In retail banking, as in any sector, legacy IT can eat up budgets; limit the CIO’s flexibility to innovate; and reduce the talent pool for technical development. But there are solutions to help break the legacy chains.
Peru’s survey of Retail Banking IT leaders ‘Turn to Face the Change’ highlighted their concern that legacy IT was one of the biggest barriers to modernising customer facing processes. In fact, almost one quarter (21%) of the technology leaders questioned thought their organisations’ legacy systems were too difficult to change.
It is a common theme that Peru Consulting has seen with many clients. Legacy IT can eat up budgets, thus limiting the CIO’s flexibility to evaluate and invest in new technologies. Additionally, the best talent is drawn towards the perceived “cutting-edge” and away from older technologies, thus creating a vicious circle which anchors a company with a long-established technology platform ever deeper in the past.
A brighter future
However, the IT world doesn’t need to be this way. Peru has regularly collaborated with a wide range of organisations to build a step by step strategy to the future. True, this cannot be achieved without a realistic level of investment, but the benefits and ultimately financial returns are indisputable.
The first step on the journey is to build a business case. So, what are the benefits of Technology Standardisation, both quantitative and qualitative?
Reduce the costs
Legacy technology can be expensive to operate and maintain, particularly in relation to extended maintenance contracts. As the technology ages, skills become harder to source and thus expensive to purchase. There will also be a natural proliferation of new technologies being introduced within the business whilst legacy systems still remain. The conflicts often created between old and new simply means more for the IT department to manage on a fixed budget.
A very positive first step is an initial rationalisation of the technology base. This often highlights legacy technology and identifies unused systems, both servers and applications, which can be easily removed.
Technology consolidation takes this a stage further, identifying efficiencies at both infrastructure and application level. Virtualisation and Cloud migration can deliver significant infrastructure cost savings, whilst removal of duplicate applications across an enterprise can result in more efficient use of technology and licenses.
Finally, the standardisation stage. This requires the negotiation, or re-negotiation, of strategic vendor deals and appropriate governance of the IT estate. The improved leverage for bulk technology and license purchases drives out further cost savings.
Reduce the risks
IT Security is a major headache in today’s environment and ageing technology only exacerbates the problem. As systems grow old, there is less likelihood that patches will be made available in time – or indeed at all – and further vulnerabilities occur where systems are left to go out of support or End of Life. Unless the investment to modernise is made, risk of failure, and in particular security breaches, increases. This alone is a compelling driver for technology standardisation in most organisations and especially in the retail banking sector.
Business continuity is also at risk. Whether through any of the issues already highlighted – from lack of skills availability to limited availability of physical hardware and spares – the risk of business disruption and damage to overall business reputation increases month-on-month. Risk reduction is best managed by a regular refresh of applications and technology.
Increase productivity and ‘thinking time’
Rationalisation and standardisation means fewer technologies. That, in turn, allows staff to focus and develop deeper expertise, rather than being spread thinly across many different areas.
In global organisations, such as high-street banks, standardisation across regions also brings other benefits, such as improved communications across teams who are better able to cover for each other. Designs can also be re-deployed in different regions and decision-making is simplified with fewer choices.
In addition, standardisation frees up time and resources to focus on where technology can deliver more value through differentiation.
Again, with standardisation across a global organisation, the CIO can minimise compatibility issues with deployment of applications globally. Given that performance is a known and measurable quantity it’s likely to be welcomed across the business.
By standardising technology, the facilitation of centralised management and governance across the organisation’s IT estate becomes an easier process. It also simplifies estate lifecycle planning and, consequently, portfolio management.
A compelling business case for technology standardisation is easy to make on cost grounds alone. But the additional qualitative benefits certainly provide strong support. Once the business case is completed, the next question should be: “what does the standardisation plan look like”? To find the answer, one technique often used by Peru consulting, is a Total Cost of Ownership Review.
As well as a TCO Review, there are a number of key elements to creating a solid platform on which to build a standardised technology infrastructure:
Asset Management as the foundation:
Ensure you know exactly what you have – without this, it’s impossible to drive effective change. The most solid foundations require collaboration between Infrastructure Operations and those with the Application knowledge. Neither side can cut it on their own! Make it easy for them with an appropriate Asset Repository (or separate, but integrated, Application and Infrastructure repositories). Assets are not just physical but also virtual and should include your software licensing inventory as well as dependency information.
Sound estate governance: Develop a series of guiding principles and a set of Technology Standards.
Involve “Build” Architects, “Run” SMEs and Vendor Managers. Have two standards for each key technology to avoid vendor lock-in, facilitate tendering and provide sufficient flexibility to application teams. Include clear lifecycle roadmaps for each technology to facilitate planning at all levels. Recognise that some departments (e.g. R&D) may need more license to innovate and build that flexibility in to the technology strategy (e.g. Core/Common/Distinct approach).
Implement key processes:
o Standards lifecycle management
o Asset & configuration management
o Patch management
o Exception management
o Release & change management
Embed these processes within organisational structures and operating models.
Ensure that communication and information about Standards and Governance is pushed out across the community and is easily accessible from a centralised location. Unless people are aware, they cannot adopt.
Rationalise / Consolidate / Standardise:
Start with the quick wins – e.g. server decommissioning and rationalisation. This can generate costs savings to invest into further standardisation.
Consolidate to drive out duplication and leverage Cloud and Virtualisation technologies to drive efficiency at the Hosting level.
Standardise for long-term strategic and financial benefit.