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The case against

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The challenge for IT departments in the financial services (FS) sector is to make people, processes and systems work smarter, rather than harder, writes Denis Fouries, sales directory of Software AG South Africa. Various factors today have placed a huge burden on IT departments in the FS sector with many of these departments struggling to keep pace with marketing and other departments.

The FS industry 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 their mechanisms to market 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.
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.
IT departments should look for new ways to accommodate the demands associated with the changing FS landscape. These include application modernisation, service orientated architecture (SOA), business process management (BPM), and integration. IT departments should consider a solution that provides system users with stability, robustness and availability, 24/7/365. Ease of use and operation are also key factors in the mix, as is the ability to seamlessly integrate with third party systems.
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.
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 rands. 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. 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 a company 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.