Aging technology at many large financial institutions has become a significant barrier to success in what is becoming an increasingly digital business environment, according to global consulting firm Protiviti.
Established firms, burdened with obsolete core systems, are struggling to compete with newer, “born digital” companies whose IT infrastructure is designed to support speed and innovation.
The combination of 5G and edge computing will unleash new capabilities from real-time analytics to automation to self-driving cars and trucks.
“In many cases, core banking technology in major U.S. banks is decades old, exposing organizations to a variety of risks and, probably more importantly, preventing them from responding effectively to the demands of today’s increasingly digital marketplace,” said Ed Page, managing director and financial services industry technology consulting practice leader.
Legacy modernization is like urban renewal, Page said. “It demands careful planning, frequent detours, temporary scaffolding, and patience, a lot of patience,” he said.
Protiviti has identified five “styles” of modernization; each of which is neither right nor wrong, better or worse. “They simply offer different approaches to solving a problem, and they aren’t mutually exclusive,” Page said. “They can be combined into a roadmap that is likely to be a reflection of an organization’s strategy and risk tolerance.”
This first style is a “greenfield” approach that’s often attractive to an organization that’s offering a new product or service or entering a new market.
“In this instance, there is no need to convert existing customers; the organization has the flexibility to stand up new infrastructure that is unencumbered by legacy platforms and processes,” Page said. “They can start from a blank slate. Often, this is reflected in a new brand. It has several benefits, but it doesn’t support bringing existing customers along for the journey.”
Another style is “preserve and protect,” which makes every attempt to leverage investments in legacy technology “and to bring existing customers along for the digital journey,” Page said. It seeks to “wrap” legacy systems in services and to create a digital “façade” for existing customers, he said.
This style offers an incremental path to digitalization, but it stops short of creating an environment that’s completely digital. “It hides a lot of the issue and buys time for full modernization, but it only defers the ultimate problem,” Page said.
A third style is simplify and rationalize. This approach is often a stepping stone to other parts of a larger strategy, Page said. It seeks to eliminate redundancies and create a more rational place for further modernization. Those firms that pursue this option are often a reflection of merger and acquisition activities or siloed operations that have resulted in a complex and redundant technology infrastructure.
Fourth is a big bang. This is a “traditional” approach to legacy modernization that involves choosing and converting to a new platform. “It may sound easy, but it is risky, expensive and disruptive,” Page said. “There are real-world examples of conversions that have gone wrong, resulting in stability issues or functionality problems.” There are also examples of aborted conversions/implementations, costing massive losses and careers, he said.
Finally, there is phased integration. In some respects this is a combination of some of the other approaches. It’s greenfield-like in
that an organization deploys a new technology platform from scratch. But it’s done “inside the walls” of an enterprise and doesn’t immediately replace legacy systems.
Rather, it allows new and old technology to coexist. This can allow an organization to build new products on new technology and retire old technology over time, Page said.
- The true costs and ROI of implementing AI in the enterprise
- AI and big data vs ethics: How to make sure your artificial intelligence project is heading the right way
- CFOs betting big on AI, machine learning, robotics process automation as business goes digital
- IT strategy: Learning from experiments with emerging technologies
- How to become a CIO: 4 tips for professionals from any background (CNET)
- Feature comparison: Email marketing software and services (Tech Pro Research)
- What The Health Sector Needs To Know About Cryptocurrency Technologies, Blockchain, And Cryptojacking Attacks
- Remarks by Minister Symonette at Business Opportunities in the Caribbean Region Conference
- Ethiopia: Attracting Investment Through Effective Public Sector
- The overseas territories – the long view
- Ethiopia: Significance of Lease Financing Services
- 2018: A space odyssey
- Germany promotes agricultural mechanization technologies in Ethiopia
- India's First Ever Cryptocurrency Fair, the Himalaya Crypto Summit, arrives at Mumbai for ‘Blockchain India Week’ 2018
- India's First Ever Cryptocurrency Fair, the Himalaya Crypto Summit, to arrive at Mumbai featuring Nick Szabo
- Yorkshire Brexiteer Andrea Jenkyns quits Government to ensure UK does not end up 'half in, half out' of EU