Most people remember Michael J. Fox’s starring turn in the bit of Hollywood magic that highlights a 30-year jump back in time, landing him in the 1950s, before space travel, the Beatles, and pervasive computing of any kind. Today, a similar leap would take us to the dawn of the internet era, a world when client-server computing was at its zenith and some questioned the future viability of Apple as a company. How much has changed! I recently saw a DeLorean on the road, which brought a certain magical whimsy to mind. Hopefully, the flux capacitor was in good working order.
Which brings us to 2023. There’s no doubt that the pace and breadth of technology changes facing the insurance industry are extensive and potentially exciting. The sense that new things can take us to better and brighter places reflects a certain optimism which is beneficial in many ways, and the idea that new capabilities can fundamentally alter our available range of options is very real.
Avoid a Blast From the Past
At times, resistance to these changes can be seen as a reflection of institutional conservatism. Sometimes, it may a fear of the future or a manifestation of the adage that “we’ve always done it this way,” a clarion call to avoid the unknown and the risky. But at other times, it is worth taking a pause to check that the right lessons have been learned before launching ships into the future. This can, at worst, ensure ideas are properly pressure tested. At best, it can avoid some very painful and expensive lessons associated with “ready, fire, aim” moments.
I was struck by an example of this recently when talking with a senior IT leader at a large insurance carrier. They have made the decision to drive all of their workloads, irrespective of native platform, toward cloud-based solutions hosted by one of the top three venders. To be clear, this is a great environment which offers some terrific capabilities—but there’s a cautionary tale to be told about taking old COBOL/VSAM/DB2 systems and simply redeploying them.
For one thing, while old mainframe environments may never be cool again, in the right hands they are stable, secure, and cheap to run. Any description of a cloud environment being “better” is usually based on capabilities, future state promises, and DR/BCP capabilities. But cheaper? Not typically the case for systems optimized to be in other spaces.
Plan a Smooth Road to the Future
In fact, some mainframe software licensing costs are spiking because solution providers have realized they have the near monopolistic power to change prices. Critical scheduling and environment manager solutions don’t have significant competitors in the market, and switching away from them can be extremely difficult. For carriers, some of these licensing costs may make the transition to universal cloud-based computing seem attractive.
This leads to some interesting “what-if” possibilities. For example, switching to a cloud provider and taking extensive advantage of its proprietary capabilities may well create the exact same type of “lock in” to environments that companies are trying to extract themselves from now. No cloud provider is an altruistic organization. It’s not out of the realm of possibility that a solution provider might enact outsized price increases at some point when the risks and costs of switching providers are elevated, becoming a “Back to The Future” moment with surprising speed.
There are clear strategies that carriers can deploy to create future state flexibility for themselves. As with many strategic imperatives, the best time to plan for this is before the actual journey starts. It is hard enough to keep your IT organization on course without having to hit 88 miles per hour! To discuss how your organization is future proofing its technology stack, among other key topics impacting the insurance industry, request an invitation to our May 1-3 Insurance CIO Council Meeting in Connecticut.