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Author's profile photo Christopher Koch

Stop Hating Legacy Systems, Start Hating Complexity

Last week I had an epiphany while attending the SAP Financial Services Forum in New York City: I no longer hate those 40-year-old mainframe legacy systems that for years I regularly dismissed as old and uncommunicative.

I realized it’s not the legacy systems I hate. They are actually marvels of engineering. No, it’s what has built up around them that I hate. Companies and IT departments have spent decades layering complex add-ons around those heroic cores until system architectures started looking like hairballs.

Time to Hock up the Complexity

And now the banking industry is collectively starting to do that rhythmic retching that cats do before they hock one up. PayPal is stealing their bread-and-butter transaction business, bank branches get as much traffic as the school vending machines that dispense broccoli, and regulators are getting ready to feast on Dodd-Frank’s 900-page carcass.

Banks are going to have to get rid of that complexity. Things have finally gotten to the point where they can’t keep slathering more stuff on. Want to know what removing all that complexity does for you? It lets you release a mobile banking app in two months—at least that’s what Don Good and the rest of the IT team at Canadian bank ATB Financial did, as Don noted in his presentation at the conference.

Reward for Removing Complexity

Another idea: Instead of only rewarding IT and business people for adding more processes and functionality, reward them for removing complexity. Better yet, incent them to do both at once.

Banks better start doing it now, because customers are pushing for things—like online and offline channel integration and free mobile banking—that drive up complexity rather than reducing it. Meanwhile, internal management is looking for more and better management tools, including real-time analysis, which will also complicate IT. The systems are going to need to get simpler and more agile to keep from umm, breaking the bank.

Here are some other things I learned last week that seemed wise and/or surprising:

  • To innovate in financial services, where do you begin? Benchmark existing processes. CFOs want a consolidated view across risk, treasury, and finance–that’s what gives business insight.
  • Real-time risk updates matter: An insurance company lost $1.6 billion in trading in 12 minutes in 2011.
  • Marketing will soon have a bigger IT budget than IT spends on its own department according to Gartner
  • Spending on risk and regulatory has been a #1 priority for banking IT for some time, according to research Kathy Burger of Bank Systems and Technology, but now analytics, BI, modeling, and information management are at the top.

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