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Like all financial companies, insurers have distinct business and regulatory compliance requirements for their application and computing infrastructure. Carriers depend on applications and databases to process massive volumes of transactions and data while providing extremely high reliability, availability, security and privacy. In order to get full value from cloud infrastructure, they need to “unlock” data that is effectively trapped in their legacy data applications.
In addition to the mainframe systems that provide the backbone of their computing infrastructure, for decades insurance companies have also relied on mid-range servers like the IBM i (formerly AS/400), which have a well-deserved reputation for delivering high performance and excellent reliability. Many insurance companies have built customized business-critical applications on these platforms; in fact, the most recent edition of an annual survey from Help Systems found that 67 percent of organizations rely on home-grown applications on their IBM i servers. In addition, many organizations also depend on data center-hosted applications from the likes of SAP and Oracle.
Yet even amid a widespread trend of organizations shifting to a cloud-first strategy, many insurers have yet to migrate their business-critical IBM i applications to the cloud, fearing the potential disruption to their business and the cost of refactoring or rearchitecting these applications to be cloud native. As a result, these applications are often viewed as “cloud stubborn.” But to enjoy all the benefits that the cloud can offer, insurance companies need a path to the cloud for these legacy workloads and applications.
A Changing Landscape for Insurance Companies
But like many industries, the insurance industry is experiencing significant digital disruption accelerated by the pandemic—from new, cloud-savvy entrants, changing customer behaviors and expectations, and a shifting technology landscape. The need to innovate faster is forcing a reconsideration of how best to move forward with legacy applications. For instance, the pandemic essentially required an overnight shift from in-person to digital engagement, supercharging an existing trend. New online-only (and in some cases mobile-first) competitors have raised the bar on customer expectations for speed and convenience.
All these pressures have put more urgency into the digital transformation initiatives that many insurance organizations have undertaken. As insurance companies move to adapt, however, these initiatives are running headlong into the limitations of traditional, data center-hosted applications, particularly when it comes to faster innovation. For example, as consumers conduct more business via mobile apps, traffic patterns have become harder to predict. Moving applications to the cloud would put them closer to the customer and improve overall performance. But while insurance providers recognize the need for change, they seek a low-risk, more incremental option than a “rip and replace” strategy for trusted, tried-and-true applications. They face the difficult challenge of threading the needle between the desire for innovation and the need for business continuity when it comes to cloud migration.
Cloud-Powered Application Extension and Modernization as a Competitive Advantage
One potential solution is to migrate existing applications to run natively in the cloud without extensive initial modification. Taking this “lift and shift” approach allows organizations to maintain business continuity more easily while leveraging existing expertise, workflows and investments. For example, running existing IBM i applications natively in the cloud might allow an organization to continue using the mature and familiar high availability solutions they’re accustomed to while enabling greater gravity and flexibility to new cloud-native services.
Once applications are in the cloud, even in their native form, they can be incrementally extended to take advantage of value-added capabilities offered by cloud infrastructure providers, including advanced data analytics, machine learning and artificial intelligence, agile DevOps, comprehensive monitoring, and others. These new capabilities can also allow insurance companies to finally capitalize on the unrealized value of the data that’s “locked” in the data center. At the same time, shifting traditional applications to cloud creates new possibilities for taking advantage of capacity on demand, better performance, and enhanced reliability with cloud-based backup and disaster recovery.
From an innovation standpoint, freeing insurance applications from the data center allows organizations to adopt a more modern software development strategy, with increased update frequency and side-by-side test and development. Moreover, for many organizations, migrating to the cloud can provide an immediate performance boost to applications that were running on older hardware in the data center.
For traditionally conservative insurance companies trying to become more nimble, running legacy applications natively in the cloud provides a low-risk path forward while providing ample opportunities for innovation. It enables insurance companies to start meeting their digital transformation objectives and offering new experiences and capabilities to their customers while providing the breathing room to modernize their infrastructure at their desired pace.