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Transformation 2022: The journey to modernising IT continues

Real transformation is posing a challenge for insurers, and not merely because the pandemic keeps flaring up again. Even though silo thinking has mostly been eliminated, it lingers on in the form of legacy architectures. Managers therefore rarely have a clean slate to work with and act upon, at any level. In the view of ERGO Germany CIO Mario Krause, it will therefore not be possible to flip the switch overnight to a beautiful new agile world, as desirable as this would be.

On the contrary, transforming our old world into a new one needs a hybrid approach. And to be successful, we need to properly orchestrate four different factors: (1) portfolios, (2) architecture, (3) processes and (4) organisations.

Portfolio management

Multi-project management has always been a key discipline for steering IT organisations. But it will not be nearly enough for such a major transformation. On the contrary, that approach needs to be replaced by multi-stage portfolio management, which enables modern planning and monitoring of all the transformation projects. The first stage, in terms of investment portfolio management, deals with the distribution of budgets. Once these are planned and set, project portfolio management takes care of appropriately allocating the resources and implementing the projects.

Especially in large companies, major parts of the budget are still used for changes in the established, traditional structures. Cleaning up legacies will therefore still be an issue both in the investment and project portfolios for years to come.
Architecture

The IT architecture in many insurance companies was set up in the legacy world, with the latter’s technical architectures. I already elaborated on this in an earlier post. Over the years, the system landscapes have been injected with more and more know-how and business complexity. Replacing them one-to-one does not initially create any added efficiency or growth value. Moreover, there are hardly any system instructions and the programming code is often poorly documented. Everyone knows that the most effective way would be to replace the legacy world with a new system or systems. Though that is of course not as simple as it sounds. The reality is that the front-end systems are being rebuilt to closer reflect the microservice world, with legacy systems acting as the backbone (hybrid architectures). This will be the focus in many environments over the next few years.
Processes

Many companies have difficulty creating a reliable and comprehensible framework for software development, beyond a team level. The message today is clear: everything has to be agile. But even agility has its problems. Starting with the question of what “agile” means in the first place. Merely scribbling out the SCRUM process on a cocktail napkin, for example, leaves a lot to be desired – to put it lightly.

The good news is that there are hybrid models that cover all software development processes and can enable everything from sequential, waterfall-like procedures to agile variants. This allows the processes to be tailored to the respective case: waterfall-like in the legacy system and more agile in the new world.
Organisations

Of course, change and transformation always have an impact on structures, as well. They also have to be adapted in the course of modernisation. We need to stop thinking in terms of rigid line organisations but rather apply hybrid transformational organisations, which also leave room for international units in order to eliminate resource- and skill bottlenecks.

The coronavirus pandemic has particularly shown how IT is spearheading change and transformation on the business side. This is also resulting in completely new types of cooperation between the business and IT sides. Changes that are successful on a small scale evolve to larger structural adaptations. As a result, structures become more hybrid over time and begin to sync with processes and architectures, with reporting lines setting the organisational framework and acting as guardrails.

A key to transformation success lies in the situational orchestration of these four factors. From my perspective, that is how to successfully transition to a modernised IT and restructure consistently, while still valuing existing systems. The challenge lies in how to design the required hybrid environment – and that will remain the case beyond 2022. I’m looking forward to it.

Innovation & digitalisation in the insurance industry

Transformation 2022: The journey to modernising IT continues

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