Despite a meteoric increase in cloud adoption, executives at many insurance companies are still reluctant to make the move. Even as leaders within these organizations grapple with the imperative to modernize and innovate, many proceed with extreme caution.
That's understandable, but for insurance leaders aiming to build competitive advantage, that sense of caution should be counterbalanced with a healthy measure of realistic optimism. In reality, cloud migration is probably not a question of "if" but "when." Evidence of the cloud's inherent strengths continues to accumulate, just as the perceived drawbacks and limitations of cloud technology are waning.
Here are the five objections you're likely to encounter as you are championing innovation in your organization, along with some arguments for overcoming them:
Overstated Security Concerns
When CIOs think about cloud migration, many envision a landscape rife with security risks that cannot be fully controlled. After all, cloud migration entails outsourcing the security of critical systems and data to a large organization that is subject to constant threats from the outside.
In reality, most insurers currently operate on a highly fragmented technology infrastructure, with thousands of potential entry points. Security teams, more often than not, fall one or two steps behind the bad guys in terms of their defense posture. Cloud providers, in contrast, employ large, expert teams whose only job is to stay ahead of the attackers.
Where the cloud was once perceived as the riskier option, perhaps correctly, today that situation has reversed. In the new reality, traditional computing infrastructures tend to be substantially less secure than the cloud.
See also: The Case for Cloud Computing
The Perceived Talent Gap
Many insurance carriers believe they simply don't have the talent necessary to follow through effectively with cloud-based initiatives. The supply of top-tier developers and cloud specialists is limited, after all, and demand is high. Many insurance carriers feel that they don't have the budget to compete for that talent and retain high performers.
In fact, carriers should also be mindful of an offsetting trend. Most insurers' IT systems may soon be relegated to the category of "legacy technology" (if they haven't already been labeled as such). As mainframe shops know quite well, the market for legacy talent grows increasingly competitive over time, as a wave of experienced personnel retires from the workforce. Meanwhile, new college graduates gravitate toward the latest technology instead.
With the transition to the cloud, managed service providers (MSPs) can solve insurers' resource challenges with staffing, training and personnel management. The right MSP can deliver talent augmentation for design, development, testing, deployment and maintenance. This not only mitigates the risk of a talent drain but also allows for the acceleration of projects at any time, without hiring to address transient business demands.
The Boondoggle Objection
Many critics will claim that cloud migration is just another wasteful IT boondoggle. Unfortunately, large-scale IT initiatives have long had a reputation for costing two or three times original estimates and for taking considerably longer than projected. Combine this with the perception that IT departments are wont to chase every shiny object that comes along, and it's easy to understand the skepticism.
In fact, cloud migration is a joint decision between business and IT, driven by both technical and bottom-line impact. There are important strategic benefits, but if those aren't clearly articulated, the boondoggle objection remains.
As with so many endeavors, planning and preparation are critically important. By investing time up front in design and planning, fully assessing system dependencies and selecting migration partners carefully, you can keep budgets and timelines intact, with the promised results delivered successfully. Preparation is everything.
Resistance to Change
The complexity and scope of cloud migration projects often prompts stakeholders to express a broad-brush resistance to change. Carrier IT infrastructure is typically extensive and fragmented, making migration seem like an impossible undertaking. This is usually accompanied by an assertion that because current systems are working reasonably well, it makes little sense to disrupt the status quo.
Cloud migration may indeed seem like a daunting task, but ultimately this is a question of mindset. With a thorough assessment, planning and design process, it is achievable, even for the largest and most complex systems in the world.
If one begins with the premise that things like agility and scalability matter, then change becomes imperative. Viewed in this context, legacy on-premise systems present barriers to success. Over time, they will become increasingly cost-prohibitive.
Perceived Immaturity of Cloud Apps for Insurance
Finally, there is the perception that cloud applications, especially for insurance carriers, lack the maturity and track record of legacy systems.
Numerous enterprise applications are already running successfully in the cloud, including mission-critical ERP systems, CRM and related business applications. Mainframe shops have been very successful in migrating complex systems to the cloud. Large-scale application environments like Facebook, Google and Amazon have proven beyond any doubt that cloud-native technology is robust, resilient and scalable.
Ultimately, on the question of whether to move to the cloud, the answer has to be "yes." The timeline for that transition may vary greatly from one organization to the next, depending on the complexity of current systems, strategic priorities and budgetary constraints. Nevertheless, the five barriers to cloud adoption will increasingly lose their hold on insurance carriers as more and more companies embrace the imperative of innovation.
As first published in Digital Insurance.