There are many reasons why financial services firms decide to transform their processes and technology landscape. Quite often the legacy environment is ancient: old enough to have children or grandchildren. This in itself is not a reason though as I’ve seen many organizations with older systems that are quite happy with them. The most significant pain point is often that the processes and systems are lacking key operational characteristics such as flexibility or business agility.
The gap is not only in the composition of the systems or the sequencing of the processes, there is fundamental lack of agility or flexibility in the status quo from an end to end perspective.
Simply replacing the core banking system itself (even with a focus on process excellence) will only improve one part of this equation, to truly transform requires a more thorough approach.
I advocate a four step approach to achieving agility when transforming:
- Understand what agility means to the organization.
- Know the current barriers from an end to end perspective.
- Address those barriers through systems and business transformation.
- Measure the impact, repeat as necessary.
Barriers to Agility
If the goal is business agility and flexibility, one place to start is where are the current bottlenecks that impede agility today. The answer may surprise you. In one case that I was involved in the assumption was that the legacy banking platform was a major drag on agility — this was true but only partially so. There were other barriers to agility as well.
To identify current barriers I started by working with the group to understand how agility was defined and to highlight a key scenario that demonstrated the challenge. In this case it was focused on product innovation and being able to respond to new innovations in the market. The goal was three months from conception to production, and the current state was several multiples of this. By digging into a previous project I could understand where the effort, time and cost was being spent and which of these was creating the lack of agility and flexibility.
What I found was that while the legacy system was brittle and inflexible (as expected) the newer platforms and middle tier solutions that had sprung up around the legacy system (to avoid this platform) had become a collection of bolt-ons and redundancies. Front ends as well were inflexible as they had been created under constrained budgets and were designed to be thrown away but never were and became long-term platforms. This then created a massive cycle of testing even for the simplest changes in the back-end involving over ten systems on many platforms. When an outage occurred, it was difficult to determine which of the platforms was the root cause and the complexity established a form of professional finger-pointing between the support groups.
An Agility Equation
It was clear that to truly achieve agility and flexibility the core system and processes must be changed but that this in itself would not be sufficient. If this was the only change, the result would have been to highlight some of the other deficiencies and show the other bottlenecks.
For banking transformation an equation that I have seen achieve flexibility and agility is:
Robust and configurable banking system + Expertise and processes transformation + Exposure of services in a flexible middle layer + Thin channels that consume services
In systems terms these are often achieved through the use of a leading core banking system, an Enterprise Services Bus pattern and the use of reusable web services. Designing channels as a presentation layer only helps to minimize the amount of change that is incurred when things change from the core.
The most challenging aspect of this equation is maintaining a focus on these areas while delivering a large, challenging, complex program. Quite often an iterative approach can be used, and to help keep the focus on agility and flexibility over time I recommend implementing a measurement program where key agility and flexibility indicators are base-lined, tracked, and then managed as the solution is transformed and improved.
These key performance indicators can become the guide for how flexibility and agility are trending over time and can help avoid changes that will impede these operational characteristics. Good measurement can shift the culture from “what is the least cost option here” to “which of the lower cost options keeps us the most flexible.”
Measuring these ‘intangible’ operational characteristics can be achieved by focusing on specific, observable factors that are agreed to contribute to flexibility and agility and then composing KPI aggregates.
The End State
There really is no end to achieving agility and flexibility, I see this as more of a continuous goal and something to push for in every decision and balance against other important factors such as cost and time to market. In my experience with the right building blocks as long as it is measured and focused on agility will increase.