Think sunk costs are not recoverable? Think again

In the first part of this series, we talked about the three main reasons that insurers cite for their hesitation about adopting cloud, and debunked the first myth about how cloud is not necessary for digital transformation.

Now let’s examine the other two most common fallacies. Most insurance leaders think sunk costs are not recoverable and that lift-and-shift does not work, but we have a case study that proves otherwise. For an Asia-Pacific multinational insurer, they were able to shrink their data center space by more than 75 percent and reduce their utility costs while moving to the cloud.1

Like most financial services companies, this insurer had grown significantly through mergers and acquisitions over the years, which resulted in it running an unnecessarily complex IT environment. The company’s IT had to support as many as 14 brands in five countries. More than 2,000 applications, with significant redundancies, complicated an already complex and siloed IT architecture.2

Accenture worked with the insurer to help it achieve an 80 percent reduction in the cost of a specific environment of an application suite. The use case was a development testing environment migration of a commercial suite of off-the-shelf actuarial systems to cloud infrastructure. The firm implemented a public cloud solution that enabled automated complex provisioning and operations workflows.3

According to an Accenture survey, one in three insurers claim unfavorable total cost of ownership is holding them back from adoption, but given that six out 10 insurance companies replace their legacy systems every three to six years, many have the opportunity to migrate to the cloud.4

An 80-percent cost reduction does not happen with slow, incremental change. Nor does it happen without the cloud.

Coming up next, we lay out the roadmap to migrating to cloud, a powerful business asset.

To learn more, register to download the report: Cloud as Rainmaker

 

  1. Cloud as a Rainmaker, Accenture, 2016. Access at: https://www.accenture.com/us-en/insight-cloud-insurance-rainmaker
  2. Ibid
  3. Ibid
  4. Ibid

 

Gordon Clark

Managing Director, Financial Services, Technology Advisory

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