On the one side there is the legacy; a complex patchwork of disparate technologies integrated at random, upgraded incrementally and rooted in an era when product-centric silos were avant-garde. On the other is the new paradigm of banking under unrelenting pressure from customers, regulators and competitors.
In the past, there might not have been too many competitive incentives for banks to modernize their legacy systems. They were fairly justified in holding back given the risk of disruption in big bang transformation or the prolonged anxiety of phased modernization.
Today, many banks are handicapped by their legacy systems as they attempt to compete successfully in a world gone digital. So, even as modernization looms inevitable, the layers of complexity in their IT environments is turning out to be the biggest barrier to core systems transformation. The good news is that for banks compelled to modernize, emerging trends in technology are opening up new possibilities that can significantly reduce the cost, time and risks involved in transformation. In 2014, many banks around the world will embrace progressive or componentized modernization as a more practical and productive approach to transformation.
This is a components-based model allowing for controlled transformation at a granular level. In the new model, enterprise systems, which have evolved from monolithic to modular architectures, will be reinvented around components. It will enable banks to focus their modernization efforts on specific lines of business or functionalities, while simultaneously minimizing disruption. It will also allow them to align modernization with exigent business objectives and to deploy components that will enable those opportunities.
In a recent EFMA-led study, 78% of respondents say that adopting enterprise-wide systems would yield significant benefits, while 58% indicate that componentized deployment is the preferred route to modernization. There is little doubt that componentized modernization would enable banks to bring their technology systems up to speed with the demands of today’s banking ecosystem. More importantly, it would also help create an architecture that can assimilate future technological developments without embarking on a transformation cycle all over again.