Take a Fresh Look at Legacy Systems
Although financial and treasury companies have seen a great increase in the sophistication of their IT systems, especially over the last 10 years, Gartner estimates that 70 per cent of all companies are still reliant on one of the oldest technologies to date – legacy systems. Although legacy systems have remained the foundation for most financial companies’ IT infrastructures, their architectures have become increasingly complex to the extent that, in many cases, they bear more of a resemblance to a wiring diagram for the space shuttle than a corporate IT architecture. Moreover, the high number of mergers and acquisitions in recent years has added an extra level of complexity due to various disparate systems being linked together (in many cases unsuccessfully).
Due to these complexity issues, many CIOs within the treasury have taken a step back to examine their legacy systems. It is evident from 30 years of service that legacy systems, much of it defined as core mainframe systems, is still the cornerstone of the majority of IT systems – and will continue to be for the foreseeable future. As such CIOs have realised that they need to evolve and extend legacy systems in order to keep up with today’s business pace and remain leaders in an increasingly competitive world.
The need to take a fresh look at legacy systems has become even more crucial in the past 12 months. Financial CIOs are under constant pressure to keep down costs while innovating for an agile future. It has become apparent that well-informed CIOs are leveraging their legacy and modernising their IT infrastructure to exploit the better price/performance of contemporary platforms, while re-using existing business processes.
The starting point on this process is to acknowledge that most legacy data still resides on the mainframe. In the year it celebrated its 40th anniversary, the mainframe has continued to be a benchmark for processing power and mission critical reliability. IBM has reasserted its commitment to it with the recent release of the z9 mainframe, which is supposed to have the capability of processing a billion transactions a day. For many, however, the mainframe is simply too expensive, especially when contemporary platforms, such as Windows or Linux, offer improved total cost of ownership for arguably comparable performance.
Unfortunately, the decision whether to migrate your legacy to a contemporary platform or modernise it on the mainframe is not a simple one.
Every CIO within the financial sector and treasury faces an important decision about how to move forward, and the wave of new options brings attractive propositions. Each company needs to consider what to do with its mainframe – some may benefit from extending the legacy system’s life on it, others may reap the rewards of migrating to a more contemporary platform. The process of deciding is based on each company’s individual merits.
After examining its systems, the book club ICS Bertelsmann realised that there had been a huge increase of CPU and disc capacity and the annual cost of running systems on the mainframe stood at €1.4m. The company made the decision to migrate off the mainframe to a more contemporary platform. As a result ICS Bertelsmann has seen an annual saving of €900,000 and ROI was achieved within 18 months of the project.
On the other hand, when Deutsche Bank Luxembourg was faced with the same question, in order to improve customer satisfaction levels, it decided to stay on the mainframe and extend its current systems. The bank wanted to integrate a new portfolio management system and facilitate and expedite secure, accessible financial transactions. By integrating its existing COBOL systems with an XML medium on the mainframe, Deutsche Bank was able to report improved efficiency and higher customer satisfaction.
Once the decision has been made on the ongoing platform choices from the standpoint of legacy, in order to increase the flexibility of systems, what is the next step for the CIO? It is crucial that legacy systems are reusable, so that systems development is easier and quicker, ensuring that construction and maintenance costs are significantly reduced. Service Oriented Architecture (SOA) is a key technology concept to achieve this level of re-use and it avoids the extreme cost and risk of complete replacement. Sceptics claim this is just another acronym for the same old promises of flexibility and agility through reuse. However, unlike older concepts, SOA is actually applicable to legacy applications. This means that it can be adapted for standard programming, as well as application construction, demonstrating therefore that it offers ‘technology-agnostic’ reuse.
We are now at the stage where the hype is starting to subside around SOA and financial companies are starting to go from pilot schemes to actual implementations. These companies that are now deploying an SOA are looking to achieve cost savings, business flexibility and re-use of code. These are three advantages also addressed by the emerging concept of applistructure.
Looking to the future, applistructure will come to play a significant role in financial companies’ IT systems. It has been defined as the merger of enterprise applications and their infrastructure and may also feature high on the CIO’s agenda. Many of the largest vendors have directly announced they will be entering this field. Financial corporations were spending up to 80 per cent of their total budget on maintaining their ever-complex IT systems, and integrating applications was meant to bring this expenditure down. However, this has not happened.
Merging these applications with the actual infrastructures’ technology is being touted as the way to address these budgetary problems. This will assist buyers looking to cut down on the number of technology platforms and technology deployments that are naturally flexible. Financial companies should have this on the horizon, as the most successful applistructure will allow different technology providers, as well as legacy codes to plug and play seamlessly. Also, it will permit fast and flexible reconfiguration of business processes – crucial in today’s world of mergers and acquisitions. Furthermore, many of the applications in evolved applistructure suites will themselves continue to be legacy applications, confirming once again that legacy is what most businesses are based upon.
The benefits of an ‘applistructure’ include the fact that:
Legacy applications have proven to be reliable, secure and scalable over the test of time, and will continue to serve as a foundation for many financial companies and treasurers’ technology needs. However, these companies need to take a fresh look at their legacy and decide the best way to develop it. Complexity does need to be monitored, and decisions do need to be made about how to evolve the enterprise’s legacy. Without this examination, systems will continue to become more complicated and greater expense will be incurred, hindering the progress of today’s business.