Even in laid-back Hawaii, agents don't want to wait until tomorrow for a reply from an insurer. They want it today. So when Hawaii's largest property/casualty insurer sought to meet the demand for a response time measured in minutes instead of days, it looked to its technology.
Instead of buying a whole new system, however, the Honolulu-based company found the answer it needed in that old workhorse of the business world, the mainframe.
"In order for us to give better customer service, and to serve both our in-house and out-of-the-company end users, we found that we had a need to give a more immediate response," says Jim Blankenship, assistant vice president of applications at First Insurance Co. of Hawaii. After carefully weighing its options, the company found that it could meet the need for speed not by replacing its computer systems, but by updating its mainframe.
"When we made the changes on the mainframe applications, that had a significant effect on the end users. They went from having to do things in a batch, gradually squeaking it by, to being able to do it right away," Blankenship says.
Derided just a few years back as the dinosaur of the computer age, mainframe computers?often called Big Iron--are staging a comeback.
"The mainframe is far from dead. It's experiencing a renaissance," says Philip F. Proudfoot, solution development manager for IBM sales and distribution.
Over the past four years, mainframes have captured 16 points of market share in the high-end server computer category, according to IBM, which in July launched its newest version of the mainframe, the z9 series.
EVOLVE OR RIP AND REPLACE
Corporations that are heavily dependent on data, such as insurers and banks, see not only stability in their mainframe systems, but increased performance, cost savings and better security.
In addition, staying with mainframe technology allows insurers--that moved aggressively to take up the technology soon after IBM introduced the first S/360 mainframe in 1964--to make the most of the investments they have made over those years.
"For many years they've been looking to preserve the investment in those original systems. They've been looking for ways to transform them into more modern technologies, with more flexible support for the business," Proudfoot says.
With new capabilities to integrate mainframe systems with today's Web-enabled world, companies don't face the choice of having to totally replace their systems, says John Napoli, global director of financial service solutions for BEA Systems Inc., a leading vendor of business infrastructure software known as middleware.
"There's no business case to pull out a mainframe unless it's an unsupported or antiquated system. The days of 'rip-and-replace' are outdated," says Napoli. "At this point it's all about leveraging what you have."
With the widespread growth of PC-based client-server systems and the explosion of the Internet, insurers added new, so-called distributed technology systems that were thought to spell the end of the mainframe.
Instead of replacing the mainframe, however, many insurers have moved to link those distributed systems into their mainframe to get the best of both worlds--the stability that comes with a mainframe and the Web access that agents and consumers expect today.
"The mainframe is a tried-and-true technology," says Keven Busque, chief information officer for personal lines for The Hartford. "What we're doing with the mainframe is we're exposing it to our Web environment.
"Our Web environment will run distribution channels, whether it's dealing with agents or insureds. It's all Web-enabled, and it integrates with the mainframe," Busque says.
That's the kind of approach that technology consulting and outsourcing firm Computer Sciences Corp. calls an "extend, enhance and evolve" strategy.
"Basically, what you're doing is you're moving your users into the future without that big rip-and-replace every time you want to add function to the system. Users are seeing the systems change gradually over time," says Wayne McDaniel, CSC's director of property/casualty outsourcing.
A BULLETPROOF BOX
Besides just trying to make the most of existing investments, insurers also point to the mainframe's dependability, security and sheer number-crunching power.
"They're dependable. They're reliable. They're scalable. And they have tremendous power," McDaniel says. "There's a tremendous amount of function in these mainframes, and companies have spent a lot of time and money putting in all the functions and features that they want to make themselves unique in the marketplace."
A key concern at The Hartford is ensuring that they have a reliable, robust system that can accommodate the company's double-digit growth, Busque says, and they know the mainframe will meet their performance standards and keep security at a high level.
"Its availability is extremely high. It doesn't crash. It's fairly bulletproof," Busque says. "Security on the mainframe is much more mature than distributed platforms."
Another attraction of updating a mainframe system is the chance to wring some costs out of its technology infrastructure.
"What we've seen in a lot of large insurers is a proliferation of servers, different platforms, be they Unix-based or PC-based servers. It's created a very complex environment with an extremely high-cost overhead and a very difficult operations requirement," IBM's Proudfoot says.
One of the ways to reduce costs is to take the larger server "farms" that many companies have built and replace them with virtual server copies on a mainframe. A single, new mainframe can support thousands of these virtual servers, according to IBM, which has the lion's share of the market when it comes to mainframe systems used by insurance carriers.
"What you get for all that is you're managing complexity. You're simplifying your environment," Proudfoot says. "You're getting a greater return on investment because you're simplifying this server farm into a single box that can be managed very efficiently."
Even mundane costs, such as the cables needed to connect all of those servers, can add up.
"You can save literally millions of dollars just in cabling costs," Proudfoot says.
At First Insurance of Hawaii, Blankenship says the company was able to reap significant savings by creating virtual servers running Linux open-source software on the mainframe to replace individual servers running proprietary software.
"That's reaping benefits on both licensing costs of software as well as reducing hardware, environmental and support costs for our server farm, which is gradually getting smaller," Blankenship says. "The total cost of ownership is being reduced by moving more things onto the mainframe."
In addition, Blankenship says the company has seen some unexpected improvements in moving some processes onto the mainframe.
"When we moved our database from a Windows-based platform onto Linux and worked with IBM to get that tuned, we had a six-fold improvement in performance," Blankenship says. "That made us very happy, and our end users are happy."
While mainframes may be here to stay, so are the newer, distributed computer systems. That means that companies face the task of making sure their mainframes and client-server systems work together effectively.
"We have seen clients that run in a coexistence model, where they may run an existing business on the mainframe platform, while new business is designed to go to a new or distributed platform," says Matt Foster, chief technical architect for insurance at consulting firm Accenture.
If, however, a company has already moved aggressively to more distributed systems, it may be time to turn off the mainframe.
"For those capabilities that exist on the mainframe that may be very mature and are clearly meeting the business demand, there's rarely a justifiable business case to move those off of that platform,' Foster says.
"If it's a single application running on the Big Iron, it's often hard to justify the cost of the Big Iron."
MICHAEL FITZPATRICK writes frequently on technology issues for Risk & Insurance®.
October 1, 2005
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