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Completing the Legacy to Modern Transformation

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29 August 2020
Max Ang

Conversations in innovation strategy deployments has seen plug-and-play and APIs as the common solution for shipping and serving modular containerized applications to core systems. This is an effort to provide scalability and maintainability of functionalities, providing added-services such as image recognition, NLP, OCR or eKYC modules to existing or modern systems. However, questions arose with regards to the legacy system modernisation or transformation. The concerns revolve around the movement of data, provision of business-as-usual and the incorporation of new functionalities through APIs integration (the why and how of incorporating APIs).

The organizational challenge

Understanding the challenges that buying organizations faced will enable seller or technology providers to develop value-added functionalities to complement their proprietary software platform or offer the stand-alone functionality as a module-for-sale. Buying organizations such as insurers will also understand the workflow change requirement or accommodation for new functionalities, upgrades or replacement.

Organizations themselves can establish innovation centres for in-house development, experimenting with new ideas and pushing viable innovations to mass production. But the goal is to understand what kind of legacy systems are in place now and how can these systems adapt to innovation. In insurance, legacy systems such as the SMART400 (Polisy/400, Life/400, Group/400), developed on IBM AS/400, are still in use today. Modern policy administration system (PAS) used are Integral by DXC Technology and the Oracle Insurance Policy Administration (OIPA), for examples. The reason for the continuous usage of applications on the AS/400 is the reliability and stability offered and the mission-critical tasks its been assigned to since the organization inception, rendering change cumbersome. The need to maintain on-going business operations stem as another factor for continuous usage.

Disruptive technologies from digital insurers, insurtechs and technology solution platforms provide room for building greater efficiency to the insurance value chain. However, adoption will depend on the size of the buyer, with smaller outfits having better agility or a cleaner slate to implement new solutions over large incumbents. However, the difference between a small outfit and the incumbent is product and market penetration capabilities. Small outfits must achieve greater product adoption without the resources for marketing and sales force, which the incumbent has.

Having a mass population willing to adopt new technology, experimentation openness and governmental support provides the opportunities for new products or innovation to reach market adoption and scale. New markets can benefit from disruptive technologies faster too, for example, the adoption rate of mobile payments is greater in certain Southeast Asia countries due to less entranced technology and telecommunication infrastructures.

How about complementing legacy with innovation?

A challenge with complementing legacy systems and innovations is the redundancy created and the costs of creating a seamless integration, whereby there will be friction in the workflow journey which may affect the customer’s journey and the need to create a bridge to the legacy systems. Innovation stem from new entrants as there is more free-play involved. Incumbents attempting to incorporate innovation into the legacy system may benefit from partnerships for ideation and production. This is discussed in previous blogs at “Moving times, evolving business models: a Singapore observation”.

Final thoughts

Innovation and legacy systems must work in tandem towards the concept of viable product, building the right capabilities and promoting the right culture for growth. Technological systems will run its course through time and innovation provide the vitality to adapt to changing trends and needs. Besides APIs solution, technological consideration for low-code, no-code paradigm shift, insurance modular selection systems are efforts in transformation projects for legacy system modernisation. Ultimately, organizations which can envision trends before they become conventional wisdom will stand a chance to be thought leaders.