Creating a Case for Transformation
As a CIO for an $8.8B Blue Cross Blue Shield plan serving 3.3 million members, my leadership team wrestled with rising costs of operations, new and expanding digital platforms, cloud transformation, a shift to big data, and a large embedded base of legacy systems and how best to manage and support them.
While we worked to develop a plan to transform the company’s IT systems and data center, we invited top consulting firms to present their ideas. Cost reduction was a significant focus of our efforts. Still, we also needed thoughtful approaches on what to do with our large and complex legacy systems portfolio and help to develop a roadmap to get from legacy to cloud, to develop a digital roadmap, and create a plan to expand into big data.
The consulting firms we invited included some very talented people, but in large part, their proposals were either overly complex and disruptive or too simplistic and single-threaded. We heard single-focused pitches like, “Cloud transformation is the key.” We also were presented with dramatic transformational proposals that would cause organization disruption, layoffs, and dramatic change at a pace the company could not support. None of the firms demonstrated a transformation strategy that included ALL of the critical components of our vision – balanced change with a pace that was sustainable, and at a cost that we could afford.
Why are health insurance companies so hard to transform? Most large health insurance organizations have a core set of large purchased systems: claims adjudication & benefits management, membership, enrollment, billing, CRM, broker compensation, and provider networks. These core systems interface with hundreds of smaller and medium-size systems, both purchased and homegrown. This plethora of systems is mostly the result of the rapidly changing business and regulatory environment in the healthcare insurance space over the past twenty years combined with slow to change vendor-supplied core systems, often built on older technology.
The key to truly transforming a large, complex IT environment is the synthesis of multiple complex threads combined with a few critical ingredients for success.
The first, and possibly the most important key ingredient, is the stability of the company’s senior leadership team and their willingness to commit to a multi-year transformation strategy. This kind of transformation takes time, money, and business commitment that spans multiple budget cycles. There is nothing worse than a company approving a sizeable transformational program one year, only to pull funding a year later as the political winds shift or leadership changes.
There are many components to synthesize into a single strategy: cloud transformation, core systems transformation, big data, a digital roadmap, and managed services for operational systems support.
Many of my business partners had read how cloud transformation could dramatically lower a company’s cost of operations and pushed me to shift the company’s systems to the cloud quickly. They did not understand that over 95% of our IT systems were older and not cloud ready. Moving them rapidly to a cloud environment would likely be more expensive than running them in our own data center.
For example, none of our major legacy applications could turn off services, scale back data storage, or scale down CPU cycles during off-hours or low usage days, critical for cost savings in the cloud. What was required was a deliberate strategy targeting legacy systems that would replace or upgrade platforms to take advantage of how cloud services billed based on usage. This strategy, a multi-year journey that required significant investment before we could reduce operational costs, competed for project funding against other business-driven needs.
At the same time, we recognized that the cloud transformation roadmap could begin immediately with the company’s digital web-based customer-facing systems. The company had internally built robust web platforms: a Member platform for individuals that carried our health insurance; an Employer platform for companies that bought the insurance; a Broker platform for the companies that sold our insurance products; and a Provider platform for doctors, nurses, and hospitals that delivered patient care. Each of the four platforms had rich, easy to use functionality, and had been continually updated and enhanced for the latest technology. The four core customer-facing platforms were almost cloud-ready, with just a few technical changes, and were a good starting point for our cloud transformation. A second wave of platforms to be moved to the cloud was those near cloud-ready applications and could be enhanced to take advantage of cloud features and billing.
We wanted to shift our legacy data warehouse to big data to take advantage of the newer tools, faster time to market, and the speed of accessing large amounts of data, but this was not a simple or inexpensive project. The company’s legacy data warehouse platform, built over ten years, produced most reports for the company and was the source of data feeds to the company’s financial systems and over one hundred external trading partners. Conversion from a legacy data warehouse to big data was a multi-year transformation strategy that would be complex and expensive.
To give the IT organization the space to focus on new and leading-edge projects, we decided to shift selected core systems to managed services vendors for day-to-day operations and support. Over time, by contract, the managed service vendor would upgrade and reengineer the legacy systems to take advantage of the cloud.
Lastly, our digital strategy, which had been the company’s focus for some years, had to be kept current and continually upgraded as business demands and technology changed. This approach took significant effort and cost. It required input from external vendors, consultants, and our customers to get right. We saw our future as digital but wanted to make sure that the investments we made each year in this area were the right ones.
The best global systems transformation strategy includes a synthesis of multiple complex threads. The plan must integrate all of the following successfully:
- a long-term cloud strategy for the company’s legacy systems
- a short-term approach for digital front door platforms to move quickly to the cloud
- a transformation plan to replace legacy data warehouses with a big data architecture
- a plan to reengineer legacy system for the cloud
- a digital strategy that enhanced and improved on customer-facing digital services
- an approach to ensure that while all this change occurs, the systems continue to operate successfully.
And most importantly, the company’s leadership must be committed to the transformation program and willing to fund a complex multi-year transformation roadmap.