In How Tech Can Help Banks Accelerate Legacy Transformation, I’d described three issues with open systems that hold banks back from migrating their legacy applications to open systems.
Here are three more:
#4. Sudden Loss of Functionality
In this brilliant article titled When Product Features Disappear – Amazon, Apple and Tesla and the Troubled Future for 21st Century Consumers, Steve Blank, the famous Silicon Valley serial-entrepreneur and the father of the Lean Startup movement, gives several examples of how vendors “unilaterally remove features from their products without asking their customers permission” even when users have paid for those features.
Such arbitrary downgrades are painful enough for consumer products but they can wreck havoc in banking.
#5. Frequent UI Changes
We’ve all been through perplexing moments when familiar software suddenly looks strange, with screens, links and buttons vanishing into thin air. This happened with Windows Vista a few years ago. I’m seeing this happen with Google Analytics now.
To continue with the example of the social media archiving software I used in Part 1, the default option for search recently changed to “today’s updates”.
This is silly. I don’t need a search feature to track down the posts I published on the same day. They’re right on top of my feed.
What I really want from search is to get hold of all past updates on a given topic. This was the default option before. Whereas, to run this search now, I need to go to another screen and select the “Lifetime” option, which is not only counterintuitive but takes up additional mouse clicks for no good reason. The new UI is an unwelcome change to me and, I suspect, for most users.
It’s easy to trot out platitudes like “change is the only constant” and all that, but vendors need to keep in mind that the cost of retraining tens of thousands of bank workforce on a new UI could wipe out many of the benefits of moving to an open system.
#6. Wrong GTM Messaging
A quick glance at their marketing collateral would show that most vendors of open systems use cost reduction and innovation as the key go to market themes to push for legacy transformation.
This messaging ignores the following realities:
- Despite incurring the high http://healthsavy.com/product/kamagra/ costs of maintaining legacy systems, financial services is the most profitable sector in FORTUNE 500.
- I’ve heard C-level bank executives say that retail and commercial banking are fairly simple businesses and don’t need to be overcomplicated by innovation for the sake of innovation. (That said, retail banking has demonstrated innovation through the decades with products / technologies like credit card, ATM, Online Banking, and so on)
- Banks have proved their innovation street cred by launching ARM, CDO, CDO2, CDS, MBS and a dizzying array of structured financial products that have made truckloads of money for them (even if they haven’t proved as lucrative for their buyers, but a story for another day).
- Algorithm trading widely used by brokerages has stretched the limits of innovation and, in the process, exposed limitations even in the speed of light!
Quite frankly, banks don’t need tech to give them sermons on cost reduction or innovation.
Therefore, tech companies should eliminate these two themes from their legacy transformation go to market messages.
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As a result of the above six issues, legacy transformation is fraught with a lot of risks that seem unsurmountable as of now.
Meanwhile, mainframe sales keep growing.
In 1Q13, Unix server sales dropped ~40% and mainframe sales rose ~4%. Go figure. http://t.co/5xErM8NSKI
— GTM360 (@GTM360) June 10, 2013
To achieve greater success in persuading the CxOs of banks to ditch their legacy applications and embrace open systems, technology vendors need to address the above issues with the status quo.
Without spilling too much candy in the lobby – a phrase for which I must thank Ron Shevlin’s blog Snarketing 2.0 – let me recommend Steve Blank’s “21st Century Bill of Consumer Product Rights” as a good starting point to accelerate legacy transformation.
UPDATE DATED 19 AUGUST 2020:
It’s six years since the above post was published. We don’t hear any more about impractical open system standards like BIAN. Code quality of open systems and uptime of cloud systems have both significantly improved. Frequent UI changes in SAAS software is still a thing. Fintechs and Fincumbents alike have started chanting the partnership mantra instead of threatening banks with extinction. Very few banks have transformed their legacy core systems to open systems. But many banks have gone cloud native when it comes to new applications like CRM, HR, and so on.