On their journey towards a truly digital transformation, many banks stumble upon the barrier of outdated banking architecture. As Tom Groenfeldt, contributor to Forbes, says, “When 40-year old legacy banking systems meet the two-month old iPhone 6, the results aren’t pretty.” Banks are now looking for ways to bypass this barrier to keep up with the latest crop competitors and offer contextual customer experiences.
Most of the IT budgets in organizations today goes towards supporting existing business operations and organic growth. There is no room left for exploring new revenue streams or strategizing for business transformation. Most bankers feel that the biggest barriers to transformation are the complex IT landscape, and absence of skilled man power. To add to the woes of banks seeking digital transformation, complex IT landscapes also account for higher maintenance costs than usual.
These challenges make a very good case for simplification of the architectural landscape for banking transformation; and there are two methods that banks can implement – infrastructure simplification or simplification of the applications landscape.
Infrastructure simplification refers to leveraging cloud technologies to manage the challenge of infrastructure maintenance, and manage increased demand through the elasticity offered by cloud. Most banks will use a three phase strategy to migrate to the cloud – initially non-mission critical loads will be moved to cloud, followed by hybrid cloud models for peak load processing. The final phase would be the movement of production workloads to the cloud completely, and follow a cloud-first strategy.
Simplification of the applications landscape refers to rationalizing the applications across the organization by leveraging enterprise-class components. This not only reduces duplication of applications across business groups, but it also improves the business agility of the organization. With a centralized business operation across various product lines, operational efficiencies are increased and maintenance costs are reduced.
Banks are also turning towards componentized applications design instead of the traditional monolithic architecture to keep up with the demands for rapid modernization and upgrades. This componentized architecture along with a set of exposed micro-services, allows for decoupling of front-end and back-end capabilities for faster innovation.
In the coming year, innovation agility driven by a simplified architecture and operational efficiency will be the banks’ biggest competitive advantage in this world of ever evolving technology.