Other parts of this series:
Cloud computing gives insurers a much-needed vehicle for vital digital innovation. However, three big myths about the cloud are stopping many insurers from capitalizing on the power of this technology.
Insurers are under increasing pressure to accelerate innovation to keep pace with new disruptive technologies and changing customer behavior.
Cloud computing provides a crucial vehicle for much-needed digital innovation. It underpins all the major digital advances insurers need to adopt to satisfy future customer needs and meet long-term business objectives. Innovations as diverse as digital channels, self-driving cars, wearables and advanced analytics systems all depended on cloud technology.
However, many insurance executives are holding back from embracing the cloud. Around 85 percent of the executives we canvased in our 2016 Technology Vision for Insurance survey, for example, agreed that the cloud would foster innovation in their businesses that was not previously possible. Yet, only 49 percent were investing in comprehensive digital technology programs as part of their business strategies – moves essential to capitalize on the potential of the cloud. Often insurers are stalling a shift to the cloud because of common misconceptions about this powerful technology environment.
Some of the reasons they give for their reluctance are:
- Lifting and shifting applications to the cloud does not work.
- Sunk costs are unrecoverable.
- Digital transformation can happen without cloud.
These beliefs are, for the most part, fallacies.
Let’s look at the first fallacy: that lift-and-shift doesn’t work. In fact, we’ve already helped some insurers realize 80 percent savings using the lift-and-shift approach to cloud application migration. In the highly-competitive banking sector, Capital One demonstrated the cost-cutting potential of switching to the cloud by migrating most of its critical workload to Amazon Web Services (AWS). The US banking group expects this shift to help it more than halve the number of data centers it requires.
In addition to cost savings, moving to a more agile, cloud-based environment provides insurers with the flexibility and speed-to-market that traditional infrastructure cannot match. That’s important, given that more than half the insurance executives we canvassed claim current technology processes are impeding their business objectives. Incremental change to traditional technologies will not solve that problem. A utility-based cloud model is the best way for insurers to improve their flexibility.
Furthermore, our research shows that more than two-thirds of insurance executives believe that replacing their legacy technology with something new would be too costly. Yet more than 10 percent of carriers use no legacy technology at all. While the savings achieved by replacing legacy with cloud-native applications are typically hard to match, we see equivalent gains in some lift-and-shift scenarios, such as migrating development and test environments to cloud workloads.
In my next post, I’ll address the common fallacy that sunk costs cannot be recovered if companies move to the cloud. In the meantime, have a look at this link. I think you’ll find it useful.