AI: Rethinking legacy transformation
Contents The Old Paradigm The Old Logic: Off-the-Shelf Software as a Safe Option For many years, the strategic decision seemed […]
Contents
- The Old Logic: Off-the-Shelf Software as a Safe Option
- Dwindling Expertise: When In-House Development Reaches Its Limits in Terms of Personnel
- The Flight to the Status Quo: Safety Became the Decisive Factor
- The Turning Point: Why the Equation Doesn’t Necessarily Add Up
- The key insight: Legacy systems are a strategic asset
- The Game-Changer: AI Is Changing the Rules of the Game
- The Key to Success: Process Expertise Becomes a Strategic Resource
- The implication for decision-makers: IT is once again becoming a key differentiator
The Old Paradigm
The Old Logic: Off-the-Shelf Software as a Safe Option
For many years, the strategic decision seemed clear: Anyone who wanted to replace their established legacy systems turned to off-the-shelf software. The reasoning was as simple as it was convincing. They opted for software that worked—at least in theory.
- Bringing best practices from the market into your own organization,
- predictable costs,
- Predictable project durations
- and a reduction in implementation risk by shifting the risks associated with development from the in-house development team to the provider
– those were the promises that won over the decision-makers.
Dwindling Expertise: When In-House Development Reaches Its Limits in Terms of Personnel
Added to this was a structural problem that had long been underestimated: As the baby boomer generation retired, not only was experience lost, but often also a deeply ingrained understanding of the logic and inner workings of the system landscape. In-house development thus became a challenge not only economically but also, increasingly, in terms of personnel.
The Flight to the Status Quo: Safety Became the Decisive Factor
This gave rise to a paradigm that persisted for years: once-proud, monolithic core systems—once the backbone of the organization—had to be replaced by standard solutions—not necessarily because they were superior, but because they were considered more manageable. For many organizations, this was less a technological relief than a psychological one.
But this paradigm is increasingly being called into question.
The Turning Point: Why the Equation Doesn’t Necessarily Add Up
The expectations once placed on off-the-shelf software are increasingly rarely met in practice. The reality is more complex: off-the-shelf software is rarely truly standard. Processes that have evolved over time, customized pricing structures, and unique business logic cannot be easily mapped “off the shelf.”
This results in extensive customization.
What was planned as a predictable investment often turns into a costly transformation program. Market-differentiating features are lost, implementation projects drag on for years, budgets are exceeded—and the hoped-for cost advantages are increasingly diminished or disappear entirely.
Furthermore, off-the-shelf solutions are often technologically closer to the legacy systems they are meant to replace than one might expect. Replacing an old system with one that is only marginally more modern rarely creates a real competitive advantage.
The New Paradigm
The key insight: Legacy systems are a strategic asset
The key insight, therefore, is this: Legacy systems, which were long considered a burden, are increasingly proving to be strategic assets.
Over the years, these systems have come to reflect processes, technical distinctions, and company-specific logic. On the one hand, this cannot be easily standardized. On the other hand, these systems document the knowledge about an insurer’s business model that has been gradually lost over the years due to demographic shifts.
This realization fundamentally changes the nature of the question. It is no longer just a matter of how quickly and with minimal risk a legacy system can be replaced.
What matters most is what must not be lost under any circumstances.
The Game-Changer: AI Is Changing the Rules of the Game
It is precisely at this stage that a new player enters the scene and changes the rules of the game: artificial intelligence.
What at first seems like just another technological promise is increasingly turning out to be a real game-changer. That’s because AI addresses precisely the weaknesses that have so far limited both in-house development and off-the-shelf software.
In the field of development, AI is taking productivity to a whole new level. Tasks that used to take months can now be completed in a fraction of the time—not just incrementally, but in significantly larger leaps.
Factor 1,000
Initial measurements show performance increases by a factor of several times, and in some specific applications, even by a factor of 1,000.
This fundamentally changes the cost-benefit analysis.
At the same time, AI opens up new possibilities for working with existing legacy systems. What was once considered a difficult-to-access “black box” can now be systematically analyzed, structured, and made transparent in terms of its business logic. Knowledge that was thought to be lost can thus be reactivated. This not only makes migration more manageable but also leads to a fundamental reassessment of its quality.
The Key to Success: Process Expertise Becomes a Strategic Resource
The changes affect not only IT, but the entire organization.
The traditional developer is taking a back seat. What will be crucial is the ability to understand business processes and integrate them with technological capabilities. The entire development cycle—from requirements to implementation—is being gradually automated, extending all the way to the development of new systems. With agent-based AI approaches, applications are created through the orchestrated interaction of specialized AI agents.
This makes process expertise a key competitive advantage.
Companies that can clearly structure and describe their value creation are able to translate it quickly and efficiently into effective systems.
All in all, the economic impact is substantial: development and operating costs decrease significantly, while speed and adaptability increase.
This marks the return of an option to the strategic agenda that many had already written off: in-house development—albeit under entirely new circumstances.
The Implication for Decision-Makers: IT Is Once Again Becoming a Differentiator
For company management, this has a clear implication: The role of IT is undergoing a fundamental change.
The question is no longer whether legacy systems should be replaced, but how this transformation can be leveraged strategically.
For the first time in decades, there is an opportunity not only to make IT more efficient, but also to use it once again as a key differentiator.
Legacy Transformation with BAMAC
How are you strategically leveraging your transformation?
We support banks and insurance companies every step of the way—from analyzing their existing system landscapes to implementation—and help identify which knowledge must be preserved. Talk to our consultants about your current situation.
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