Our own Dan Griffiths was approached this past summer to provide his insights into the legacy system headaches that organizations face today. You can read the full piece on the Finanicer.com website in their August issue, or you can read on to hear Dan’s views on modernization.
Although they may well have been considered state-of-the-art in their day, the IT currently being utilised by many financial institutions (FIs) is several decades old – legacy systems that are pretty much creaking at the seams. Without doubt, the continued use of such outdated systems (often large and cumbersome IT infrastructures) is making it very difficult indeed for FIs to adapt to meet the new demands of customers and regulators. For many of those operating in and around the financial sector, FIs are very much in survival mode, with little chance of new developments, replacing legacy systems much-needed innovation and modernisation.
1. With many financial institutions (FIs) continuing to operate legacy IT systems which are decades old, how pressing and problematic is the need to maintain or replace them?
Dan Griffith: For many financial institutions, it’s very important to maintain, and in some cases replace, legacy IT systems if they are going to deliver modern customer experiences and still adhere to regulations that are increasing and continually changing. However, for business continuity reasons, many legacy systems cannot be replaced. In these cases, a modern agile process framework is very helpful to connect legacy systems to the web portals and mobile applications that are key customer interfaces today.
When systems are replaced, FIs face challenges figuring out what to do with the data they maintain. Knowing what data to keep for compliance and business continuity requires an agile approach to application decommissioning.
2. How do aging legacy systems affect the ability of FIs to compete in an aggressive business environment? Are they compromising efficiency, agility and innovation?
Dan Griffith: Legacy systems adversely affect the ability of FIs to compete because they are too rigid and lack the ability to quickly change without massive coding and development overhaul. This rigidity does affect them adversely because without something additional (i.e. a modern agile process framework) they can’t change or innovate quickly, deeply affecting their ability to keep up with changing markets and growing customer expectations.
3. To what extent are these systems the result of patching together systems that were never intended to integrate?
Dan Griffith: Many of the systems in financial services reside in silos, often in different business divisions. This siloed environment makes it increasingly difficult to integrate systems without a modern agile process framework. Many of these systems were never intended to integrate, but that integration is now critical to customer experience success. Without integration, FIs don’t have a single view of the customers across products and services, and they can’t provide a consistent, seamless customer experience.
4. Are FIs reluctant to spend money on legacy systems due to a “if it ain’t broke don’t fix it” mentality? What are the cost and time implications of replacing legacy IT?
Dan Griffith: In today’s climate where IT budgets are shrinking, the adage “if it ain’t broke, don’t fix it” may be the prevailing mantra, but it often results in more costs and issues than replacement does. In some cases, they might put a new system in place, yet leave the legacy system running to maintain existing records. Storage costs, IT expertise and time-consuming coding changes all result in higher than expected costs for maintaining legacy systems. What is surprising to many is that retiring legacy systems and migrating data can be done quickly and result in bigger cost savings through an agile application decommissioning strategy.
5. What options are available to FIs to solve the legacy problem? Are there ready alternatives that are easier to use and deploy – for example, enterprise content management (ECM)?
Dan Griffith: There are a few options to solve the legacy problem. In cases where it isn’t feasible to replace a legacy system, FIs can introduce business process automation frameworks to connect these systems with modern interfaces such as portals and mobile applications. This approach enables FIs to keep data in their legacy systems yet make it accessible to modern customer experiences.
Another option is to migrate legacy systems to modern applications following an agile application decommissioning strategy. The key is to migrate only the data that is needed for compliance and business continuity and put in place a solution that will manage archived data appropriately, including its eventual defensive destruction.
6. Do you expect to see an uptick in the number of FIs replacing their legacy IT systems in the years to come? What steps should they take to incorporate this process into their long-term corporate strategy?
Dan Griffith: Yes, we expect to see more FIs replacing legacy systems for a variety of reasons. The key is to allow employee efficiency and customer experience drive the priority of a modernization strategy. A simple replacement strategy where you turn on the new system and turn off the old one is not possible for most organizations. Utilization of a business process automation framework can lead to quicker results by enabling access to some legacy systems in modern interfaces while migrating critical systems.
FIs also need to ensure they are preserving only the data necessary when they migrate to newer systems. An analyze, classify, migrate and manage approach to application decommissioning will ensure compliance is met and the right data is available in the new environment.