Martijn Groot, VP of Product Management, Asset Control
According to a 2017 study, 31% of an organisation’s technology is made up of legacy systems[1]. There are a number of reasons why an organisation may find itself with a diverse collection of legacy technology platforms, such as past mergers, failing to keep up with developments in technology or a reluctance to budget for development other than small scale solutions. While these platforms may have once been efficient and instrumental to day to day operations, like any software application they do not age well if not looked after.
The use of legacy systems further down the line can become a burden, becoming unable to scale to new volume requirements and costly to maintain with the suggestion that on average 60-80% of IT budgets are spent on maintaining legacy applications[2]. Yet, while most businesses recognise the need to update their data management systems, they are sometimes reluctant to do so due to the cost of change and perceived difficulties of integrating their systems with new solutions.
These perceived challenges and costs to businesses are preventing a large number of businesses from updating their platforms which is arguably the riskier move. Not only is complacency over legacy systems costlier in the long run, but it also holds businesses back from their true potential. Here we look at the real costs businesses are likely to face if they fail to bring their data management capabilities in line with 21st century requirements.
Why legacy platforms will cost you
Despite the difficulties associated with implementing and integrating new data management platforms, businesses are more likely to be negatively impacted by inertia than by taking action and updating their data management solutions. According to our research, more than a third of financial institutions say that legacy data platforms are the biggest obstacles to improving their data management and analytics capabilities. For financial institutions, this is a worrying statistic as they are heavily reliant on easy access to quality data and analytics to perform their role effectively.
However, this is just one of the issues preventing businesses from taking action with a further 31% of financial institutions citing the cost of change is holding them back from updating their legacy systems. For these organisations, there is a mistaken idea that it is cheaper, and therefore more cost-effective, to stick with legacy systems than to update them. Yet, this doesn’t take into account the indirect costs of legacy platforms, such as the impact of data discrepancies, and the effects these costs have on a business. These issues can be felt across a number of different areas, including information security, and can result in a lack of business user enablement and productivity.
It is vital that organisations consider how much their current data management systems are holding them back operationally as they typically take longer to carry out processes, delaying data delivery to end-user applications and reports and lowering productivity. Legacy systems can slow down organisations as they are costly to maintain, miss audit or lineage information, often cannot scale to new volume requirements. More often than not, these platforms do not quickly and easily provide business users with the data they require. Especially with frequent new regulatory requirements on data quality and due process, the cost of change can be formidable.
A further significant and potentially costly by-product is the potential for data discrepancies because they lack a clear and comprehensive view of their sourcing and validation process. Similarly, legacy platforms are a higher security risk as they tend to no longer be supported or patched. This leaves data businesses vulnerable to being lost or compromised due to hacks and malware, which can be costly in several ways, including potentially breaching GDPR or other data regulations.
The solution: insight-driven data management
Crucially, businesses must invest in the right tools to overcome the challenges and risks posed by legacy platforms. For some organisations, the initial cost of a new solution may seem off-putting, however, delaying and continuing with outdated solutions is likely to see them encounter greater threats and a growing number of indirect costs.
Despite the fact businesses may be reluctant to change, many at least understand what they require from new data management solutions. In fact, our research shows that when considering new data management and analytics capabilities, firms remain focused on the fundamentals with more than a third citing ease of use and flexible deployment as their top business consideration. For 41% of the sample, ROI was deemed to be the biggest factor. As such, organisations must look for data management platforms that deliver on these areas and are capable of being easily integrated with other systems within their business.
For a long time, data management has been a challenging problem for the industry to solve, and it can be tempting to lean towards complacency and accept an unsatisfactory status quo. For financial institutions, changing data management strategy and tactics is undoubtedly a difficult task, owing to it being expensive to start again – not just in terms of systems spend, but also in time and resources to undo a solution which is typically deeply embedded. However, as established, legacy platforms come at a high cost and risk to an organisation, affecting business continuity, security and reliability. This can have wider implications as faults caused by unreliable legacy systems are likely to be deemed unacceptable by the businesses’ customers and could damage their reputation.
Rather than focusing on the initial costs of implementing a new platform, businesses should consider the ways in which their current set up of legacy systems is holding them back and the risks of failing to take action. Taking the time to consider the business’ requirements from new technology and which applications it must be able to integrate with will ensure the right solutions are chosen and that the business gains added value from the new solutions. In an industry where regulations govern many processes and data is king, businesses must ensure they have the most efficient and effective solutions in place to avoid data discrepancies and potential non-compliance and optimally support the business in an ever more data intensive environment. Ultimately, in a data-driven industry, the risks and costs to the business of failing to be compliant due to legacy platforms are likely to be far more substantial than replacing the systems in the first place.
