The Real Price of Outdated Legacy Systems Is Driving Away Your Customers and Employees

We start our journey on a definitory note. The definition here will be broad-based and from different schools of thought to offer you a more comprehensive understanding.

A code or tech debt is:

• The consequences insurance companies suffer when their technical teams try to enhance a legacy system or add functionality that soon becomes costlier to maintain than its benefits.
• It’s the upshot of prioritizing rushed automation solutions over quality and long-term sustainability.
• Industry analyst Gartner defines technical debt as the deviation of an app from any non-functional requirements.
• The Software Engineering Institute at Carnegie Mellon University defines technological debt as the trade-off between the short-term benefit of rapid delivery and long-term value.
• It’s the coding you must do tomorrow because you took a shortcut to deliver a shoddy technological solution today.
• It’s the money you should be spending on innovation being wasted annually to maintain outdated legacy tech systems that you lack the will to upgrade.

All these definitions point to three common problems:

• Rushing to deliver defective solutions that don’t offer long-term value
• Short-termism
• Shortcuts that soon short-circuit your business

So, what causes insurance firms to sink into tech debts? Companies have varying reasons for their tech debts. We can categorize into two broad ranges:

• Good: When a business thinks it’s better to get a technical solution at the expense of smooth functionality as long as it “works.”
• Bad: When a business focuses on other innovative or interesting areas that don’t add long-term value.

Now, let’s break down these two primary reasons into specific causes behind technical redundancy.

1. Deficient strategies: Failing to clarify an overall strategy and define its capabilities at a corporate level causes technical debt. Also, misaligning IT and overall strategy with meager resources reduces IT’s full positive impact on the company’s strategic direction.

2. Time constraints: Sometimes, a firm’s IT department settles for half-baked automation solutions when they’re under tight deadlines.

3. Constant evolution: We live in an ever-changing tech environment. Its dynamic nature can outpace an automation tool’s ability to serve customers, optimize market opportunities, and handle emerging cyber threats.

4. Outdated tech: An insurer might also suffer a technical debt if they fail to update their current automation frameworks, libraries, and systems.

5. Poor processes: Poor processes without proper project prioritization and task planning solutions also cause tech debts. Additionally, failing to maintain processes properly and measure code quality can also cause these debts.

6. Talent: Failing to maintain or attract tech-savvy talent also produces tech debts because it breaks a company’s technological backbone.

Technical debts come in different forms that require different customized solutions to pay. Here are the leading tech debts your business might be carrying.

1. Deliberate

These debts arise when IT experts fully know what they should do and how fast they do things. Doing things faster is still right if it doesn’t compromise non-negotiable dimensions like quality and ease of use. Unfortunately, some software technicians do things quickly to get a faster solution.

Also, a company can buy an automation tool its designers rushed just to get it to the market faster. This rush causes the end-user a technical debt because the product doesn’t work well.

2. Bit rot

Bit rot is another tech debt that grows over a long time when system components devolve into unnecessary sophistication. The complexity could result from incremental adjustments, especially when different people who don’t fully comprehend the system’s initial design work on it.

3. Accidental

We can categorize these debts as accidental or outdated. They occur when designers quickly design simple and easy-to-use automation systems. However, things go wrong when they don’t think ahead to future-proof these solutions. After some time, challenges arise along the way and render the system irrelevant or incompetent.

Insurance firms should always strive to balance these factors before settling for automation solutions. Balancing these components is a tight rope to walk. However, insurers and their IT departments still need to strive to achieve that delicate, all-important balance.

Technical debts are like bad debts in finance. They are like taking a loan to invest in a white elephant that overloads you, but you get no visible fruit. We must treat tech debts with deserved seriousness because they are costly.

It’s no wonder a recent McKinsey survey casts a dark shadow over these debts. The participating CIOs admitted that they divert 10% to 20% of their technology budgets for new products to fixing tech debt problems. Further, these CIOs confessed that their tech debt amounted to 20% to 40% of their entire tech estates’ value before devaluation.

How do these debts cripple insurance players? Here are the consequences of accumulating technical debt.

• Your agency or company can’t maximize big data techniques and tap into new third-party data sources to bolster its core competencies.
• Your firm won’t be able to cope with increasingly unpredictable insurance risks. For example, it won’t effectively address aging populations and ever-changing cyber threats.
• You will miss a huge chunk of the millennial digital natives who demand seamless and efficient inter-platform user experiences. That means you won’t benefit from this critical demographic because your business model tastes and smells like “old school.”
• Further, your business won’t deliver new capabilities, services, and products that meet timely or trending user demands.
• Saddest, you could lose tech-savvy clients who are tired of outdated technological models. Why? Because your platforms will always leave them with a sour user experience that gradually prompts them to embrace your competitors.
• Your firm will lose its competitive edge and become vulnerable to technologically responsive competitors.
• Don’t forget that you could lose the ability to optimize your enterprise data’s monetization potential.
• You might lose golden opportunities to collaborate with or even acquire insurtech startups that could give you a competitive edge.
• On the employee side, your business could lose its tech-savvy fresh blood, fail to attract new digital natives, or both. All these odds are against you because you can’t serve a digitally native generation with old school systems.
• Lastly, your organization’s operations and processes will degenerate into numerous deficiencies. For example, you won’t be able to gather or visualize data in real-time from a local or international angle.

Now, do you want to suffer or remain in any of these tech debt challenges? Definitely not. No insurer wants or deserves this kind of messy IT situation. Read on to learn how you can detect and resolve tech debts.

Detecting and resolving tech debts aren’t rocket science. Anyone can do it by following the right process. These steps are as breezy as counting 1,2,3, and boom!

1. Identifying the systems that are causing your technical debts

Start your prison break by looking for any or some of the following symptoms.

• You and your team face excessive complexity when your automation technology and tools overlap with one another.
• You suffer critical system failures due to catastrophic defects.
  Poor-quality code
• Various challenges like security breaches, unreliable code outcomes, increased usage difficulty, abnormally slow performance, and lack of compatibility with other hardware or software.
• Drastically reduced agility.
• Lastly and worst of all, your customers will always leave your platforms with a sour taste called negative user experience.

2. Managing technical debts

After detecting the problem, it’s now time to start managing your debts. Execute the process this way.

Assess: You must assess and measure the entire system to determine the debt’s actual cost. Perform this duty by estimating the amount of money and time your team or a vendor needs to fix the problem. Also, estimate how you expect the tech debt to change in the future.

Communicate: You don’t need to keep the bad news that you are in technical debt to yourself. It’s beneficial to share it with the relevant stakeholders for resolution. Share its implications with your technical team and non-technical leaders to forge a joint repayment plan. Do you remember the adage that a problem shared with the right people is half solved? It still makes sense today.

Pay: Since you have brought every relevant stakeholder on board, start paying the debt immediately. You can pay the tech debt in three simple ways:

• Waiving the requirement: You may take the easier route and live with the outdated and indebted system, keeping business as usual. If not, you have to pursue the other two options.
• Refactoring the systems: This alternative simplifies your automation systems, removes duplicates, and improves code structure. Taking this path is best if you want to enhance your code’s internal structure without interfering with a solution’s core behavior.
• Replacing the systems: Lastly, you may replace the entire automation system. This approach will rapidly address the debt and significantly minimize it.

3. Tips for running tech-debt-free insurance enterprises

Lastly, here are actionable tips to guide you in your resolution journey. They will help you succeed in the resolution steps we shared above.

• Treat tech debts with deserved seriousness as real business challenges and threats. Treating them as another technological shortcoming could convince you to cohabit with them.
• You and your team should agree on a shared tech debt definition. Reading from the same script helps you resolve the debt harmoniously as a united front.
• Avoid incremental technical debts by minimizing new investments in outdated automation systems and solutions. Only invest in new and flexible platforms.
• Resolve huge technological debts progressively by developing short, medium, and long-term strategies to pay them. Start with the most pressing debts and end with the less inconveniencing ones.
• Always consider each resolution’s financial implications and fund it with sufficient time and money to clear the debts.
• Maintain a simple and easy-to-understand debt catalog. Update the catalog with all arising items and assign them to the relevant people to address them at least twice annually.
• Don’t view technical debts as problems affecting some groups or departments in your insurance firm. They must be a shared duty between IT and other business departments.
• Assign responsibility for your catalog to teams participating in app, system, and project development/launching processes.
• Lastly, today is always the best time to start fighting technical debts. Never postpone resolutions to unknown and convenient future dates. Always budget time to address all tech debt issues the way you resolve other business matters.

With these steps at your fingertips and these insights in your mind, you should be able to run a technologically debt-free business. Don’t wait for tomorrow; start today because tomorrow isn’t guaranteed.

Technical debt is a new make-or-break battlefront for insurers, depending on how they approach and handle it. Therefore, we composed this post to guide you through all the necessary nuggets for detecting and resolving this challenge. We hope you are now supercharged enough to act, take the bull by the horns, and wrestle it down.

Luckily, you are not alone in this long-overdue prison break. Our team has helped many insurers like you break their tech debt chains and walk free. Go ahead and contact us today for more information.