Legacy Modernization in Financial Services
28 Aug 2006
Why Financial Services Institutions Should Modernize Their Legacy Systems
Legacy modernization – updating and simplifying core applications and infrastructure – is essential for financial services companies to remain competitive.
Companies with a dependence on rigid core legacy systems comprised of redundant applications and fragmented data stored across disparate organizational silos are at a significant disadvantage when it comes to the flexibility needed to increase scale in this highly competitive industry.
The reasons for upgrading legacy systems are numerous and each one is dependent upon the other for success. Below are EDS' top eight reasons financial services institutions should make legacy modernization a priority:
- Growth – Financial services institutions have made growth commitments to both their shareholders and the financial markets alike. This commitment can come through organic growth or in the form of mergers and acquisitions, new markets via globalization or even product expansion via product development. Regardless of the method, growth is imperative to the survival of financial services companies – and legacy modernization is essential to an aggressive growth plan.
- Operational Efficiency – In the past, companies have tried to find ways to quickly cut costs through short–term efficiency gains. Today's forward thinkers are looking for broader, more sustainable operational efficiency as a strategic objective. They realize redundant processes and aging, poorly integrated IT architectures are limiting their efficiency. Becoming agile offers the operational efficiency and flexibility to support growth through new product introduction, expansion into global markets and the ability to quickly adapt to regulatory change.
- Cost – Complexity, redundancy in processes and systems, and lack of operational efficiency significantly affects costs, and therefore impacts profitability. Complexity also hampers the speed at which the institutions can expand into new markets and introduce new products – also affecting the bottom line. Since each new market push, whether physical or through a new line of business, increases complexity and has the potential to paralyze the business, legacy modernization can help alleviate these growing pains and reduce costs across the enterprise.
- The Customer – In an industry where change is accelerated and customers are more sophisticated, competitive differentiation is imperative. The ability to respond quickly to market changes and opportunities is crucial to long–term viability. How change affects customers – whether responding to a request, supplying a quote, or providing new checks and cards that reflect a new company name – is critical to customer satisfaction, and therefore critical for growth.
- Compliance – New regulatory requirements, such as Sarbanes–Oxley and Basel II, are pushing financial services companies to system modernization. Compliance with these regulations requires agility and flexibility to implement process automation with appropriate controls, globally integrated views of business activity by customer and product, and transparency in reporting to support supervisory reviews.
- Agility – Financial organizations must become more agile – able to adapt to changing business climates and situations quickly and easily. Using streamlined processes and technologies as enablers, agile organizations can quickly integrate operational efficiencies and an increased customer base, while providing new products and services to meet customers' needs – regionally, nationally or globally.
- Product Development – Rejuvenating legacy architecture can help reduce inefficiencies, eliminate product silos and ultimately allow financial institutions to expand into new markets and introduce new products. The combination of new service–based technologies and updated legacy systems can reduce the typical product development life cycle drastically. A decrease in a products time–to–market translates into a competitive advantage for the company as it expands into new regional, national or global markets.
- Globalization – As growth through mergers and acquisitions in the United States levels off, many financial services organizations are looking at overseas acquisitions. This new growth opportunity carries its own set of unique and complex challenges. Standardizing systems and processes will help global institutions improve efficiencies, manage risk across the enterprise and create operational efficiencies.
To learn how EDS can help you integrate the legacy modernization pieces into your Financial Services organization, contact us today.