Much Work to be Done Before the Boomers Bolt
Information Management Online, March 3, 2010
Though more marathon than sprint, insurers are indeed in a race to glean as much as they can from a graying IT workforce possessing increasingly rare skill sets and a vast amount of institutional and system-specific knowledge.
Considering the stakes, carriers need to make tactical considerations, including shifting internal staff and outsourcing certain functions, in order to maximize the effectiveness of these workers.
Concurrently, many insurers view this generational shift as a strategic opportunity to refresh their technology stacks. With the industry competing for a new generation of technology workers eager to work with the latest technologies, the importance of these efforts is hard to overstate.
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Aging is not easy on man, woman or machine. Whether it's a carrier's legacy infrastructure or the increasingly graying heads tasked with maintaining those systems, the signs of age are evident.
With the baby boom generation inexorably moving toward retirement age, insurers face a brain drain of unprecedented proportions, but also the opportunity to reinvent their technology stack.
"It's not uncommon within insurance IT groups for more than half the group to be within 10 years of retirement," says Matthew Josefowicz, director and head of the insurance practice at New York-based Novarica, noting the long-term nature of the problem has helped delay its resolution. "The average tenure of a CIO is three to five years, so 10 years may seem like a lot of time, but as a strategic issue for insurance companies it is a very serious issue."
Eric Bulis, SVP & CIO at New York-based SBLI USA Mutual Life Co. says the graying of the IT workforce has several major implications for insurers.
"In some organizations it may speed up efforts to migrate off legacy systems if leadership has been able to create a value proposition that justifies the initiative in addition to just the people challenge," he says. "The graying of the workforce should not be the sole reason."
In addition to speeding legacy migration, Bulis sees two other primary impacts from an aging workforce. "One, it is speeding up the outsourcing of the support of those systems versus truly confronting the aging issue in their organizations," he says. "Two, it is finally pushing senior business and IT leaders to create and execute comprehensive and deep succession plans for those key resources in their organization - the SMEs that care for these older systems. I would like to think that most leaders are taking a blended and balanced approach that considers and incorporates the most appropriate elements of all three opportunities in a way that is custom to the needs of each organization. One size does not fit all."
To be sure, implications of this demographic shift are profound for insurers. While many front office, customer-facing applications have been modernized, legacy systems and languages persist in the back office.
What's more, legacy system knowledge and expertise is not being refreshed in the workforce gene pools, notes Cornelius Valenti, IT communications manager for Warren, N.J.-based Chubb Corp. "They are not teaching 'old' technology like COBOL in schools," he says. "We have to find ways to replenish these skills now and into the foreseeable future."
The Race
As VP and CIO of Atlanta-based Bankers Fidelity Life Insurance Co., Sanjeev Singh is also keenly aware of the ramifications of the coming retirement wave.
Singh agrees the aging of the workforce is putting a premium on legacy migration efforts, noting that in five to seven years, many of the people on his staff will be retired.
"On the back end, we have staff maintaining legacy systems, and they have been here for 20, 25, even 30 years," he says. "The challenge is to get the systems replaced while they are still here."
Yet, despite a variety of new tools available to ease migration, it remains a challenging and time-consuming process, says Craig Weber, SVP at Boston-based Celent. "Carriers have a lot of trouble," he says. "It's a very manual process-slogging through code to extract logic buried in the system. It's hard to make a clean-sweep approach away from legacy even after you have decided to do it. It's a process, and it's going to take time."
For Singh, one of the more obvious challenges is in extracting the business rules out of his company's existing system. "That's where the pain points are," he says.
To bring the proper resources to bear, CIOs have options ranging from re-deploying internal staff to utilizing third parties, and Singh has utilized a mixture of both, using strategic outsourcing in order to enable his staff to focus on legacy migration. "I am currently using outsourcing on the front end," he says. "The question is: How much can you replace?"
Valenti, too, says carriers must make the most of the time they have left with aging workers. "There are things we can do to maximize the use of remaining available Boomer time and talent," he says. "To do so, we have to better understand and accommodate the aging workers needs, and we are engaging them to help us learn."
Singh is confident he saw the retirement wave coming far enough ahead to take corrective action. "I think, in our case, there's enough time."
Weber, too, thinks carriers have ample opportunity to prepare. "This is a train wreck that we've seen coming far enough ahead to address it," he says. "This is one of those calamities we've seen coming for a long time. The only question is, does it get here this year or five years from now?"
Outside Help
Another way carriers can address a looming of scarcity of IT workers is through outsourcing.
An insurer can opt for outsourced help for a continuum of services from basic application maintenance all the way to purchasing a fully managed service. With an aging workforce placing human capital at a premium, some carriers will outsource basic jobs such as programming and data entry, preserving more experienced workers for higher-level tasks that demand understanding of the business, such as project and program management.
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