies have taken the old green mainframe screens and fixed a Web browser interface over them to make them look better, but that doesn't correct the underlying problems. You need to actually take the load off the legacy system," Wishman says.

In addition to bridging to the quote engine, the edgeConnect front-end interfaces with various service systems, which has delivered LV= better integration across the Web, the call center, and live chat channels. "Channel integration is key from a customer service perspective," Wishman says. "I may come to you originally via the Internet, but when I phone up the call center, I expect you to know who I am. So, it's essential whatever we're doing, online can transition through to the contact center so we get a single view of the customer."

Additionally, LV= has been able to improve the customer experience at lv.com. "Our customers now obtain a 'guided journey' at the site," Wishman indicates. "Previously, when they came to the site, the data entry forms were fairly convoluted. Error handling was not great, and it was filled with bugs. Edge has enabled us to provide the customer with a better experience and to put LV= consistently among the top five Web sites for financial services in the UK."

Since the lv.com upgrades were completed, the company has seen a shift in channel usage from 20 percent online and 80 percent call center to the complete inverse while growth in business via the online channel has increased 500 percent.

"That would not have happened had we relied solely on the mainframe," Wishman says. "edgeConnect gives us a set of tools that utilize Web 2.0 technologies and improve customer experience. There are other platforms in the market that can do the same thing, but edgeConnect did the job for us as we would want it to."

Today, LV= focuses on the online customer when designing new products. "In the past, our first question was, 'How will this look on the mainframe?' Only later did we ask, 'Now, can you chuck it on the Internet, too?' Today, it's all about what is best for our online customers, which is a change in mindset for the company. With the systems we now have in place, we have made the appropriate investment to enable that change," Wishman says.

HEAVY LIFTING

Successes notwithstanding, add-on solutions mean legacy systems still are in place and ultimately need to be dealt with. "We still have this mainframe, as far as our core contact center is concerned," Wishman says. "As you will find with other insurance companies worldwide that have a monolithic legacy environment, any changes you make tend to have unexpected repercussions. You touch one bit of code, and inadvertently something else falls over. We have tried to alleviate that as much as we can with a channel shift, but it's still a cumbersome process to address."

The complexities of making technical connections between new front ends and legacy systems can't be underemphasized. "It was challenging," says Kevin Harris, CIO of ICW Group Insurance Companies, in describing the company's nine-month project to deploy a new front end from FirstBest to its legacy systems for underwriters and agents.

"Our system is mainframe, COBOL based, and had been carefully nurtured over the past 25 years. There is a lot of knowledge embedded in those systems, and a lot of 'tribal knowledge' that isn't. We had to extract all that knowledge and visit the rules in those systems to put the new front end in place and to unwind and unravel the 'bowl of spaghetti.'"

However, Harris says, the benefit of deploying FirstBest's Underwriting Management System (UMS), branded as "Snap," has been worth the effort. "Now, having extracted that knowledge, we have the ability to move quickly and confidently and respond to opportunity," he says.

For its workers' compensation line, where terms are governed by various states, new-product development is not a top objective for ICW Group. Instead, what the company sought was the ability to move quickly into new markets and to expand its product offering into new classes of business. ICW Group also wanted to provide real-time collaboration between its workers' comp underwriters and the company's agents and brokers. The company's legacy administration did not accommodate those objectives.

"One of the biggest challenges we were facing was, despite our zeal to service our customers and make our agents look good to their customers, our systems weren't able to keep up. They weren't as fast as we needed them to be. The time it took to make modifications was long, and the resource demands to make those changes were high. The environment was so cumbersome it was placing increased pressure on our business financially and impacting our perception in the marketplace," Harris notes.

ICW Group moved as many servicing tasks to the Snap platform as possible. "One of the reasons we went with Snap is it's not just an underwriting tool; it's a communications portal," Harris asserts. "It presents a single user interface to the agents, and baked within that interface, they can not only present new policies and quotes but chat with our underwriters, as well. Internally, underwriters can use the system to manage their entire workflow, so agents won't feel like there was a gap in the process."

Through the first half of 2009, 50 percent of ICW Group's applications had been received via Snap. Compared with the same period in 2008, quote volume was up 70 percent, and total policy count increased 27 percent. Harris attributes this growth to Snap's ability to increase agency productivity and make it easier for agents to do business with ICW Group.

Equally important, the system supports ICW Group's enterprise architecture goals. At the time the system was deployed, the company also built an SOA-based integration layer that runs on ICW Group's IBM mainframe in a z/Linux partition. "Snap doesn't talk to the back end. It talks to the services cloud. That layer of abstraction lets us change vendors and even change systems of record without impacting either side," Harris says.

FUTURE-PROOFING

"For carriers looking at any new systems, they need to ask not just what the functionality is now, but how it will enable an easy upgrade path so they are never four versions behind what the market is using," Goldberg advises. "They need to assess how the system will scale as business grows. Those are the questions carriers should ask any vendor, whether it's a component, a replacement, or a new front end."

"Companies are investing more heavily in enterprise architecture and long-term planning. With that, the awareness of 'future-proofing' is starting to improve," says Harris-Ferrante. However, she also believes not enough carriers look far enough ahead to have proper planning for large-scale industry changes, such as shifting demographics or regulatory intervention that may occur five to 10 years in the future.

"Future-proofing isn't looking ahead three to five years; it's looking ahead 10 to 20. Of course, you don't know exactly what's going to happen in 20 years, but you need at least to be asking yourself whether–unless there is a huge business disruption that derails your company–your investments will be taking you where you plan to be. Is this truly a growth platform or something that will be a legacy system to deal with in only five years?"

Or, as Auto-Owners' Buchanan observes, "Today's new development is tomorrow's legacy.

"With our approach, we think we're doing it correctly. Our development is agile, the modern systems we're bringing in are flexible, and business can do much of the work themselves without involving IT," he says. "We are getting better every single day, and the road to 'best' starts with 'better.'" TD

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