1 March 2006

In the light of commercial pressures and the prospect of less risky migrations, the insurance industry is moving off the mainframe.

The insurance industry is by definition one of risk. The whole idea behind offering insurance is about measuring risk exposure and offering a premium based upon that exposure.

With risk always at the forefront of its business decisions, insurers have in the past been unwilling to replace legacy systems that for all their costly inefficiencies do the job asked of them reliably.

But, of course, even this cautious industry has been unable to resist the business advantages gained from the increased agility of non-mainframe systems. Recent research from analyst Celent has shown that 52 per cent of insurance organisations are looking to re-platform within the next three years.

And figures from HP show that their presence in the mainframe migration market is growing while IBM's mainframe business is shrinking. More than one-third of HP's EMEA mainframe migration account wins in the last year were in the financial services industry, several of which were insurance companies.

Les Wilson, HP's European MFA programme manager, says: "We're seeing individual countries and individual parts of the market underline the overall trend away from mainframes to much less expensive, lower TCO solutions on platforms like Windows. "If you piece together all of these trends, in four or five years from now it will really be the laggards who are still dependent on the mainframe."

The mainframe manufacturers recognise the trend and are re-evaluating their business models to cope with the shift. "Mainframe manufacturers are backing away from mainframes, they're trying to position themselves in the services market. They recognise that opportunities for selling mainframes are getting fewer," says Ian Copley, head of sales for Northern Europe at migration specialist Asysco.

According to research done by the Mainframe Migration Alliance, a group of technology companies that provides information to help organisations migrate workloads off the mainframe and onto the Microsoft platform, the five top reasons that companies are migrating off the mainframe are: the high cost of mainframe operations and upgrades; the lack of flexibility and agility on the mainframe; long-time-to-market for new products; a shrinking mainframe labour pool; and vendor roadmaps forcing tough migration decisions.

Ravi Bommakanti, head of the insurance business unit at IT consultancy and services company Satyam, says: "We find that people are looking at selective mainframe migration in the sense that some of the functionality that had been handled by mainframes is being transferred to new technologies, including Microsoft platforms.

"The reason that they are doing this is primarily because of competitive pressures. We find that the majority of insurers operate either through independent agents or dedicated agents and the agents find that the carriers are offering new ways of selling insurance products, and that leads to competitive pressure. So people who offer inflexible systems to the agents quickly find that they are not favoured. The insurance agents are putting pressure on carriers to upgrade their systems and provide much more integrated systems where you have Web and new technologies at the front end with the facility to cut down on cycle times."

Dennis Maroney, managing director of Microsoft's insurance industry division, agrees that agility is playing an increasingly important role in convincing insurers to migrate. "It can be a straight cost-cutting exercise, and there are a lot of good things to be said for that, but a lot of people are looking at it to unlock the agility of their business to get to a services-oriented architecture, where they can extend and expand their reach, and then be able to take advantage of it in a number of ways that won't even become apparent until they get there," he says. "This is supported all the way by a cost effective framework. So you can do it a little or you can do it a lot or you can do the whole thing. Migrate an application, migrate the infrastructure or migrate everything with a view to switching over to brand new ways of doing things."

Migration need not now be the risky venture that it once was. "We're all aware of examples where companies have taken legacy systems and replaced them with a package and expected everything to be up and running in six months," says Tony Hill, CEO of legacy development company Micro Focus. "What we've learned about those enterprise 'rip and replace' activities is that, firstly, they're very time-consuming but, perhaps more importantly, they're very risky too.

"Our message is that there is a way to solve that problem by re-using what you have. You can re-use things on the Windows platform in the .NET environment, to get the benefits of Windows and .NET but without having to throw away what they already have. Moving applications to Windows and subsequently .NET requires code changes of less than one per cent of the total code."

The Micro Focus Lift and Shift offering means, for example, a typical large application with 10m lines of code would need less than 100,000 lines of code changed. "If you're able to do that, then there is a very different level of risk exposure," Hill explains. "Annuity rates, business rules about policies, policy folders whatever it may be that is captured remains unchanged. All of the changes are to do with a change in the underlying database, but essentially, and at an intrinsic business level, the application is unchanged."

Asysco's answer to the risk question is to automate as much as possible. Asysco focuses on the migration of complete sets of applications from the mainframe to a Windows environment using its own automated conversion products to translate the code and place it in a new repository-based application.

"But there is more to migration than code," says Copley. "I learned to look at migration through different aspects. There are the programs that drive the application. There is the data, which will usually be in a database. Then there is the control language. And there are all the interfaces to other platforms, internal and external, that will be required post-migration and so must be addressed.

"Asysco migrates and modernises the applications for the Windows environment. We pick up the database definition or schema on the existing platform, we then build a new schema for the Windows platform in the relational database of choice, which is now almost exclusively SQL Server. We build that in such a way that the applications are capable of doing all the things they could do on the mainframe. We will then unload the database from the mainframe and then we'll populate the new relational database. "Now that we've addressed the programs and the data, we do the same thing for the workflow or job control language, again automating as much as we possibly can." Asysco's emphasis on automation gives them the confidence to offer the service for a pre-determined fixed price and they will guarantee that the migrated systems and applications will perform at least as well as they had done on the mainframes.

But despite the drivers and guarantees, the insurance industry is still a little slow in getting on with it. There are two reasons for this. Yes, there is interest, but it still takes a compelling event to convince them to make the switch, such as a lease running out or where there is an increasing workload and the company must make the choice between an additional mainframe or to upgrade. "Companies with those kinds of deadlines approaching are much more interested in our proposition," says Hill. And, as the research from Celent says, more than half of the industry is looking to review its platform within the next three years.

The other reason is cultural, in that insurers still have to overcome the powerful sense of caution that comes naturally to them.

To do this, large financial services institutions are implementing pilot programmes with some of their smaller, mid-size subsidiaries before looking to migrate the big environments, or are engaging in smaller-scale selective migration.

HP has a portfolio of four mid-tier insurers in Germany operating on its platforms and they are looking to use that as a foundation to win contracts from larger insurance companies in the country.

Peter Richardson, insurance director at EDS, says that detailed support from a trusted partner is crucial when embarking on a legacy renewal project. "Renewal is a multiphase, multiyear journey. There are multiple paths to modernisation, but the first stage is to assess the current ecosystem of core technology and construct the most effective road map to the future. Enlisting the support of a trusted partner who shares the vision and has the credentials can facilitate the journey and mitigate the risk of large-scale transformation," he says.

A vital part of this is to be able to find a partner that can unravel the complexity of the existing environment. "Any third-party migration partner needs to have a thorough understanding of the source environment," says Jan van Rouwendal, CEO at Asysco. HP provides a seven-step approach to helping customers move off their mainframes. Firstly, their consulting and integration teams meet the customer to learn about the existing mainframe infrastructure, the insurance applications that are running, and the customer's pain points.

The second phase is a detailed portfolio analysis of the main application areas ? such as customer databases, claims management systems, back office systems and financial systems ? and a discussion with the customer about whether the functionality is replaceable with a standard solution or whether the customer wants to migrate the applications to, perhaps, an SOA environment. "We'd look at whether we could migrate some of the old Cobol code to other languages, and we'd look at whether the customer wants to enhance the functionality of the old applications," says Wilson.

"We then do a decomposition of the applications and go back to the customer with a proposal on what they should migrate and how they should do it. The fourth stage is the engagement itself, which is broken down into investigation and delivery. The fifth and sixth stages are the actual deployment and ongoing maintenance and the seventh is handing back to the customer."

"Migration projects are not done in just a couple of months," says Herman Eggink, EMEA MFA programme manager at HP. "You cannot freeze the existing application so our methodology is to keep track of all changes so that they can be easily incorporated at the end. It's a bit like continuing to cook while the kitchen is rebuilt. It is essential and also very powerful."

"Legacy modernisation is not a quick fix, though, and certainly isn't a journey for the inexperienced. It requires commitment across the highest organisa-tional levels and the help of an experienced partner," says Richardson. "But without modernising outdated IT systems, financial services companies will not be able to meet the high growth rate expecta-tions they have set for themselves, their shareholders and the market.

"Increased competitiveness, agility in the market place, top-line growth and improved operational efficiency are the opportunities enabled by modernisation. Ultimately, transformation will be a key determining factor between the winners and losers in this high-stakes competition for customer share, stability, longevity and profitability."

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