• Huw Owen, Head of EMEA & APJ at Couchbase


• 05.07.2021 10:00 am
#Digital #transformation #digitalisation

With digitalisation reaching new heights, it’s important the financial services industry shifts sooner rather than later, to technology that can meet the demands of today. Digital transformation has become a priority for many organisations which are now looking to rapidly implement changes. As a result, it is critical IT units have access to technology that can adapt to the needs of the business. With end-users carrying out more transactions than ever by mobile and online, it is important the financial services sector takes the next step to keep up with consumer demand.

However, this isn’t as simple as it seems. Many organisations are being held back by the many legacy systems and infrastructures still in play within banking. According to a 2019 survey, 60 percent of businesses say legacy technology is delaying digital transformation projects. While, 86 percent say a reliance on older technologies has meant they haven’t even considered newer innovations.

Seeing as legacy technology is causing such a headache, why do so many still use it? And how can organisations transform their digital capabilities successfully despite this?

Built for comfort?

Legacy technologies are similar to having that favourite, fraying jumper that you never wanted to throw away. But deep-down you know it’s days are numbered. But until that time, it’s quite possibly one of the best things you own. Legacy systems and technologies are considered the same way and will often provide an essential task to the business, one that the organisation is highly comfortable with. Essentially, it will work perfectly until the exact time it isn’t fit for purpose anymore.

Identifying this time is the challenge. Many financial organisations were built on a foundation of legacy hardware and applications, and it can be difficult to part ways with tried, tested and trusted technology. However, eventually the needs of the business, and the capabilities of more modern technology, will stretch beyond what legacy can offer. At this point, the financial sector needs to be ready to make the change – or begin to suffer by holding onto increasingly outdated technology.

Building a graph

Where exactly this point lies depends on the organisation. Some might need to make a change immediately, or already be behind the curve. Others could continue for some time without the need to change. For instance, if legacy technology is running critical business processes that perform perfectly; is supported by skilled teams who have an in-depth knowledge built up over years of experience and potentially writing millions of lines of code; and would ultimately be more expensive to replace than to continue using – especially given the need to ensure services are always available and there is no risk of data loss – then it makes sense for the business to stick with what it knows.

However, at the same time organisations have to be wary of the sunk cost fallacy. Just because technology has had a lot of finances, time and resources invested in it to date, doesn’t mean that this should continue indefinitely. There will come a time when the total cost of legacy systems – in terms of maintenance, management and missed opportunities from not having the right technology in place to pursue digital projects – will outweigh the cost of upgrading.

Making the move

Whether an organisation’s crossover point is far in the future or near at hand, it needs to prepare. The first step is calculating exactly when the crossover point will be – it may be that it is already in the past, in which case urgent action is critical. The organisation then needs to know how long any transformation will take, especially if is to be done carefully enough to avoid any disruption to essential services. A vital factor in this is knowing what will replace the legacy technology. If the enterprise plans to move services to cloud architecture, the actual process may be much faster than procuring on-premises infrastructure. Similarly, if teams need to re-skill to learn the new technology this also has to be factored in. Understanding these timings will give the enterprise a marker for where it has to be ready to begin transformation – and then allow it to begin planning and choosing its replacement technology, regardless of whether it has months or years to prepare.

If an organisation can plan effectively, it can see real benefits. For example, the Marriott hotel chain’s central reservation system was originally based on a legacy database running on mainframe architecture. As an international chain, maintaining 24/7 uptime is critical. As a result, its move to a new, NoSQL database – while allowing the chain to take advantage of a much more flexible database architecture – also needed to maintain that uptime, and ensure that the skills its team had built up weren’t wasted. By choosing and planning carefully, Marriott now uses a modern, open source platform which allows the business to deploy new applications faster and more reliably.

Is it the end of the line for legacy?

Quite frankly, legacy technology isn’t going to disappear any time soon. It is performing too well and is simply too embedded. This was highlighted in an IBM study with 92 of the world’s top 100 banks still relying on mainframes to contain and process huge amounts of transactions. Over time, financial services organisations will migrate to newer technologies, but this will require well-thought and detailed planning that will maximise uptime and keep everything running smoothly.

Planning will prove key to successfully transitioning from legacy technology to newer innovations. It will be important to do this in a way that will not remove the core capabilities of a business or make any existing skills obsolete. Instead, they should adopt a modern system that aligns with business needs and will make the organisation highly successful within the financial sector.