Temporary IT, or, Where Does Technology Go When It Retires?

I recently reviewed an IT project that had been submitted for an award, only to learn that between the time of the submission and the time of the judging, the IT project in question had been “retired.” The context forced me to ask whether such a project could still be considered award-worthy, but the more general question is whether a retired system can be called a success. Some IT projects are destined for retirement the day they are conceived. They are the temporary measures put in place to achieve a certain minimum level of functionality “until.” Until the entire core system is replaced. Until a vendor offering provides the function in their next upgrade. Until the technology available in the marketplace can duplicate this custom code. Until someone comes up with a better/cheaper/faster way of doing it. These projects live short, meaningful lives. They go into production quickly, do their job, and then gracefully make an exit six months, a year, or two years later when the permanent solution is ready. Such projects include things like a custom agent portal that is eventually eclipsed by a full policy administration replacement. Or a simple rating calculator that is maintained outside the legacy system and used solely to provide real-time quotes to agents until the legacy system has been modernized. Or hard-wired integration between a billing and claims solution maintained while both systems are being upgraded. These projects are a success not despite the fact that they are eventually retired, but because they are eventually retired. They have done their job and helped the organization advance to the next stage. In fact, the true disaster is when a tech initiative that was always meant to be a temporary solution evolves into a critical system that lives for ten years, cobbled together like Frankenstein’s IT, preventing the company from moving on to a better, more modern solution. This happens more often than we’d like, and so even projects with short lifespans need to be taken seriously. The truth is ALL technology is temporary technology. Every system will eventually be replaced by the next system. And any system–no matter how modern and “permanent” it is upon implementation–will become legacy technology if it is not constantly kept up to date. We can learn from these temporary IT projects. Smart organizations approach such initiatives warily, making sure that it will be easy to turn them off when it is time to move on. So should be the case with every project. Smart organizations consider how employees will be impacted when a temporary IT project is no longer available. So should be the case with every project. Smart organizations have a next step in mind when they start a temporary IT project. So should be the case with every project. If insurers treat every IT initiative like it is a temporary one then insurers will be less likely to end up with irreplaceable legacy systems. Part of IT planning, even for major systems that have long life spans, is to consider how the system will be kept up-to-date and how it will eventually be retired.

Hardware Outsourcing vs. People Outsourcing

I’ve been doing research for several reports on the topic of IT outsourcing, some about utilizing cloud computing for hardware and some about working with vendors to handle consulting and development. While these two areas are conceptually very different, the approach and business values are quite similar.

One misconception about both is that they are used for “replacement.” By this I mean that an insurer uses cloud computing to replace their data center or an insurer utilizes an IT service provider to replace their IT organization. While in some instances this might be true, it is rarely the case.

The other misconception is that an insurer uses cloud computing or consulting services to lower costs. Lower cost might be one reason, but shouldn’t the only reason. Many CIOs, however, do approach IT outsourcing primarily for the perceived cost benefit, and Celent sees this as a mistake. In many cases, some or all of the long term costs might actually be higher. This does not mean a cost-sensitive insurer should avoid IT outsourcing, but, rather, should proceed with an outsourcing project while looking at the overall business values associated with it.

The added business values are the other area of similarly for hardware and development outsourcing. Both help a company increase capacity, one with increased server capacity and the other with increased human capacity. Both help a company access new capabilities that they didn’t have earlier; cloud computing providing rapid server deployment and failover (among other things), development outsourcing providing resources with skills sets that did not exist in house. And, finally, both work best when thought of as a long-term strategy that will complement the existing IT and not just as a temporary measure or as a replacement for existing resources.

The takeaway is that any organization looking at IT outsourcing–whether for hardware, software, or people–should focus not on cost but on long term business value. Organizations that only care about cost are often disappointed by the outcome. Organizations that have a strategy to bring new capabilities and business value to users will be successful.

Finetuning Customer Portals – Lessons from A Christmas Scrooge

The commercial craziness that is the run up to Christmas has kicked off here in Britain with the checkout tills are humming from Oxford street to Covent Garden in London. But if you listen carefully, you should also be able to hear the whirrings of transactions in the darkness of cyberspace. The English have embraced on-line shopping, and there are estimates that we will buy 15% of our Christmas goodies on-line this year.

I’m a great example of someone who uses the Internet for work and play. As if being wedded to the laptop for more hours of the day than necessary isn’t enough, I choose to shop on-line as well. And for the most part, I love it. As an industrious cyber-shopper and pedant, I pride myself in spotting website shortcomings.

What surprises me is just how many sites with shortcomings I’ve stumbled across in this last week. Have Santa’s little helpers gone on strike ahead of the rush to Christmas or is this poor planning on part of IT and operations? Here’s a few examples:-

  • A hotel booking website which couldn’t successfully take a booking via credit card – no surprise, I choose another hotel.
  • Two retail sites that send tracker notification emails without the tracker ids – annoyance factor that grates at their brand.
  • A mobile phone site requiring me to re-key all details when I move to another section – more brand erosion.
  • A retail site who’s “shopping basket” had a memory limit of 5 minutes.

Some of these shortcomings contribute to the annoyance factor. It’s like going into a brick-and-mortar store, and they don’t have the item on the shelf. You can’t sell what you don’t have in store. So you take your pounds elsewhere, and the company never knows they even lost your business.

Business should be smarter about their on-line stores. You don’t leave your high-street store unattended, or without stock? You should pay similar attention to detail in your on-line offering. The direct channel will become an increasingly important in the future, for retailers, and insurers alike. Relative to retail, insurers have been a little slow at embracing on-line commerce, but should remember that they get measured along the same factors as an on-line retail store. After all, that’s what the consumer knows.

The English are happy to buy insurance on-line, particularly motor. We have some of the better websites in Europe for doing exactly that. And there is plenty of activity. Through an aggregator site, one insurer gets 250,000 quotes between 8pm and 9pm on Monday’s – apparently, this is the time consumers look to shop for insurance. You couldn’t make it up!

The key take-away here is the importance of having a solid customer portal that behaves in the manner a customer expects. This requires continued investment to reflect changing customer behaviour, and to leverage new technologies. In conversations, we see this as one of the key areas for IT investment in 2010. (We will be writing more on the topic of B2C in insurance in January). Owning the distribution space remains an important objective for insurers looking for growth in the coming year.

New competition for UK policy admin vendors and more choice for insurers

The PAS space is hotting up here in the UK. Talk of eviscerated IT investment spending has been vastly overstated. Before the crisis really kicked off, insurers around the world were looking at how to address legacy core systems, and the level of RFI activity and PAS deals supported this. The recent announcement of Allianz UK and TIA was an example of a large UK insurer taking on the challenge of the legacy drag effect. Today, this was followed by the announcment of Axa Commercial replacing the current mainframe system with Duck Creek’s Example platform. Deal activity levels in the UK have seen a lull in the last twelve months, but Celent sees these two deals as a sign of the new times. Insurers will look to get back on track in IT investment as soon as possible, and most will have to face the challenge of replacing outdated core systems or at the very least, consolidating to a few of the best systems in house. Both these examples highlight the investment that has been going on for sometime by policy admin vendors from outside the UK. Celent’s view is that the UK market has been underserved by PAS vendors for some time now, and an increase in competition can only mean more choices for the insurer.