Can we use Micro Focus format data and indexed files directly or do they need some form of conversion?

You can keep your indexed data in Micro Focus format during a transition period by using the "mfc" file handler.
To specify all files as Micro Focus files to be handled by the mfc file handler, use this configuration variable in your runtime properties:

   iscobol.file.index=mfc

We suggest you convert your data as quickly as possible, and during this transition, you will want to set the file index to whichever data file format you have a majority of, then specify a different format for each of the other files.
For example, these settings set MyMFFile1 and MyMFFILE2 to be handled by the "mfc" handler, and all other files to the c-treeRTG file handler:

   iscobol.file.index=ctreej
   iscobol.file.index.MyMFFile1=mfc
   iscobol.file.index.MyMFFile2=mfc

Fixed-length sequential and relative files do not need to be converted; they can run as is.
Variable length sequential files will run without conversion as well, but you will need to set this configuration in your environment for the sequential files:

   iscobol.file.sequential=mfsequential

Variable-length relative files must be converted to fixed-length relative files.
This conversion should be done with a Micro Focus program that reads from the variable-length file and writes to a fixed-length file using the maximum record size from the input file as the record size of the output file.
For more information and additional configuration needed in some cases, please check the isCOBOL documentation's transition guide for Micro Focus.
When you're ready to migrate your indexed files, see How do I migrate indexed files to a format that is supported by isCOBOL? for instructions and an example.