An architecture to deliver the missing link: a service-oriented architecture provides a roadmap to meeting a corporation's tactical and strategic business objectives, as it links the past with the future.

Success in today's dynamic insurance market hinges on a carrier's ability to move quickly and adeptly in bringing innovative products and services to market. Carriers are being pushed--by economies and by customers--to explore new business models and delivery channels to remain competitive.

No longer questioning whether their systems need updating to meet fast-paced business and marketing goals, carriers are now focused on effecting the needed change at a reasonable cost and with minimal disruption to their operations.

While the industry continues to grapple with the inherent limitations of aging technology infrastructures, an increasing number of business and information-technology executives are discovering that service-oriented architecture can provide a strategic and tactical platform for immediate business flexibility and sustainable growth.

As the fulfillment of a unified strategic vision, service-oriented architecture offers a roadmap for an affordable, evolutionary transformation through the incremental replacement, migration, retirement and consolidation of outdated legacy systems onto more flexible, open and cost-effective platforms with little or no risk.

A BRIDGE TO THE FUTURE

One of the critical success factors in any technology-enabled organization is the effective use of existing assets. Carriers have invested millions of dollars in their current systems, and, naturally, they want to realize the full value of those.

Yet, the very systems that facilitated growth over the past decade now stand in the way of the continued survival of those very same carriers. Not only lacking the requisite flexibility and functionality needed to run a nimble organization, in many eases, these outdated systems require care and feeding that alone consume as much as 85 percent of a carrier's IT budget, leaving precious few dollars for new strategic initiatives.

While sometimes perceived as a purely technical solution, service-oriented architecture is not solely about technology or architecture. Nor is it a "forklift" replacement strategy that requires immediate displacement of existing systems and processes.

Service-oriented architecture provides an approach that acknowledges the value that resides in existing systems and embraces modern technology principles to leverage those assets. Further, it does this while paving the way for system consolidation and operational savings through the use of more consistent processes and common functionality across the organization.

Essential to achieving this are the concepts of encapsulation, decoupling and servitization.

Encapsulation is the analytical process that is employed by service-oriented architecture to isolate an organization's core business rules away from a specific system, language or database.

It "decouples" business functionality away from individual systems and allows that functionality to be accessed, or called, by any interface, regardless of the language or technology. Servitization essentially is what codifies this process following industry standards.

Why is this important? It helps to look at the genesis of legacy policy and claims systems and the highly transactional nature of insurance. Considering the typical policy system is more than 17 years old, it's not surprising that these systems don't meet the requirements of today's distributed computing.

To handle the high volume of transactions required, systems were engineered for performance, using the best technologies available at that time. And while that worked well, it produced silos, redundancies and complex integration challenges.

Plus, most legacy systems were not implemented in a fashion that lends itself to servitization. Presentation logic is often intertwined with data-access logic, and business rules are locked within individual systems and not easily accessible to one another.

Divorcing business rules from the back end breaks down the platform and system dependencies that inhibit applications from effectively sharing functionality. It creates a more open, flexible and efficient computing environment where old and new systems work together to meet a carrier's evolving business requirements.

This is essentially a winning proposition for the business and the information-technology side of the company.

Carriers can extend the life and value of their current information-technology investments, while taking advantage of new technologies to move the business forward.

Perhaps more importantly, the stage is set for an incremental migration away from stove-piped legacy systems to a more efficient, consolidated technology infrastructure.

With more functionality being available to and handled by newer technologies, carriers can begin to retire older systems, freeing critical information-technology dollars for more strategic investments.

LESSONS ON THE WEB

While the Internet afforded insurers a lucrative and efficient channel to grow their business, the path that many carriers followed in taking advantage of the Web added unintended costs and redundancies.

For example, as carriers looked at how they might offer online quoting capabilities, most realized that the underwriting rules required to do this were locked within the legacy policy administration system.

Rather than architect a process by which they could access underwriting data from this new interface, the Internet, many pulled out the needed code to duplicate the business rules or simply rewrote the code in another language.

In hindsight, carriers have realized that in the rush to adapt to the Web, they had layered on more costs for the maintenance of and responsibility for additional systems, and expanded the number of resources required to communicate and coordinate changes required for shared business rules.

By leveraging the service-oriented architecture principles of encapsulation and servitization, this same process can be accomplished today by breaking out the underwriting rules from the legacy system and allowing them to be accessed by the Web. This approach avoids duplicity while also providing a single point of maintenance.

The insurance industry is in the midst of a radical transformation that will likely continue for the rest of this decade. Quite simply, the infrastructure and strategic systems that are required to support contemporary operating models, customers and offerings must evolve quickly for carriers to sustain their business.

Service-oriented architecture can provide that bridge to the future for those prepared for the journey. It is not an overnight fix, but an incremental path with measurable payouts along the way.

For those who've been around for some time, service-oriented architecture is not so much a new proposition as it is the fulfillment of promises made--but not fully realized--by earlier innovations.

Skepticism is not surprising, given the size of investments and missteps along the way. But technology has evolved, and what was not possible then is today because the underlying technical architecture and enabling tools are in place to make it work.

Service-oriented architecture is not completely new, but it is a different, more practical strategy that presents fewer risks, more deployment options and a healthy payback that appeals to the economic and business sensibilities of a risk-averse industry.

Summary

* Service-oriented architecture allows carriers to move away from siloed, "stove-piped" systems to a more efficient model.

* It allows carriers to break out underwriting rules from legacy systems, allowing the rules to be accessed by the Web.

* Because underlying technologies have evolved, skeptics can rest assured that what was not possible several years ago is possible today.

ANDY LABROT is chief technology officer for Innovation Group, a claims, policy administration, business intelligence and business process outsourcing firm. He can be reached at [e-mail].