Infrastructure Optimization and Hybrid Cloud Journeys of Insurance Carriers
Navigating Challenges and Finding Success
Insurance, being a protection industry, has always been cautious when it comes to adopting the cloud. COVID-19 changed that. Many insurance companies began migrating their workloads to the cloud to not only build scalability and resiliency but also to reduce costs.
Today, most insurance companies have 50-60% of their workloads on the cloud. However, three key issues have come up that most carriers are now addressing:
- Most cloud business cases are not holding up. Carriers find the cloud to be significantly costlier than on-premises solutions.
- Creation of technical debt and an increase in risk profile in infrastructure with end-of-support (EOS) / end-of-life (EOL) risks.
- Increasing software costs.
This blog post explores both the challenges and real-world responses from insurers who adopt cloud technology, and how Tech Mahindra helps insurers address these risks while saving costs.
From On-Premise to Cloud: A Reality Check
The cloud promised a lot to the data-heavy insurance industry, which handles massive volumes of customer data, policy information, and claims records. However, in a frenzy to adopt cloud solutions, some insurers overlooked the need for solid business cases and underestimated the complexity of moving away from their long-standing on-prem systems.
Without strong governance, cloud costs can quickly spiral out of control.
The cloud journey of insurers has been marked by increased adoption for efficiency, innovation, and scalability. However, significant challenges such as data security, legacy systems, and regulatory compliance have also persisted.
While the initial business case seemed sound, the cloud promised cost savings, agility, and always-on scalability, reality painted a different picture:
Aspect | Promise | Reality |
| Scalability | Seamless management of seasonal surges in claims processing and other fluctuating workloads. | Scalability exists, but costs can spiral without control. Business users started replicating entire databases, which quickly led to spiralling costs for data. |
| Agility | Faster digital-service deployment, like self-service portals.
| Bottlenecks due to legacy systems. Complex, expensive, lengthy integrations. Operational disruption due to migration delays. |
| Cost Efficiency | Reduced on-premise infrastructure costs.
| Anticipated savings often failed, and poor planning led to cost overruns. |
In their cloud journeys, clients faced challenges in data security and Privacy, Vendor Lock-in, Regulatory Compliance, Legacy Integration, and Talent Availability, among others.
Most carriers started with the aim of moving 100% of their workloads to the cloud or SaaS platforms. However, with many cloud business cases falling short, they are now burdened with a hybrid cloud model, where workloads are split between on-premises systems and the cloud.
Many of these on-premises platforms haven’t received a lot of investment and are at the end of their life cycle (EOS/EOL). As a result, most carriers are urgently remediating this technical debt to stay compliant and secure, further increasing their costs. This has also increased licensing costs, as organisations need tools that work across both environments.
The Role of the Right Infrastructure Partner
Strategic technology partnerships are crucial for success. The right infrastructure partner not only remediates the technical debt but also helps advance the cloud agenda with the right operating model and workload migration strategy.
Tech Mahindra, for example, has helped save $125 million for a large Asian Pacific Insurance conglomerate and $115 million for a leading US insurance carrier through a combination of infrastructure transformation, software licensing optimization, a shared hybrid cloud operating model, strategic cloud management, and cost optimization efforts.
In both cases, Tech Mahindra:
- Incrementally remediated technical debt.
- Migrated 16,000+ workloads to Microsoft Azure.
- Reduced licensing costs despite inflation (via effective negotiations, global discounts, and improved asset management).
- Implemented digital automation solutions with a more efficient operating model.
- Used Tech Mahindra’s proprietary FinOps tool to cut cloud costs.
In our experience, having a multi-hyperscaler strategy and engaging in a transparent discussion with your current cloud partner is critical to balancing costs. Today, Insurers are evaluating all three major hyperscalers—Azure, AWS, and Google — for application workloads. There are opportunities for insurers to drive significant cost reductions on cloud data usage through cloud-native tooling. This approach allows companies to choose the best platform for each workload, ensuring flexibility while avoiding vendor lock-in.
Strategies for Managing Infrastructure and Cloud for Insurers
Successful management of infrastructure and cloud costs requires a strategic approach:
- Incremental Migration: A phased approach that moves workloads gradually, tests performance, and optimizes costs is more effective than a “big bang” migration.
- Realistic, Well-Planned Business Cases: CIOs who pursued overly ambitious cloud projects without proper planning often encountered system disruptions and cost overruns. A well-structured business case with clear ROI metrics is crucial.
- Governance and FinOps: A lack of governance often leads to uncontrolled costs. FinOps, a cloud financial management approach, helps insurers reduce cloud spending by 20-30% by optimizing workloads and eliminating waste. Tech Mahindra’s expertise in FinOps and cloud cost management enables insurers to balance between cost savings and performance.
- Remediation of Technical Debt: Addressing technical debt and consolidating data centers is critical for effective multi-cloud management and seamless operations across platforms. Stabilizing hybrid infrastructures, addressing inefficiencies in legacy systems, and optimizing on-premises systems simplify cloud migration.
- Smart Non-Labor Cost Management: Actively managing non-labor costs, such as data centers, software, third-party contracts, and hyperscaler subscription fees, is critical. Leveraging tools to drive visibility and awareness of the impact of decisions within the organization is important. Consolidating data centers and software platforms and leveraging global partnerships is another key lever in this journey.
Conclusion
The insurance industry's cloud journey has been a learning process. Initial enthusiasm has given way to a more measured, strategic approach. Cloudification is expected to continue playing a critical role for insurers in improving efficiency, enhancing experiences, and driving innovation. For CIOs, it's not just about adopting the latest technology. It's about making sure every step delivers real value. Insurers need partners they can trust to navigate the complexities of the cloud, optimize resources, and deliver tangible ROI.
Tech Mahindra's deep experience in insurance-specific hybrid cloud infrastructure transformation and management strategies helps insurers strike a balance between innovation and cost efficiency, making cloud adoption a truly valuable investment. This blog has offered some key data points and perspectives. Still, Tech Mahindra's experience goes far beyond with numerous success stories and deeper insights that can guide insurers on their unique cloud journey.
