Demystifying Legacy Systems: Know it All
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Demystifying Legacy Systems:
Know it All
Costly old legacy systems can morph from
being slow behemoths to rich repositories of
accessible and transferable information via
knowledge institutionalization
Abstract
Can legacy systems get a fresh lease of life in a digitally driven world made more complex by
changing regulatory compliance? Is there a way to offset their obsolescence and minimize the
challenges they pose to growth? By focusing on knowledge management and competency
development capabilities, insurers can manage their mainframe legacy systems optimally
and continue to derive value from yesteryear’s technology investment.
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Running a White Elephant imperative to identify ways and means of reducing the
cost of ownership of these applications, and enhancing
Legacy in insurance industry is a given. By virtue of
their effectiveness and efficiency.
being one of the early adopters of new technology,
the insurance industry has seen the era of monolithic Legacy systems are integrated with new knowledge
mainframes. Although there have been many management and competency development systems
technological advances, the insurance industry still to centralize the management, maintenance, and use
remains one of the most intensive and largest users of of information. Knowledge Management (KM) ensures
mainframes and mid-frames. that the complete knowledge of the system embedded
in the thought processes of individuals and in the
While mainframes continue to provide significant
code, is extracted, documented, and institutionalized.
benefits in terms of reliability, availability, and security,
Competency Development ensures that the resources
aging legacy systems are plagued with a number of
maintaining these applications have the requisite levels
problems:
of technical, functional, and behavioral skills, not just
● Limited technical support to maintain them, but to also identify and implement
● Inflexible business rules performance tuning and productivity enhancement
● Over-burdened databases mechanisms.
● Hard-to-learn interfaces This thought paper attempts to look beyond the
known hindrances insurance companies face owing
● Difficulty in integration to their dependence on legacy applications. It also
● High maintenance costs discusses two essential imperatives—knowledge
● Inability to respond to regulator-driven reporting institutionalization and competency development—that
requirements can help organizations efficiently manage their legacy
applications.
● Too many changes in the original system logic
● Inability to respond to competitors owing to higher
product launch time Built to Fit: Legacy in Insurance
Each of these factors contribute to making legacy Insurance companies use legacy systems to manage
applications unresponsive and rigid, negatively impacting applications that handle:
operational efficiency, resource and time utilization, ● Marketing channels
creating cost pressures, and increasing compliance
● Customer service/claims
risks for insurance companies. Yet, insurers continue
to depend on these legacy applications. It is therefore ● Actuarial calculations/reinsurance management
Market Channel Applications
Legacy applications were mostly used for monitoring the
productivity of marketing/field personnel and to estimate
the commission payable to them. Since commission
calculations are complex and need to be paid for decades
in the case of lifetime policies, it was one of the earliest
processes to get automated in the insurance world. Thus
legacy is common in the channel management portfolio
of insurance IT. These applications have interfaces
with both external and internal systems (like Point-
of-Sale (POS) data entry, commission management,
accounting, agency management etc.). Hence, altering
these applications may impact all/any of these systems.
Typically, front-end processes like agent communication,
illustrations, marketing, and training support within the
channel management space have been ported into
newer technologies; back-end business processes like
agent set up, agency monitoring, and commissions
management continue to reside on legacy systems.
Customer Service and Claims Applications
These are the core components of an insurance
company’s operations. They are the storehouses of
2 2
policy and claims data, and the pivots on which the entire Against All Odds: Why Legacy Systems Are
insurance organization’s business strategy is developed. Still Relevant
The need to maintain this data over an elongated period
of time, repetitive data-driven processes, and complex Legacy systems persist because of the expense, effort,
business processing rules that underpin the two sets and potential risk of business interruption associated
of applications warrant early adoption of automation. with the movement of data and key business processes
In recent times, the largest part of the aggressive to more advanced and contemporary technologies.
insurance legacy landscape is accounted for by these There are numerous reasons why insurance companies
two sets of applications. They interface with almost all persist with their existing systems:
applications (except the actuarial applications) in an Repositories of Processes, Rules, and Data: Legacy
insurance company. The competition warrants insurers systems have been continuously involved in processing
to offer better and faster services to their customers. policyholder information, creating repositories of insured
However, insurance companies still need to manage data, policy information, and the operational processes
existing legacy applications for as long as the policies in vogue. In many cases, the information pertaining to
issued using such legacy systems are in force and not various processes/ practices that guide the business
terminated or ported to other customer service/claims rules is hard to find—and the data used may not be
systems. available anywhere other than in the legacy systems.
This has kept many insurance companies from re-
engineering or replacing legacy applications with newer
Actuarial/Reinsurance Management Applications
applications built on latest technologies (both hardware
These applications are one of the most important and software). The risk of losing information in embedded
information assets of an insurance company. Data business logic, business rules, and underlying data is a
within these applications is used for designing various big deterrent for insurance companies.
products, performing claims analysis, and meeting
Reliability of Applications: Many insurance companies
regulatory requirements. They form the “heart” of the
still depend on legacy systems to handle key processes.
insurance company’s strategy. The valuations and
They are reliable and capable of delivering what they
modeling requirements of the actuarial department
were built to deliver. Hence, many insurance companies
almost mandated early adoption of automation.
are reluctant to undertake any replacements related to
these business critical systems.
Poor Knowledge of the Existing System: It is difficult to
find complete specifications that mirror the functionality
of the entire legacy system. This may be due to
unavailability of the original system designers, and
insufficient documentation.
In most such instances the available system does not
include the details of all the system changes. Replacing
a legacy system is dangerous since businesses face
the risk of losing vital business knowledge embedded in
these systems.
Expensive to Change: Changing from legacy systems
to new systems involves huge resource overruns due to
the following reasons:
● Various parts of the systems may have been
developed by different teams, resulting in lack of a
consistent coding style
● New programs may have been added or interfaced
with other parts in an adhoc manner
● The level of system documentation available may
not be adequate, increasing the amount of time
required to comprehend, assess, and make changes
to the system
● Designers of the system may not be available
2 3
Encashing on Legacy: A Knowledge-Skill is incomplete or has been lost. In the bottom-up
Nexus approach, tools may be used to extract and document
the business logic underlying the various applications.
Legacy systems are inherent, inescapable and here
to stay. It is, therefore, important to enhance existing These created documents, thus, form the basis for future
applications to correctly reflect the changes in business legacy support/ maintenance activities.
processes and rules. Reducing maintenance costs
of these applications through effective performance Knowledge Institutionalization
management, storage management, and CPU time
Since no system documentation is ever really complete,
management is of critical importance to get the best ROI
the previous/ongoing projects, collaborative efforts,
for insurers.
and communication carried out during the modification
Coforge believes that other than the traditional application of the legacy system needs to be maintained in an
value enhancement methods, insurance companies environment where they can be readily accessed. Most
need to strongly focus on knowledge acquisition, importantly, the practice of knowledge management
knowledge institutionalization and competency needs to be institutionalized, as the efforts yield rewards
development to extract value from investments made on over a period of time.
legacy systems.
The knowledge institutionalization mechanism
should ensure that comprehensive, indexed, and
Knowledge Acquisition easily accessible knowledge of the system resides
Knowledge exists in embedded business logic, business in the repository and is periodically updated. It should
policies, and rules formed over a period of time from the also have a training management system with an
data extracted from business operations. assessment mechanism to ensure that new members
have a thorough understanding of applications before
Knowledge can be acquired by following the top-down embarking on any maintenance activity.
and bottom-up approach. In the top-down approach,
knowledge from the original designers of the existing Insurance companies should establish processes to
system is documented to provide a complete picture transfer knowledge, so that it is not lost due to resource
of the legacy system. The bottom-up approach helps movement; and new resources are made knowledge-
in gathering knowledge when original designers have rich within short, predefined short timelines.
missed out on certain areas or when the original
designers are not around and the system documentation Competency Development
Knowledge of applications alone cannot ensure
successful operational excellence and cost reduction. To
be able to achieve this objective, the maintenance teams
need to have a specific set of technical, functional and
behavioral competencies. This demands the creation
of a competency development framework that details
various competencies required by the role holder. The
assessment criteria measure and create a development
program that generates competencies in staff members
across levels.
Only a fully competent team having adequate knowledge
of the applications and the underlying processes will be
able to continually improve system performance and
productivity. To accomplish this, the maintenance teams
handling these applications need to have a strong hold
on the functional, technical, and process details of the
application.
2 4The Coforge Thought Board:
Demystifying Legacy Systems: Know it All
What Problems do Legacy Systems Pose for
Insurance Companies?
Technical support Systems are hard to Systems are Systems are
is not easily understand for newer difficult to expensive to
available resources integrate maintain
Company is unable
Original system logic Slower time-to-
to fulfill regulatory
has changed too market affects
reporting
many times competitiveness
requirements
What Applications Run on Legacy Systems in Insurance?
Marketing channels Customer service/claims Actuarial calculations/
reinsurance management
Why do Insurers Persist with Legacy Systems?
They are a vast Few resources They are interlinked
storehouse of They function know how the with other core
processes, rules, reliably system works systems, so change is
and data from end-to-end expensive and risky
How can Insurance Companies Extract True Value
from these Aging Systems?
By focusing on
Knowledge Knowledge Competency
Acquisition Institutionalization Development
What are the Key Elements of Knowledge
Acquisition and Institutionalization?
Using a top-down and bottom-up approach Ensuring that comprehensive, indexed, and Training management system and
to document knowledge from original easily accessible system information is in assessment mechanism for knowledge
designers as well as from business logic and the repository and is periodically updated transfer
rules underlying applications via tools
Why is Competency Development Important?
Mere knowledge cannot ensure Resources need technical, functional, A competency development
proper maintenance and behavioral competencies to framework is a prerequisite to ensure
operate and maintain legacy systems the right staff competencies
5Past Perfect: Institutionalizing Knowledge technology due to the risks involved. Maintenance of
for the Future legacy systems in the absence of proper documentation
and non-availability of resources with requisite
In an environment where the market demands high- fundamental knowledge base is a nightmare.
speed delivery of products and services, the insurance
companies’ legacy systems are slowing them down. A robust knowledge acquisition engine, coupled with
Legacy systems are not easily adaptable and hence strong knowledge institutionalization can go a long
require extra effort to integrate, upgrade, and test them. way in helping the support and maintenance teams to
The cost of maintaining legacy systems is more than the comprehend the business functionality within the legacy
cost of maintaining new technologies as the latter are far applications, enabling them to create a modernized
more flexible and user friendly. application in a relatively smaller time frame.
Maintenance of legacy systems enhances Return on
However, legacy systems are rich goldmines of Investment (ROI) made in the hardware and software
knowledge and processes, which are not available systems.
anywhere else. Hence, maintenance of legacy systems
is an alternative which most insurance companies use, By focusing on these aspects, the insurance legacy
despite the heavy costs involved. Managements believe landscape management team can become more
that the cost of maintaining a legacy system is less than effective and efficient; thereby reducing the Business as
the cost involved in replacing them with state-of-the-art Usual (BAU) costs while enhancing system flexibility.
6For more information, contact information@coforgetech.com © 2020 Coforge. All rights reserved. Coforge is a leading global IT solutions organization, enabling its clients to transform at the intersect of unparalleled domain expertise and emerging technologies to achieve real-world business impact. A focus on very select industries, a detailed understanding of the underlying processes of those industries and partnerships with leading platforms provides us a distinct vantage. We leverage AI, Cloud and Insight driven technologies, allied with our industry expertise, to transform client businesses into intelligent, high growth enterprises. Today our proprietary platforms power critical business processes across the Financial Services and Travel industries. Our 11,000 technology and process consultants engineer, design, consult, operate and modernize systems across the world. Learn more about Coforge at: www.coforgetech.com Stay connected:
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