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© 2007 Athena Confidential 1 Between the rock and the hard place – core systems replacement or renovation? Tom Rogerson, CTO Financial Services Sector EMEA Sydney, March 2008
© 2007 Athena Confidential 2 Agenda How we got here The cookbook: strategies for replacement or renovation Making a success of replacement strategies –Selecting a package vendor SOA – the silver bullet? Making the decision
© 2007 Athena Confidential 3 How we got here… Insurance an early adopter of technology Change on change M&A Relics of previous strategies (CRM, ERP, client/server…) Previous (failed) replacement projects Weak IT governance Were still adding legacy quicker than were removing it
© 2007 Athena Confidential 4... and its causing real pain Poor flexibility: –speed to market, new distribution channels, business process improvements, automation Costs: –60%+ of spend on maintaining the old Risk: –obsolete technologies, brittle architectures, poor understanding Damaged IT / Business relationship: –IT focused on keeping the lights on Challenges different for Life/Wealth Management and P&C (but sufficiently similar to justify a single discussion) Bjarne Soustrup: Legacy code often differs from its suggested alternative by actually working and scaling
© 2007 Athena Confidential 5 The cookbook: strategies for replacement or renovation Outsource Application Outsourcing or Business Process Outsourcing Re-engineer Tactical re-engineering or full re-platform Wrap e.g. SOA Replace Build or buy Consolidate Onto one (or a very few) of your existing systems Componentise External components
© 2007 Athena Confidential 6 Consolidate or replace? ConsolidateReplace or Strategies for replacement or renovation pick your best system and convert to it better the devil you know replatform then consolidate? 8old system old system = old system Commonly considered in Life / Wealth Management for legacy products BuildBuy or we know our business best its about competitive advantage no troublesome vendor relationships were not a software house need to pool investment with others short term priorities will blow us off course Build strategies for speciality lines otherwise Buy strategies favoured on risk grounds
© 2007 Athena Confidential 7 Componentise strategies Strategies for replacement or renovation Tactical: –hardware re-platforming –Identify / streamline stabilise the 20 percent of code that is: invoked the most often and / or has a history of being changed and / or has a history of causing problems Strategic re-platforming: –code conversion / model-driven development / business rules extraction Increasing potential Re-platform then consolidate? Re-engineer strategies changing the wheels on the moving train –Easy: e.g. document production –Medium: e.g. calculations, billing, UI, product rules –Hard: e.g. policy admin Very common for the easy stuff … … but tends to stop at the hard core of policy administration functionality Re-engineer Componentise
© 2007 Athena Confidential 8 Outsource strategies Strategies for replacement or renovation Business process outsourcing (BPO): Well established Primarily focused on cost reduction Well established where transformation is to vendors strategic platform (Potential) agenda conflict hell Closed BookOpen Book Without IT Transformation With IT Transformation Outsource
© 2007 Athena Confidential 9 Outsource strategies Strategies for replacement or renovation Application service provision: 3 Proven 3Frees budget to tackle legacy strategy ?Include IT transformation in an Application Outsourcing deal? –Tempting, but best to retain control Increasing responsibility delegated to the vendor Staff Augmentation body shopping Managed Service narrow range of service Application Outsourcing full accountability can include transformation Outsource
© 2007 Athena Confidential 10 Making a success of replacement strategies The perils of doing replacement as an IT-only initiative: IT: We have the business case, youll scarcely notice … some time later Business: We know youre working hard but we cant wait, we need to launch new products … a little later Business: Hey, the new functionality we are getting is less than in the old system … and not much later Business: This is too expensive and painful. We need to stop and reassess … and an unpredictable amount of time later Business: Why is our IT landscape so cluttered? Replace
© 2007 Athena Confidential 11 Making a success of replacement strategies Replacement strategy must be part of a wider business initiative: – shared case for action not just a business case Allow time up front to integrate business process designs with IT designs: – will take longer than you could imagine Integrated business & IT plans, program management and governance Business change management an integral part of the program, not an afterthought Use the package as package, not a tool kit Data migration & quality realistically built into the plan: – the older the application, the worse these will be – proven approaches, tools and vendors exist, use them Replace
© 2007 Athena Confidential 12 Selecting a package vendor Harsh reality: the insurance package market is $MM but highly fragmented Highly parameterised (business processes, rules) Excellent functional fit Easy to extend, based on standard frameworks Standard, open technologies Can be deployed in components but also in a box Flexible integration mechanisms, based on industry standards Good access to skills Proven in your line of business at your scale The ideal insurance package … … so thats no problem then. Replace
© 2007 Athena Confidential 13 The functionality versus architecture dilemma Older packages tend to have more functionality but worse architectures If we spend five times more on enhancement than on initial implementation shouldnt I select the best architecture? But if the functional gap for the initial implementation is too great then thats a major risk in its own right … … and if I cant deliver value quickly then Im in trouble Ü it depends on the product line (for stable, legacy products, choose a mature package) Ü never be the first to implement a package (nor the last) Ü watch out for the draggy-droppy sales demonstration Ü score packages against weighted criteria that balance function and architecture for you (but decide these up front) Replace
© 2007 Athena Confidential 14 Challenges for a package vendor (in addition to the traditional functional / technical checklists) Your objectives The vendor FunctionalityTechnology The relationship The package How are you different and why does it matter to me? What clients do you have and when can I talk to them? Whats your biggest implementation? Where have you implemented my products before? How will you help me achieve speed to market? How will your integrate with my legacy? How do you separate rules from code? Walk me through a typical implementation How will I benefit from investments other clients are making? Replace
© 2007 Athena Confidential 15 SOA – the silver bullet? Wrap
© 2007 Athena Confidential 16 The SOA promise Allows you to build on your investment in your core systems Allows legacy functionality to be orchestrated in new ways Allows IT to become more responsive to business needs Potentially a way of enabling piece-by-piece legacy replacement strategies … and the pitfalls Many more moving parts to manage: reliability, scalability, performance, security, wide range of skills needed The standards soup Analysis paralysis Harder governance – who owns what? Architect wars, vendor hype Wrap
© 2007 Athena Confidential 17 Some high profile failures SOA not to go away (though the name may change): –SaaS and BPO will drive adoption Package vendors repackaging themselves as component providers (approach with caution) Not to become a commodity soon: –how you design and implement an SOA project still more important than the technology choices you make You can expect Get some experience now – if only on a small scale Dont expect it to solve your underlying legacy issues Focus on delivering business benefits early, worry less about getting it right first time Exploiting SOA Wrap
© 2007 Athena Confidential 18 Replatform? BPO? Making the decision – the right recipe for you? Application Outsource Re-engineer SOA Replace Consolidate Componentise … to free up budget … and potentially BPO for legacy products or and Part of a wider business strategy? Y N and … functionality or architecture? … so far but no further? … tactical: good benefits but limited …re-platform … long term potential, start now …will it address the business issues?
© 2007 Athena Confidential 19 Questions?
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