Does your company rely on old software or hardware to complete functions central to the business? If so, you’ve been using a legacy system.
A legacy system is defined as, “A computer system or application program which continues to be used because of the cost of replacing or redesigning it and often despite its poor competitiveness and compatibility with modern equivalents.”
This definition brings with it troubling implications for businesses. Poor competitiveness and poor compatibility don’t bode well for any company. Technology that came out five years ago is already outdated, let alone 25 years ago. And that’s the problem: there are many companies that actually employ technology that old on a daily basis. Depending on the legacy technology used and how fast the industry standard is evolving, businesses that cling to their legacy systems might be able to survive, but the issues that arise from doing so tend to lead to a tumultuous existence that will eventually be hard to come back from.
Why Keep Legacy Systems?
Companies relying on legacy systems have concluded that the cost of replacing the system is not worth the return on investment. Whether that’s because the system is so integrated into the company’s day-to-day activities that uprooting it would be a massive undertaking, or if changing it is simply too expensive, companies that continue to use legacy systems believe upgrading to up-to-date technology is not worth the cost, time or energy involved.
Companies that find themselves reducing costs as much as possible often overlook another major cost: the cost of missed opportunity. James Nunns from Computer Business Review explains the idea effectively:
“IT and business leaders always think about sunken costs, and they don’t want to give up on them. But they have to think about sunken opportunity, and the high price their companies pay for missing out because of their antiquated infrastructure. In the fast-paced environment in which companies operate today, this legacy infrastructure from last century doesn’t allow them to move fast enough to seize an opportunity when they see it.”
If you’re relying on old applications, you’re not allowing your business to be agile. Massive technology shifts happen overnight; if your business can’t adapt on the fly, it is at a distinct disadvantage.
One industry in particular has a reputation for holding onto these old systems is insurance.
The Insurance Industry’s IT Struggle
A recent survey conducted by Willis Towers Watson revealed that 58% of insurance company executives acknowledged they are behind other financial services sectors with digital technology.
For example, the manual re-keying of data between systems continues to dominate many insurance firms. Relying on legacy systems typically leads to inaccuracies and bottlenecks in data sharing. Even more frustrating for employees is the systems tend to crash. This was recently noted by Nick Ismail of Information Age, who also explained the hesitation in the industry to make improvements:
“…overall, in an industry where there is so much complexity, many are sticking to old methods, rather than, what might seem to them, to be a riskier option of looking at new solutions.”
These complexities appear to be causing an innovation standstill in the insurance world. While other industries have moved beyond manually keying in data, many insurance companies are still holding onto old methods that not only make employees’ jobs harder, but also result in an inferior product filled with data gaps and inaccuracies.
Business agility isn’t the only reason you should begin thinking about system overhauls within your company. In fact, there are many reasons to update your internal systems, including your customer experience.
The idea that customers should be able to easily access information should go without saying. When a customer finds that this isn’t the case and that they need to jump through hoops to get what they need, problems arise.
One way which insurers are leaving customers frustrated is by not providing digital portals for accessing their account information. Simple touches that we take for granted in many other industries are still not as common as they should be within insurance. Ismail provides a look at what companies not being held back by their legacy systems are doing to improve the customer experience:
“With some insurers, customers can access their policy information and progress of claims through engaging and interactive digital portals. This is driven by the trend towards self-service across all sectors and leaps in software design. In fact, research shows that user-centric, design-led companies outperform those who do not have such a focus by 211%.” (Design Management Institute/Microsoft)
Creating a simple customer experience isn’t just a good idea; it’s necessary if you want your organization to thrive. If your ancient system is holding you back from creating a better product, it’s time to explore ways to upgrade your systems.
There is also the matter of security to consider. A 25-year-old internal data management system isn’t designed to defend itself against today’s cybercrime. Last year’s Cisco midyear cybersecurity report had concerning implications for aging infrastructures:
“Some [organizations] may simply wait to replace their infrastructure rather than go through the hassle of upgrading—or they may find they have waited so long that they can’t upgrade their products because they are no longer supported. In any case, we found that products run with known vulnerabilities for about 5 years, on average.
Fragile, insecure infrastructure cannot support the emerging next-generation digital economy. To truly realize the benefits that digitization and the Internet of Things will bring, organizations need to tackle the security problems of the first digital wave.”
Is saving money upfront worth the risk of data and reputation loss? Most companies would argue no, yet legacy systems still remain – much to cybercriminals’ delight.
How to Change
Being a technology-centric company, we are very familiar with the opportunities available to businesses. The internet of things, the cloud, machine learning and so forth are all huge avenues for businesses to start investing.
Insurers will argue new technology doesn’t fit in with regulatory rules or the precise processes they’ve already established, but Ismail explains that new technologies actually help with the regulatory landscape. Data visualization and analytics help insurance firms leverage customer and risk profiling data to generate better insight. On top of that, the data is more accurate and found quicker.
The message here isn’t to blindly adopt these tools but to consider how old systems prevent you from benefiting from technological advances. Is the cost of gutting your internal systems worse than falling behind in your industry? Is it worse than frustrating employees and customers with outdated methods?
If your business can’t afford to fall behind, then it’s time to begin the hard, yet worthwhile process of updating your legacy systems.
Written by Nik Vargas