How to move beyond the burden of legacy systems [Q&A]

These days, companies are seeking to stay competitive and current by pursuing and succeeding at end-to-end digital transformation.

Successful digital transformation brings a myriad of benefits to organizations of all types, including operational efficiencies, improved customer engagement and digitally-enabled sales and service. However, organizations can't fully embrace and reap the benefits of digital transformation if they're still relying on their old legacy environment.

We spoke with Vinod Kachroo, CIO of SE2, an industry leader in life and annuities insurance technology, to find out why legacy systems are holding organizations back in general and hampering their response to business conditions created by COVID-19.

BN: Why is it more important than ever for organizations to address their legacy systems issues?

VK: Legacy systems are becoming riskier by the day. Systems modernization is now a real imperative, not an option. If companies don't digitize, their operating model can quickly become obsolete. They won't have the ability to enable newer operating models in an agile manner to quickly respond to ever changing market needs. And if companies don’t move off their constraining legacy systems, they might discover that they don’t have the necessary skills in house to continue to maintain these systems for both business continuity and agility in the not too distant future. It's important for organizations to really grasp the true business case of digitization beyond what is visible above the surface. They need to see the big iceberg under the water line that could potentially hit and completely destroy the organization.

BN: Is it possible for organizations to fully embrace digital transformation if they are still reliant on their legacy environment and still operate in silos?

VK: Legacy systems limit organizational agility, preventing companies from easily responding to changes in the business environment. In addition, many businesses are held back by siloed business units that work in isolation and prevent organizations from delivering a unified customer experience and leads to operating inefficiencies. Organizations that still engage with customers in product or line of business silos can't compete in the digital world. Companies must leave their siloed business unit mentality behind in order to successfully transform digitally. They need to deliver a brand experience.

BN: In general, how are companies doing at digital transformation? What's holding them back?

VK: Right now, only a small percentage of companies have migrated off of their legacy platforms. Most companies still use some form of legacy technology. The main challenge in migrating from the legacy systems is the complexity and the cost of those implementations. Migrations are typically multi-year transformations and senior and executive management may not have the appetite to commit to a large capital investment that spans multiple years.

BN: Do organizations face cultural challenges to modernization? Is there a legacy mindset that organizations need to overcome? Skills shortages?

VK: There are multiple challenges to modernization. On one hand, companies have IT teams that are very familiar and comfortable with their current technology landscape and they see that landscape as their job security. On the other hand, many of these technologies are becoming obsolete, may no longer be supported by technology vendors or might be supported by an aging workforce so when they retire, there may be no knowledge of these technologies left in the enterprise. As an example, New Jersey's unemployment insurance system wasn't able to handle the enormous volume of applications it received in April because the technology platforms were mainframe- and COBOL-based and the market lacks programmers with knowledge of the 40-year-old-plus programming language.

BN: How is the COVID-19 pandemic driving companies to take immediate action?

VK: While it has been important for quite some time for organizations of all types to digitize their environment, the pandemic has made digitization essential. Companies need to have a remote consumer model enabled by digital capabilities to maintain customer communication to both keep in touch and offer advice and reassurance, and also to act as a sales channel to offer products and services to market which might be sheltering at home. The pandemic has demonstrated the value of digital technologies and digitization of processes. The difference between winners and losers in this environment is how quickly companies were able to provide a digital sales and service model to their customers. The key for enabling a digital re-imagination for a digital paradigm is not only in creating a cool digital front end, but enabling the back end with digital technologies to create an end-to-end digital architecture.

BN: What steps should legacy-bound companies take to move toward digital transformation? How can they get started?

VK: Organizations must invest in digital end-to-end architecture to completely thrive in the modern world while completely future-proofing their enterprise. Companies need to upgrade their front end with a sound customer engagement platform. They can put a wrapper around their back-end platforms to start with, but they will eventually need a digital back-end platform for a truly efficient business model. Right now, in the midst of the pandemic, companies might want to start by focusing on digital origination systems and delivery systems that enable them to digitize the delivery of payments and documents. Getting the digital origination and engagement capabilities up and running quickly is absolutely critical. If companies don't have the front-end capabilities right now, they'll miss the boat dealing with the new demands of this pandemic. If they don't take steps to move off legacy systems and create truly digital organizations, they won't be able to succeed in the future.

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