Modernization: An Efficient Option to Systems Replacement

While a lot of organizations are bringing in new technology to solve their legacy system problems, others aren’t willing to spend multiple millions without looking at alternatives.  Many of these are finding “legacy modernization” brings much of the benefit without an eight-figure price tag.

Why Modernize?

Gartner’s recent survey; “Top 10 Technology Trends Impacting Life and P&C CIOs in 2014” clearly identifies Modernization as a top trend, and found three primary drivers for the need to Modernize:

1. Service to customers and / or business partners
2. The level of operational efficiency
3. The time to market for new products and services

That said, Modernization as a Practice, is not a topic that is widely discussed in the P&C world.  Most often, the route to core processing refreshment is through Policy, Claims and Billing replacement projects.  However, such projects are fraught with risk, and quite often suffer cost overruns, or worse.  There are very few companies that have ‘modernized’ their core processing systems.

As the tools and techniques of Modernization mature, perhaps it is time to look at the Practice of Modernization in the P&C Industry.

Be Flexible

A best-of-breed Modernization process should first and foremost be highly flexible. It is important to understand that one size of Modernization does not fit all customers – one size does not even fit all systems within one customer.

Best-of-breed Modernization Practices should break the work down into three steps:

1. Assessment – what is the state of the current software, and what does it do?
2. Strategy – how is the software going to be modernized?
3. Transformation – the process of Modernization.

A flexible Modernization Assessment process uses the actual code base. By using the actual code base, there is assurance that what is being discovered is exactly what the system does, as opposed to what the out-of-date documentation (if there is any) suggests it does.

Be Successful

A successful Assessment process will typically consist of two steps:

1. Discovery–where all the application attributes; source code, schemas, screens, scripts, or other resources are used to create graphical and tabular representations of the components.
2. Elaboration– this is a deeper dive into the application and data structures,exposing program and data interdependencies and the underlying business rules.

After the Assessment, the next step is to develop the Strategy.  Now that the company knows as much information as possible about the legacy application, the next question is: what is the best next step?

Select Options

There are really 5 strategic options, one or more of which will be used in a modernization project:

1. Re-host / Re-platform – the application is moved from its current environment (typically mainframe) to a distributed client-server environment, and the host language remains the same.
2. Retain / Wrap –Parts of the application are ‘wrapped’ to make the system web-enabled to improve the accessibility.
3. Refactor / Reengineer –Parts of the system are redeveloped to take advantage of both the modern language and the ability to migrate the application to a distributed environment, improving flexibility and end usability.
4. Rewrite – a new application is written from scratch using the information gained during the Elaboration phase to help architect and design the system.
5. Replace – the legacy application is replaced with a commercial off-the-shelf application, using the work done in the Assessment phase to understand / design the appropriate configuration of the new system.

What’s Next?

This is the first of 2 posts looking at Modernization in the P&C Industry. In the next article, we will examine which systems P&C companies should consider for Modernization.

Editor’s Note:  Peter Symons ([email protected]) is vice-president Insurance Services at Mariner Innovations, an innovative IT services company, as well as Canada’s leading supplier of Application Modernization Services. .  Peter has been a long-time friend of Insurance-Canada.ca.