Since the early days of this century, strategic planning documents have referenced ‘technology modernization.’ For example, “In order for us to achieve our strategic goal of profitable, sustainable growth, we will need to include technology modernization initiatives in the plan.”
Now, after a decade or so of use, we are getting some different perspectives on what this actually means. We’d be interested in your perspectives on what ‘modern technology’ means in your environment.
Attacking legacy systems with modern technology
Going into the 21st century, many (perhaps most) insurers, and some brokers, faced a huge challenge. Keeping up with needed changes to core application systems (policy, billing, claims) took a multi-year holiday due to the urgency of fixing the year 2000 problem.
The resulting backlog was so large, and the methods of making the changes so difficult (due to constraints of the systems) that many organizations started to look at alternatives in order to ‘modernize’ the ‘legacy’ (read: old) technology, which would, in principle, fix the existing problems and allow for easier changes going forward.
There were two general approaches:
- Rip and replace. Buy or build new systems with modern technology and take out the old. This was going to be expensive, and take years to implement.
- Surround and supplement. Maintain the existing systems’ core functions (policy, billing, claims) and put modern technology front end pieces in place, such as user friendly screens, separate analytic/reporting tools (often Excel spreadsheets), new print tools, etc. Cheaper than 1, but only a band-aid really.
Many insurers committed to large projects, set up steering committees, and got to work. An unspoken assumption was that the modern technology platforms would ensure that we could go forward with certainty that we would never have to face this again.
Never say never
Turns out that ‘modern technology’ might be a bit fuzzy around the edges. Ask.com says that the term ‘modern’ encompasses a time frame from middle ages until now, and “‘modern technology’ is widely used to refer to the continuing development and advancement of electronic instruments.”
In other words, modern technology is a moving target. This is not bad, but it does have implications, most of which fall on the business managers to recognize and address.
Today’s legacy was yesterday’s modern
Peter Symons, from Mariner Innovations, has penned several posts in this space looking at details of modernization in today’s environment. Symons’ contends that the modernization decision is not a yes/no question, but, rather, a determination of the approaches required for specific situations. Symons writes, “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.”
Symons provides details on how to evaluate requirements, breaking this into three discrete steps:
- Assessment – what is the state of the current software, and what does it do?
- Strategy – how is the software going to be modernized?
- Transformation – the process of Modernization.
The face of modernization is changing
SMA – Strategy Meets Action recently published a perspective authored by Karen Furtado, ‘The Changing Face of Insurance’, which is being distributed by NTT Data Insurance Solutions. Furtado notes two changes in P&C insurance that are impacting modernization journeys:
- The insurance industry is more complex and its sense of urgency “is much greater than it was just five or ten years ago.”
- “Business capabilities that were considered to be leading or even bleeding edge in the insurance industry not too long ago are now in the mainstream. Many capabilities that were once considered advanced are now table stakes for competing effectively.”
This approach has everything to do with modernizing business capabilities, and engaging technology as an enabler. Furtado stresses that strategies and tactics must be constantly reviewed: “In order to respond to the increasing demands of a fast-changing world and the marketplace that serves it, insurers must commit to changing too, especially in the areas of the customer, distribution channels, products, and data.”
What does ‘modernization’ mean to you?
I’d appreciate your comments. Does ‘modernization’ have real meaning in your organization? Is it helpful in aligning business with technology? Is there something better to facilitate the communication and alignment?
Keep me modern, please.