A pragmatic approach to legacy transformation


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A pragmatic approach to legacy transformation

  1. 1. A pragmatic approach tolegacy transformationThought Paperwww.infosys.com/finacleUniversal Banking Solution | Systems Integration | Consulting | Business Process Outsourcing
  2. 2. A pragmatic approach to legacy transformation Over the years, I’ve had the opportunity to be limitations underlies them all. And although part of several legacy transformation initiatives. there’s no silver bullet, experience shows that a Few projects are more exciting, or challenging, well-thought out pragmatic approach can go a for that matter. While every implementation is long way in realizing the benefits of transformation unique, a set of similar concerns, questions, and and mitigating its downside. Why legacy transformation is imperative In the banking context, legacy systems date Unfortunately, there’s no easy way out. Even if back about 40 years in the developed world, and a bank chooses to introduce new functionality 25-30 years in the developing. Over the years, through a flexible external system, it will these systems have been “patched up” repeatedly eventually have to integrate it to the legacy to cater to changing requirements. But now it system because that’s where core transactions is becoming impossible to stretch their rigid are recorded. That means dealing with all those mainframe architecture and limited capabilities integration challenges we spoke of, challenges any further to meet the current needs of the which inflate the cost of maintaining these business, which has changed almost beyond systems as well as seriously hamper their agility. recognition in the last few years. Another problem is that legacy skills are now hard to find – remember, these systems were To make things worse, banks have created in vogue decades ago, but now have been multiple such standalone systems over the years, replaced by new technologies in academic and integrating them “one to one” as they pleased, professional training curricula. The last straw to create a monolithic and inflexible IT snarl. Under is that legacy systems frequently break down the circumstances, even a small modification, say under higher load. in a payments application, necessitates a change in the coding of the core banking software, an The writing is on the wall, and it reads exercise that could take well over a year! “legacy transformation”.02 Thought Paper
  3. 3. Yet, a number of banks won’t face up to itIronically, the largest pockets of resistance to cost several million dollars and carry on for astransformation are the banks’ IT teams, which long as 5 to 7 years. The bank has a huge numberare either reluctant to change a technology that of stakeholders – investors, employees, customersthey’ve used for years, or fear that the arrival etc. – each having different expectations andof open systems will diminish their hold over concerns, none prepared to wait long years totechnology decisions, and conversely, increase see the first benefits trickling in. I’ve seen manythat of business users. Hence, vendors of projects lose steam after the first couple oftechnology transformation must play their years, because there were no visible results.cards smartly, taking care not to project legacy Should there be a change in management duringtransformation as a mere replacement of an this period, there is a real risk of the plug beingold system with a new one, but rather as an pulled. Therefore, it is important to earn theopportunity to derive immense value by organization’s confidence through quick wins,transforming the business itself. however small, throughout the project’s duration. For example, an Internet Banking channelIt follows from the above, that both legacy IT could be launched within the first year of a fiveand business transformation must be closely year long project, and the resultant increasealigned, and driven by a suitable Business in customer traffic projected as a prelude toOperational Model that will take the banks from bigger things.where they are today to where they’d like to betomorrow. Say that a bank wants to change its Since transformation occurs at the level of theproduct centric business model to one that is organization, the people within must accept itcustomer centric. It must first identify the key in order to make it a success. That’s easier saiddrivers in this revised business model – for example, than done when different people (shareholders,wallet share per customer instead of number customers, business users) want different things.of products held, or profitability per customer The bank must win them over by showingrather than profitability per product, or channel them that transformation means business value,agnosticism – and then devise a new process which is the common denominator in all theirmodel accordingly. The revised business and interests. Having said that, I will emphasizeprocess models will ultimately decide the bank’s that business holds the key to successfulnew enterprise architecture, and its IT drivers, transformation. It’s important to get that groupsuch as enterprise capability or a 360 degree on board first, so that they can provide thecustomer view across different lines of business. right people to redefine the business operatingOnce the bank envisions the end-state of its model and say what the business needs fromoverall architecture at the completion of the new IT system. The top business echelontransformation, it must break it up into smaller must be involved in key decisions. Technologylogical milestones to be crossed in the intervening vendors and business consultants must helpyears. Assume that one of its goals is to accelerate things along by working closely with the bank’sthe annual growth in its lending business from business and IT teams right from the businessthe current 5% to 25% within 3 years. Say that model stage, and setting realistic expectationsthis requires the bank to add new products from transformation.quickly, impossible with the current legacy It is important to sustain the goodwill generatedsystem. In that case, the bank will first have to by the quick wins with more substantial results.replace its lending system with a core banking However, identifying the right showcase projectsolution aligned to the enterprise architecture. within the larger implementation can be quiteReaching these milestones is also important tricky. Since the bank cannot afford to riskfrom a tactical point of view. Depending on its mission critical operations before time, it is bestscope, a legacy transformation project could that it picks up a smaller operation, but one that Thought Paper 03
  4. 4. is capable of generating reasonable business The other aspects that need to be planned or value, to transform at this stage. Clunky central even rehearsed well in advance include user office operations, such as mortgage lending, testing, validation and simulation. Testing is are a great candidate for makeover. While the particularly important to ensure that there are benefits of switching to a new lending module no – or as few as possible – glitches in the new are immediately visible to all (new products, system. This is also important from a political shorter time to market, sharp growth in loan point of view, to keep the opponents of portfolio etc.) the pain associated with the shift transformation at bay, who are waiting to pounce is mainly felt in the central office, which controls at the slightest sign of trouble. the operations. Best of all, the downtime during Like it or not, plan B is a necessary part of the cutover doesn’t impact online operations. preparation, because there is always an outside Completing a “transformation within a chance of things going badly wrong. Since transformation” as described above can also yield customer services must not be compromised at collateral advantage in terms of early learning – any cost, the bank has to be ready with a rollback on how to migrate data, train end users, validate plan should the worst happen. The rollback processes or plan cutover, for instance – that can decision must be neither knee-jerk nor based be subsequently replicated in the bigger story. on gut feel, but rather a calculated call based on The bank must therefore consciously file away predetermined and objective criteria. these lessons for reuse during the later phases Life does not end with cutover. The bank needs of implementation. to keep a war room and several help desks As the project enters the critical phase, when going for a few weeks after go live, to ensure full there’s more at stake in terms of the number support to each and every user. I know of banks of people impacted or investment required, that lost customers immediately after revamping it’s important to have everything planned their legacy systems because neither the branch out beforehand. Nothing is more critical than staff nor the customers had been educated about preparing end users to deal with the after effects what to expect. This issue can be addressed to of transformation, which can be quite stressful a great extent by identifying an advocate or in the initial weeks. Here, training is the key. The transformation agent within each branch, who is bank must begin the process well in advance, so well versed in the new system and can handhold that the users are already conversant with the the rest of the crew during the early days. new system and processes when they go live. Ultimately, a system is only as good as the people Since this will create some inconvenience – such driving it. In my experience, the most effective as having to work extra hours, attend training implementations owe much of their success to sessions during the weekend, or get through a the fact that they had the best people at the period of instability – it is important to spread helm, who were not only able to visualize the awareness down the ranks about the reasons benefits but also convert the skeptics in their for undertaking the transformation exercise and midst. The finest implementation means little, how it will benefit not the just the bank, but unless it has the commitment of its end users. their own situation, in the long term. Once That’s the moment of truth in any transformation. again, it is important to keep up a regular flow of communication on how the project is coming along, milestones crossed, and so on. Chandramouli Kundagrami Industry Principal, Infosys04 Thought Paper
  5. 5. About FinacleFinacle from Infosys partners with banks to transform process, productand customer experience, arming them with ‘accelerated innovation’that is key to building tomorrow’s bank.For more information, contact Finacleweb@infosys.com www.infosys.com/finacle© 2012 Infosys Limited, Bangalore, India, Infosys believes the information in this publication is accurate as of its publication date; such information is subject to change without notice. Infosysacknowledges the proprietary rights of the trademarks and product names of other companies mentioned in this document. Thought Paper 05