There is a building blue down in Australia (where Blue means conflict or fight!) over whether it is strategic to replace an aging core banking platform or let it remain intact and push for expansion and development of channels and front line innovation.
CBA and NAB have decided that it is strategic to do an overhaul while ANZ has decided that it’s strategic to keep the existing system intact.
So is core systems replacement strategic? It all depends on how it’s done and the operational characteristics that are achieved with the program.
- Initiatives that are focused solely on replacing existing systems and retaining current functionality are not strategic in nature and are focused more on the resiliency of operations than new business capabilities.
- Where new software is helping transform business silos and enable new operational models or concepts, these are strategic programs.
- Just because systems are old doesn’t mean they are legacy — some of the most flexible and useful systems are over 30 years old, and recently implemented systems can be irrelevant. Much depends on the business needs not the platform. Pure technology risks can be mitigated.
- Where hubris and complexity are replaced by simplicity and coherence, this is strategic.
Achieving a clean end to end core banking architecture is generally a good idea, but ensuring that it aligns with an effective operating model and organization structure is important. Timing is also important, and planning the investment such that competing priorities aren’t detracting from the program is also critical.
So in summary, if your core banking architecture is a bodgy bitzer (a real mess) and it’s not aligned with your strategic direction then it is strategic to make it clean and supportive of the future needs. If there are no legacy based constraints on the business and the architecture is flexible and clear then it’s not strategic to replace it.