Denis Fourie, senior vice-president: MEA at Software AG, shares his thoughts on the financial services landscape.
The financial Services (FS) industry, – an industry originally dominated by banks and insurance companies, has changed dramatically over the past ten years, with many South African companies now attempting to capitalise on this previously untapped market. Products and services have become key, with the mechanisms to market these differing greatly from those traditionally used.
Well over 6 000 new banking accounts are opened each day, and pressure is placed on FS to reduce banking costs to attract and retain lower income customers. All of these factors place a huge burden on IT departments with many of them struggling to keep pace with marketing and other departments.
Historically IT departments faced challenges to deliver enhancements and new products as a due to massive backlogs created over time. Today new products and service distribution have precedence over enhancements and the backlog that is created sees historical requests losing more ground to new product developments. The complexity of these newly developed products requires integration with other systems or third party services, increasing the workload associated with their development.
Today the complexity of the products and services on offer to consumer is making it increasingly difficult to predict the total cost and anticipated ROI over a period of time. Significant growth in the customer base not only results in increased costs to administer and service the customer but adds additional loads on systems supporting this growth.
The window of opportunity for both new entrants and those that traditionally dominated the FS sector is small enough as it is, but if these companies are unable to design and deploy products and services, they will eventually fall short. The challenge for IT departments is not to make people, processes and systems work harder but rather to make them work smarter.
IT departments have thus begun to look for new ways to accommodate the changing FS landscape and the demands associated with it. There are a number of alternatives available to IT departments when considering how best to meet these challenges, such as legacy modernisation, service orientated architecture (SOA), business process Mmanagement (BPM), integration and rip and replace.
IT departments should choose a solution that will provide system users with stability, robustness and availability, 24/7/365; ease of use and operation; the ability to seamlessly integrate with third party systems as well as an elegant and intuitive user interface.
From a customer point of view, elements such as ease of access (internet, mobile devices, remote areas); ease of operations; single repositories for information, response time issues, and the ability to access and transfer information without constraints are vital for IT departments to consider when looking to either develop or replace their traditional IT structures.
The decision for IT departments thus lies in whether or not to ‘rip and replace’ their IT systems or to utilise the systems they already have, in order to modernise their IT infrastructure, save money and meet the increasing demands being placed on them. However, the rip and replace approach is rarely the appropriate solution for many FS Industries, legacy applications are mission-critical – it is estimated that 70% of the world’s data still resides on the mainframe.
These applications run the financial systems that form the backbone of the business. They house the data and business processes that differentiate a company from its competitors and represent years of valuable intellectual property. Ripping legacy systems out and replacing them with newer systems, when less drastic alternatives still exist, makes little fiscal or strategic sense.
In addition, the experience of a number of well-known organisations demonstrates that rip and replace projects can be costly and prone to failure. And the price tag for a failed attempt can run into the hundreds of millions of dollars. But even when these projects do succeed, rip and replace remains a high-cost, time-intensive approach.
Preserve and extend is a quicker, less costly and a less risky approach than rip and replace, and it means that a technology leader does not need to simply walk away from the systems that drive the business.
By preserving and extending legacy applications either through SOA, BPM, or Integration a business can capitalise on its enterprise system’s longstanding strengths—reliability, security and performance that even the largest farms of smaller servers can’t match—while also addressing their limitations. In other words, a strategy to preserve and extend legacy applications is a commitment to maintain the past and the present, and to propel the enterprise into the future.
In deciding which alternative to choose to keep abreast with the continuously changing FS sector, IT departments need to work closely with business units to ensure that IT meets the changing business goals. Businesses will likely need multiple approaches to modernising and integrating.
A “one size fits all” strategy will not suffice. What they need is the power to adapt to today’s changing environment—as well as to future, unforeseen changes in the business and technology landscape. Whether the company wants to start small, or take a leap toward SOA, BPM, or Integration a strategy to preserve and extend will enable companies to move all of its legacy applications forward and meet the challenges facing the FS industry.
Companies will then see improved business processes as a result, enabling them to attract and maintain growing customer relationships, improve their bottom line profitability, enter new markets and deploy new business capabilities to meet strategic goals.