8/8/2019 Accenture Banking IT Simplification

1/12

The Case for

IT Simplificationin BankingUntying the legacy knot

8/8/2019 Accenture Banking IT Simplification

2/12

2

Table of contents

3

4

6

8

9

11

Introduction

The Need for Simplification

The Approach Needs to be Holistic

Enabling Factors are Now Plentiful

A Road Map for Simplification

Conclusion

8/8/2019 Accenture Banking IT Simplification

3/12

During the economic downturn, the mantra

for banksand pretty much all companies

was reduce costs. The IT organization did its

part, implementing a variety of measures

designed to cut expenses in the short-

term to help the bank survive. However, a

bigger problem with banksone that has a

disproportionately large effect on a banks

overall cost structurehas yet to be addressed:

the increasing complexity of IT. CIOs for years

have been faced with the need to radicallysimplify both their organisations and the

applications they manage, but, to date, there

has been little appetite within the business

for the long and expensive effort such

simplification would entail.

Today, though, the tide may be turning. With

economic conditions improving and banks

once again thinking about growth and

profitability, there is a pressing case for

simplifying the entire businesswhich

necessarily includes IT. Plus, more than

ever there is a wider set of factors that can

help a CIO build a rationale and roadmap for

simplification. In short, the time may be right

for banks to finally address one of their biggest

obstacles to high performance: IT simplification.

In this article, we explore how CIOs can take

advantage of the current environment and

develop a pragmatic, measured approach to

IT simplification that can help their companies

achieve their business goals.

Introduction

3

8/8/2019 Accenture Banking IT Simplification

4/12

4

In the throes of the recession, with cash preservation

of utmost importance, CIOs were forced to make

a number of changes to achieve immediatecost reductions in ITincluding better demand

management, infrastructure virtualization, smarter

sourcing and process efficiencies. However, these

changeswhile critical to the banks ability to

survive the financial crisistypically only targeted

the low-hanging fruit. All of these initiatives

have been limited in terms of long-lasting impact

because banks so far have been unable to address

the underlying issue driving their high total costof ownership: their technology is too vast and

complex to manage and maintain. In addition,

banks legacy systems are often seen as a major

constraint to business flexibility and growth

simplification can help remove these obstacles.

During the past two decades, growth and

incremental changes within financial institutions

have spawned extensive diversity and complexityin systems, technologies and IT organizations

themselves. Because of mergers, IT decentralization

initiatives, the lack of a global view of IT needs and

opportunistic moves to capitalize on new business,

most banks find themselves struggling with a

multiplicity of systems supporting the same functions

or businessesnot to mention a proliferation of

infrastructure, development and IT management

tools, as well as infrastructure standards andhardware providers.

Moreover, the IT organization itself has been

shaped by corporate evolution in the previous

decades. Striving to keep pace with a dynamic

business environment, most IT organizations

have added new capabilities largely in an ad-hoc

manner to support various country or technology

initiatives over the years. The unfortunate resultsare multiple modes of governance, culture,

methodologies and processesalong with a

variety of data centersthat cost far too much

time and money to maintain, reduce IT organization

agility and effectiveness, and inhibit the business

from responding to marketplace developments.

The Need for Simplification

8/8/2019 Accenture Banking IT Simplification

5/12

5

Unfortunately, CIOs have had a difficult time

getting senior-executive support for efforts to

address their legacy system problems. Such effortstypically require a lot of time and money, neither

of which have been in ample supply in banking

organizations over the past few years.

However, all that may be about to change.

Since the financial crisis and economic downturn

began, banking leaders have begun focusing on

simplifying their overall businesses as a way toincrease their organizational flexibility, improve

growth and rebuild profitability. One of the

obstacles to that pursuit is, of course, the tangled

mess of legacy systems that CIOs have long hoped

to address. Thus, it seems the time may be right

for banks once and for all to dramatically simplify

their IT organization along with the technologies

they manage (including core banking applications)

as part of the drive to simplify the business overall.

8/8/2019 Accenture Banking IT Simplification

6/12

As they pursue IT simplification initiatives, CIOs

should consider that true simplification can only

be achieved if it is addressed holistically andarchitecturally. In other words, a CIO must address

applications, infrastructure and the IT organization

simultaneously if the bank is to achieve a real step-

change in flexibility and total cost of ownership.

Addressing each of these areas individually tends

to lead to simply optimizing the current state.

Application replacement is often seen as the

answer (or at least part of the answer). But thisapproach can also be limited in its impact. In

the cases where a radical approach to application

replacement has been taken, it is rare even for

as much as half of the application estate to be

replaced, and generally the infrastructure and

organizational complexity is addressed only asan afterthought (which itself is often hindered by

existing sourcing arrangements and/or by the fact

that the business agenda has moved on because of

the considerable length of the replacement program).

Furthermore, a number of banks have been enticed

in the past with what they saw as silver bullets

(core systems replacement, SOA, etc.). But, in

many cases, such efforts by themselves didnt gofar enough to deliver the promised benefit and, in

some instances, even added to the complexity.

6

The Approach Needs to be Holistic

8/8/2019 Accenture Banking IT Simplification

7/12

But there is hope. A wider set of factors than ever

before exists that can help CIOs build an affordable

rationale and roadmap for simplification.

Technologically speaking, theres now a wider

range of standard software components available

that can help with a replacement strategy

(core systems, finance, CRM, etc.). Whats more,

significant investment in offshore delivery capability

from suppliers of these components has reduced

implementation costs. Maturing SOA thinking

and delivery capabilities can provide more supportfor the re-architecting of a banks legacy system,

while new standardized process models can jump-

start the simplification effort, and a new spate of

tools can quickly and reliably convert data from

the legacy system to the new application.

Cloud computing and virtualization is also providing

a significant boost to banks in their pursuit of

simplification by enabling them to decoupleinfrastructure provisioning from the underlying

architecture to increase flexibility. Software-as-a-

service together with business process outsourcing

solutions can take that a step further and drive

radical simplification by helping banks shed areas

of the business that no longer need to be ownedand operated by the institution.

From a people and organization standpoint, more

options than ever before are available for sourcing

talent flexibly across geographies and organizations,

while a heightened focus on risk and cost has led

to a general centralization of decision-making that

makes it far easier to get the business behind a

simplification journey.

At a high level, theres a substantial movement

underway among banks to invest in initiatives that

will enable them to comply with new regulations.

Why not leverage these investments to renew your

banks architecture instead of making the existing

one compliant?

In short, theres never been a stronger case or bettertime for a simplification effort.

Enabling Factors are Now Plentiful

7

8/8/2019 Accenture Banking IT Simplification

8/12

8

A major challenge in any broadly-scoped effortas

IT simplification certainly can beis the potential

investment cost. At a time when money is stillscarce, a major simplification initiative would

compete for resources against other efforts that

deliver more immediate business returns. Thus, we

recommend a transformational process that can be

characterized as Big vision, small steps. In other

words, the approach unfolds graduall