Modernizing legacy systems and platforms can drive significant business value by enabling faster innovation, greater agility, and lower costs. Organizations take a variety of approaches to modernization, typically based on their specific situation, such as the current state of their investments, their risk appetite, and their time horizon. In this interview, we highlight one such approach, where Lincoln Financial Group transitioned its sizable legacy footprint to cloud within two years. Rob Klaczak, senior vice president and divisional CIO for life, annuities, and distribution, and Satyendra Kumar, vice president and executive sponsor and program lead, discuss Lincoln Financial Group’s transformative journey from decades-old legacy platforms to a dynamic cloud-based architecture, the lessons learned on the way, and their advice for others with similar goals.
McKinsey: What prompted you to undertake this transformation?
Rob Klaczak: Lincoln Financial’s primary goals for migrating its legacy footprint (for example, assembler code, COBOL-based systems, highly customized system configurations) to the cloud focused on three objectives: reducing overall operating costs, addressing the high expenses associated with certain specialized software licensing, and transitioning to a more modern and flexible environment.
The need for modernization and the desire to move away from our fixed-cost legacy setup have been the crucial drivers of this migration. In the context of an insurance company like us, whether managing a million policies or just a few policies, the costs associated with our legacy platforms were largely fixed, posing a financial challenge.
We undertook our program to address these challenges, which were complex due to the nature of our business; the large scope of the modernization, which included 120 complex systems; and an accelerated time frame of less than two years to complete the entire program.
Satyendra Kumar: Another key objective was to move the decision-making power from IT to the business side by implementing a model that put a price on the consumption of technology services. Now each line of business has the discretion to increase or reduce its spending in alignment with its business goals.
McKinsey: How were you able to get senior management’s support and buy-in?
Rob Klaczak: The decision to transition to a cloud-based system—and getting senior management’s support for it—was based on a strategic blend of three things. First was grounding technology investments in a cost-benefit analysis aligned with the organization’s commitment to efficiency and cost effectiveness. We positioned the cloud transition as a significant expense-saving measure with tangible business benefits.
Second, the transition involved managing 12 to 15 policy administration engines critical to Lincoln Financial’s core operations in life, annuity, and retirement. Confidence in the success of the transition was contingent on a comprehensive risk-mitigation strategy. Recognizing the inherent high-risk nature of the program, we put together a robust risk-mitigation plan.
Third, the team’s execution strategy has focused on maintaining flawless operations throughout the transition. Despite an accelerated timeline, the emphasis has been on ensuring a high-quality product to avoid disruptions to internal businesses and external customer experiences. Our planning included meticulous checking, multiple validation processes, business acceptance testing, and parallel production runs undertaken by the team to guarantee a seamless transition.
McKinsey: How did you assemble the team to pull this off?
Rob Klaczak: The success of our effort came from a combination of strong leadership, adaptive planning, thorough due diligence, and effective organizational design. Satyendra’s leadership style, technical acumen, and commitment have been central to driving the program’s success. Our operating model also emphasizes leadership alignment, building organizational support, and implementing an agile approach to overcome the complexities of the transition process.
A significant aspect of the transition strategy involves adaptive planning. Traditional program management office (PMO) approaches are inadequate for dealing with the complexities of systems that have been in place for over 50 years. We therefore adopted an iterative approach, emphasizing frequent assessments, replanning, and agile responses to evolving requirements.
Gaining support and alignment across all levels of the organization has been critical. Transparency in decision making, involvement of diverse stakeholders, and clear objectives have contributed to building confidence among senior management and the broader team.
Designing robust organizational operating and engagement models is paramount. The hub-and-spoke model, where the core team (hub) is connected to various parts of the business and IT (spokes), ensures effective communication, information flow, and collective engagement. The emphasis is on avoiding isolation and fostering a collaborative environment to address challenges and celebrate successes collectively.
McKinsey: How did you approach overall planning for such a significant migration?
Satyendra Kumar: There were a number of key areas we focused on. First, we adopted a multiprovider, multipartner strategy for the transition. And the necessity of bringing partners together early on and encouraging collaboration beyond organizational boundaries was critical. Security was also a key consideration, and we worked closely with all key partners to ensure that we understood the nuances of security in a legacy system and met current standards in the target state.
The creation of a comprehensive, Wikipedia-style playbook democratized data collection and information sharing across the organization. We prioritized applications based on business needs, considering factors like processing times and application sensitivity, and took a dynamic approach to planning, blending automation and manual processes.
Lincoln Financial’s success in executing an agile approach, despite initial challenges with shifting dates, was due to the agile mindset, which was essential for adapting to unknowns, building confidence, and consistently delivering results. We also drew inspiration from Navy SEAL strategies, emphasizing preparation for the unknown and the ability to quickly readjust plans.
Leadership played a critical role in instilling confidence through successful deliveries and a transparent, agile approach. Positive feedback from business leaders highlighted the program’s success with minimal disruptions. Building and executing a robust cloud operating model was also essential in gaining support across the organization, and we empowered the team with decision-making authority, which helped us avoid “analysis paralysis” and become comfortable with short-term tactics. We also closely engaged stakeholders and leadership for interfacing applications so that their own feature release schedules were in sync with the migration schedule to ensure a seamless experience for the business users.
McKinsey: What were the major technical or nontechnical challenges?
Rob Klaczak: With a program like this, one should expect lots of challenges, and the only way forward is to work through them. A few of them included legacy security measures—authentication without authorization posed a significant challenge. Early engagement with the chief information security officer (CISO) and fostering a strong relationship with the CISO’s team were crucial for navigating security complexities.
We also focused on the need for a fundamental shift in mindset, from creating multiple environments in the legacy footprint to optimizing for cost efficiency in a cloud-based, consumption-driven structure. Emphasis on thought leadership and adapting to a more efficient approach in orchestrating processes was necessary.
Satyendra Kumar: This program is very exciting for technology professionals but posed significant challenges to senior management because there were so many unknowns related to more than 100 million lines of code, diverse old technologies, and fundamental changes in the underlying data structures and formats. Solutions involved conducting equivalency tests, securing data, and leveraging compression and decompression technologies.
Underestimating the time required for moving large volumes of data became a significant challenge. Migrating data across extensive policy engine platforms presented time-consuming hurdles. We also faced challenges related to code conversion, especially in technologies tied to specific partners, which demanded expertise in certain niche languages. The search for source code and addressing gaps in applications that lacked source code added complexity.
Identifying and dealing with technology blind spots, where certain technologies and functionalities are outdated, was also difficult.
McKinsey: How is the performance in the target state?
Satyendra Kumar: While the organization has not yet accumulated sufficient volume to comprehensively assess efficiency, there are early positive indicators. Parameters such as environment stability, meeting service levels, and running at optimized costs have shown promising results. Initial anecdotal evidence suggests improved performance for both external customers and internal business users. The cloud environment, despite its complexity, is more efficient, thanks to advancements in cloud technologies. Notable improvements in cycle times, with a reported enhancement of 20 to 30 percent, and affirmation of reliability, scalability, and performance of the cloud-based systems, have been the highlights so far.
McKinsey: What are the key lessons learned, and do you have any advice for others?
Satyendra Kumar: Careful and detailed planning, along with a SWAT team approach to identify and resolve unknowns, is critical to success. You also need to bring the whole organization along and clearly lay out the role each team needs to play. Communicate effectively and extensively within the organization and with vendor partners to create awareness and build a highly engaging team.
Rob Klaczak: An effort like this needs unwavering support from senior management. We also acknowledge the dedication of team members and partners and their enthusiasm and eagerness to contribute to this challenging and exciting initiative. The unifying goal attached to the program and the collective effort of a thousand individuals have been instrumental in overcoming obstacles and achieving success.
