Legacy system to competitive advantage: How incumbents can win it all in the digitalisation raceBy Adrian Bugaian
The banking and capital markets industry has seen a monumental shift in how money is created, transferred, stored and owned. With the phenomenal growth of digitalisation - from the rise of cryptocurrency and blockchain, to new developments in open banking, businesses have what seems like endless opportunities at their feet. Despite this, Baker McKenzie’s digital transformation report revealed that 79% of executives in APAC still identify as digital laggards rather than digital leaders within their industry.
As organisations scramble to catch up with the latest technological developments, even straightforward digital upgrades can sometimes be too much for them to handle. For many incumbent institutions, there is the realisation that the need for speed and agility when implementing new products is very much at odds with their current capabilities. However, finding the right partners to accelerate the deployment of new technologies is challenging, and many have fallen victim to delayed, fragmented and even failed transformations. At the end of the day, it all boils down to an organisation’s digital strategies.
Nevertheless, legacy systems work like tree roots - a complete overhaul means felling the whole tree and killing important ecosystems. As the industry continues to evolve, the challenge here will be to meet the demands of businesses while safely evolving digitalisation strategies.
Tackling legacy system at its core
Understanding a business’ legacy estate is integral. Many incumbents have already started to see problems in their original core platforms that were architected well before the millennium.
From global leaders to smaller players who have built their platforms by integrating packages, it is not surprising that the current challenge is to keep up with the demand for customisations and integrations. For them, the direct solution is to modernise legacy systems. This involves more than simply swapping one tool for another, and may appear overwhelming and financially daunting for those who do not have the proper technical expertise.
Innovative products only move as fast as their slowest piece, so assessing the full system architecture already in place will prevent barriers to implementation later down the line and ensure that value is delivered most efficiently. Once done, organisations can then start modernising their legacy applications, transforming their IT operations and improving their overall business processes.
Harnessing data the right way
Banking and capital markets operate on data. Every transaction, update, and interaction involves a huge amount of data look up, movement, validation, and access across environments. But while data enables digital acceleration, it can become a double-edged sword if not used correctly. Firms often have to spend huge amounts of money sorting through, cleaning, transforming and packaging their data to make sure it is fit for consumption.
According to IDC's Worldwide Big Data and Analytics (BDA) Spending Guide, APAC’s spending on BDA solutions will rise to US$53.3 billion by 2025, with banking remaining at the helm as the largest investor. This is driven by the need to have a clear strategy on how to extract value from data assets, to gain operational efficiency and resilience. With clean data, organisations can then accelerate their processes to create truly engaging digital experiences for customers and clients. The central, consistent tenet is knowing exactly where the data is, how it is being accessed and managed, and having the tools and capabilities to make it employable for the whole company.
Ultimately, a company’s data sets need to gel across departments, be usable across the entire organisation, and evolve to meet business needs, not as a siloed resource. Only with the right data strategy and analytic capabilities built into operations can organisations engage in iterative evolution of their digital offerings to tackle everyday problems.
Setting your infrastructure up for success
Legacy infrastructure is often another cause for concern due to the lack of expertise, outdated cost models, and overall ownership and maintenance risks. Rather than just a ‘lift and shift’ to the cloud, which will only solve a part of business problems, modern organisations should map out a proper cloud strategy and architecture.
What many companies struggle with is integrating their organisation’s cloud goals with existing infrastructures, or tackling application sprawls in the process. The best solutions for an organisation will depend entirely on their business circumstances and rationale for embarking on their cloud journey. Simply put, a cloud migration strategy cannot be developed in isolation. It is imperative that business objectives are considered, while at the same time striking a balance between short-term budgets and long-term rewards.
Digital acceleration is an iterative process, demanding reactive and adaptive work patterns. Underpinning and essential to this is having the right partners who are present for every step - from ideation, conceptualisation, prototyping, piloting and anywhere in between. With the right partners, organisations will be able to provide innovative and value-led solutions, enabling faster and better platform evolution to meet the demands of emerging markets.