Useful Lives and Technology Planning


Useful Lives and Technology PlanningFor insurance carrier IT organizations, this is a time of both great advancement and careful consideration for the future. An array of new technologies and deployment options make an installation today better, more functional, and more resilient than anything we have seen before.

In many ways, these factors can even alter our perception of what an IT organization needs to do. Many carriers have concluded, for example, that “getting out of the data center business” is an idea whose time has come. 

These changes, however, come with some stark new realities that are important to consider before getting too far out of a calm port of call. For example:

  • The useful life of new systems may be surprisingly short. Beyond the notion of continuous development/deployment, simple obsolescence may come surprisingly quickly given the general pace of change. Moore’s Law described this for hardware decades ago. Software is now moving fast, which suggests new planning and financial paradigms.
  • Trusted, strategic vendor relationships can also move fast. Beyond an array of M&A possibilities, the simple fact is that R&D is spelled “M&A” by many companies. Private equity and venture capital funding models can alter relationships in a hurry. Planning for changes in control has never been more important.
  • Resource supply chains are different today, with demand for key human capital skills now transcending any notion of a traditional local market. Delaying or deferring currency and allowing technical debt to build up can lead to both future retention and recruiting issues. With staff recognizing that they need to keep skills current to maximize their own value in the labor market, slowing or deferring efforts to maintain currency can have some surprising and painful adverse consequences.

That addresses issues with the “new stuff.” What about old systems that may have been developed by the grandparents of the people that will be hired tomorrow? Ironically, many may well have a long and useful life ahead of them if they are managed appropriately. They will never be cool again, but many can carry surprisingly robust workloads at remarkably low prices.

One of the magic elements of new hardware running old software is that, if tuned properly, it can run, as we say out in the country, “like scalded rabbits.” This may happen in someone else’s data center, of course, but the right workload on the right platform can lead to surprisingly good economic outcomes.   

As we’re fond of saying at Aite-Novarica, legacy systems may be fine for legacy customers…and not for new ones. In some long-liability-tail businesses (e.g., life insurance), legacy clients are likely to continue to be a reality for a long time into the future. If old contracts are to be converted, there should be clear decisions made on the financial benefits a carrier will achieve, particularly since new platforms may well cost more to operate than the systems they replace.

Of course, this also introduces other issues, including finding resources for systems dating well into the last century. This is a solvable problem that we see other industries addressing head-on with a variety of creative solutions. The most challenging thing for IT leaders may be thinking about all of this as a series of micro-problems to be addressed, rather than a macro-problem that responds well to a one-size-fits-all solution.

The United States Air Force offers an interesting analogy. It is clearly interested in new airplanes for new missions but recently announced that the venerable B-52, which first flew nearly 70 years ago, is getting new engines that will keep it in the air until 2050. These classics will be in the air long after new planes rolling down production lines now are retired in favor of even better, newer aircraft. Just as with many insurance carriers, a balancing act of the old and the new is key to successfully achieving an array of goals.

We live in interesting and complex times, to be sure. The answers CIOs and their teams need to consider are unlikely to neatly fit into a binary world of black and white solutions. Shades of gray will define the future; advantage will likely go to those who address this paradigm shift most effectively. Have thoughts on this topic? Please reach out to me at [email protected].