In the banking, finance and insurance sectors, legacy systems are the anchor that keeps the business rooted in the past. Moving away from legacy systems can be both technically and culturally tough. Still, it is a challenge that must be faced, especially at a time when organizations are trying to accelerate business transformations.
There are multiple challenges at play. Technically, it can be hard to extract data from legacy systems, including ancient storage systems, networking gear, servers, operating systems, and applications that run on them. Chief Information Officer (CIOs) stress over the complex dependencies that have been built up over the years as layers of databases, middleware, and enterprise resource planning systems (ERP) have accreted.
However, doing nothing means storing up more significant IT problems for later, especially as firms struggle to find people with the skills to manage the old systems.
Delaying the inevitable also makes no business sense. Nimble digital platform providers, armed with data-centric business models that entail relatively low capital and operating expenditures, are positioning themselves to challenge incumbent banks with increasing force.
Financial sector face data-driven competitors
The financial industry sector today is hyper-competitive, and companies need every bit of agility and insight they can get to compete with old rivals, as well as with new virtual banking entrants.
Hong Kong has already issued eight licenses for new virtual banks, and Singapore is following suit with five virtual banking licenses to be issued by the Monetary Authority of Singapore (MAS) in 2020. Lurking in the wings are new entrants from other sectors such as Grab, whose financial platform can disrupt the banking sector, much like its ride-hailing services have disrupted the taxi sector.
Adding to this is the omnipresent mandate for corporate governance. The spaghetti-like nature of data centers that have not been modernized makes them an excellent hiding place for data, and that can mean an inability to react adequately to a regulator’s demand to see an email message or details of a trade.
Smart company executives in the financial industry understand this but have struggled to make the necessary changes. The result is data fragmentation on an epic scale where data is stored and duplicated in an opaque and disconnected matrix of data islands such as backups, file shares, archives, analytics programs, and other homes to enterprise data.
Many CIOs have sought the answer in moving to the cloud, but the issue of data fragmentation continues to follow and haunt them.
Cohesity surveyed 900 senior IT decision-makers in 2019 and discovered a chasm between the benefits they expected and what they got from migrations to the public cloud. In fact, 91% of respondents said data is fragmented across clouds, so rather than getting rid of data fragmentation, moving to new deployment platforms makes the problem worse. Fragmentation means data is less secure, infrastructure costs can run high, IT staff do not want to work on outdated systems, and finding reliable data for governance or analytics purposes becomes tougher.
Modernize data management
The answer to all of this lies in having a modern approach to data management that the old storage hardware behemoths, hooked on a business model of selling more and more refrigerator-sized arrays and storage capacity, cannot provide.
Companies in the financial industry need to embrace a software-defined platform approach to data management, where workloads and data islands can be easily consolidated and managed through one user interface. This platform approach not only extends to data on-premises but data in the cloud.
Additionally, financial institutions should look at other opportunities to improve compliance, which could be done, in part through, applications that sit on the platform. These applications can look for personally identifiable data and can play a crucial role in data governance.
Financial firms can also deploy other applications that can improve security or utilize analytics to enhance the customer experience. It is far more than an IT issue and a vital source of competitive differentiation. It can help firms even stand out from start-ups that are not weighed down by legacy systems but lack the depth of data and the customer bases that incumbents can call on.
The financial industry space is unusual in that it still contains players that have existed for more than a hundred years. However, if the major established banks and the old insurance and finance marques want to survive, they have to modernize. That starts from their single most valuable resource along with their brands — data.
Sheena Chin, Managing Director of ASEAN, Cohesity, authored this article.
The views and opinions expressed in this article are those of the author and do not necessarily reflect those of CDOTrends. Photo credit: iStockphoto/bestdesigns