1. A pragmatic approach to
legacy transformation
Thought Paper
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2. A pragmatic approach to legacy transformation
Over the years, I’ve had the opportunity to be limitations underlies them all. And although
part of several legacy transformation initiatives. there’s no silver bullet, experience shows that a
Few projects are more exciting, or challenging, well-thought out pragmatic approach can go a
for that matter. While every implementation is long way in realizing the benefits of transformation
unique, a set of similar concerns, questions, and and mitigating its downside.
Why legacy transformation is imperative
In the banking context, legacy systems date Unfortunately, there’s no easy way out. Even if
back about 40 years in the developed world, and a bank chooses to introduce new functionality
25-30 years in the developing. Over the years, through a flexible external system, it will
these systems have been “patched up” repeatedly eventually have to integrate it to the legacy
to cater to changing requirements. But now it system because that’s where core transactions
is becoming impossible to stretch their rigid are recorded. That means dealing with all those
mainframe architecture and limited capabilities integration challenges we spoke of, challenges
any further to meet the current needs of the which inflate the cost of maintaining these
business, which has changed almost beyond systems as well as seriously hamper their agility.
recognition in the last few years. Another problem is that legacy skills are now
hard to find – remember, these systems were
To make things worse, banks have created
in vogue decades ago, but now have been
multiple such standalone systems over the years,
replaced by new technologies in academic and
integrating them “one to one” as they pleased,
professional training curricula. The last straw
to create a monolithic and inflexible IT snarl. Under
is that legacy systems frequently break down
the circumstances, even a small modification, say
under higher load.
in a payments application, necessitates a change
in the coding of the core banking software, an The writing is on the wall, and it reads
exercise that could take well over a year! “legacy transformation”.
02 Thought Paper
3. Yet, a number of banks won’t face up to it
Ironically, the largest pockets of resistance to cost several million dollars and carry on for as
transformation are the banks’ IT teams, which long as 5 to 7 years. The bank has a huge number
are either reluctant to change a technology that of stakeholders – investors, employees, customers
they’ve used for years, or fear that the arrival etc. – each having different expectations and
of open systems will diminish their hold over concerns, none prepared to wait long years to
technology decisions, and conversely, increase see the first benefits trickling in. I’ve seen many
that of business users. Hence, vendors of projects lose steam after the first couple of
technology transformation must play their years, because there were no visible results.
cards smartly, taking care not to project legacy Should there be a change in management during
transformation as a mere replacement of an this period, there is a real risk of the plug being
old system with a new one, but rather as an pulled. Therefore, it is important to earn the
opportunity to derive immense value by organization’s confidence through quick wins,
transforming the business itself. however small, throughout the project’s duration.
For example, an Internet Banking channel
It follows from the above, that both legacy IT
could be launched within the first year of a five
and business transformation must be closely
year long project, and the resultant increase
aligned, and driven by a suitable Business
in customer traffic projected as a prelude to
Operational Model that will take the banks from
bigger things.
where they are today to where they’d like to be
tomorrow. Say that a bank wants to change its Since transformation occurs at the level of the
product centric business model to one that is organization, the people within must accept it
customer centric. It must first identify the key in order to make it a success. That’s easier said
drivers in this revised business model – for example, than done when different people (shareholders,
wallet share per customer instead of number customers, business users) want different things.
of products held, or profitability per customer The bank must win them over by showing
rather than profitability per product, or channel them that transformation means business value,
agnosticism – and then devise a new process which is the common denominator in all their
model accordingly. The revised business and interests. Having said that, I will emphasize
process models will ultimately decide the bank’s that business holds the key to successful
new enterprise architecture, and its IT drivers, transformation. It’s important to get that group
such as enterprise capability or a 360 degree on board first, so that they can provide the
customer view across different lines of business. right people to redefine the business operating
Once the bank envisions the end-state of its model and say what the business needs from
overall architecture at the completion of the new IT system. The top business echelon
transformation, it must break it up into smaller must be involved in key decisions. Technology
logical milestones to be crossed in the intervening vendors and business consultants must help
years. Assume that one of its goals is to accelerate things along by working closely with the bank’s
the annual growth in its lending business from business and IT teams right from the business
the current 5% to 25% within 3 years. Say that model stage, and setting realistic expectations
this requires the bank to add new products from transformation.
quickly, impossible with the current legacy
It is important to sustain the goodwill generated
system. In that case, the bank will first have to
by the quick wins with more substantial results.
replace its lending system with a core banking
However, identifying the right showcase project
solution aligned to the enterprise architecture.
within the larger implementation can be quite
Reaching these milestones is also important tricky. Since the bank cannot afford to risk
from a tactical point of view. Depending on its mission critical operations before time, it is best
scope, a legacy transformation project could that it picks up a smaller operation, but one that
Thought Paper 03
4. is capable of generating reasonable business The other aspects that need to be planned or
value, to transform at this stage. Clunky central even rehearsed well in advance include user
office operations, such as mortgage lending, testing, validation and simulation. Testing is
are a great candidate for makeover. While the particularly important to ensure that there are
benefits of switching to a new lending module no – or as few as possible – glitches in the new
are immediately visible to all (new products, system. This is also important from a political
shorter time to market, sharp growth in loan point of view, to keep the opponents of
portfolio etc.) the pain associated with the shift transformation at bay, who are waiting to pounce
is mainly felt in the central office, which controls at the slightest sign of trouble.
the operations. Best of all, the downtime during
Like it or not, plan B is a necessary part of the
cutover doesn’t impact online operations.
preparation, because there is always an outside
Completing a “transformation within a chance of things going badly wrong. Since
transformation” as described above can also yield customer services must not be compromised at
collateral advantage in terms of early learning – any cost, the bank has to be ready with a rollback
on how to migrate data, train end users, validate plan should the worst happen. The rollback
processes or plan cutover, for instance – that can decision must be neither knee-jerk nor based
be subsequently replicated in the bigger story. on gut feel, but rather a calculated call based on
The bank must therefore consciously file away predetermined and objective criteria.
these lessons for reuse during the later phases
Life does not end with cutover. The bank needs
of implementation.
to keep a war room and several help desks
As the project enters the critical phase, when going for a few weeks after go live, to ensure full
there’s more at stake in terms of the number support to each and every user. I know of banks
of people impacted or investment required, that lost customers immediately after revamping
it’s important to have everything planned their legacy systems because neither the branch
out beforehand. Nothing is more critical than staff nor the customers had been educated about
preparing end users to deal with the after effects what to expect. This issue can be addressed to
of transformation, which can be quite stressful a great extent by identifying an advocate or
in the initial weeks. Here, training is the key. The transformation agent within each branch, who is
bank must begin the process well in advance, so well versed in the new system and can handhold
that the users are already conversant with the the rest of the crew during the early days.
new system and processes when they go live.
Ultimately, a system is only as good as the people
Since this will create some inconvenience – such
driving it. In my experience, the most effective
as having to work extra hours, attend training
implementations owe much of their success to
sessions during the weekend, or get through a
the fact that they had the best people at the
period of instability – it is important to spread
helm, who were not only able to visualize the
awareness down the ranks about the reasons
benefits but also convert the skeptics in their
for undertaking the transformation exercise and
midst. The finest implementation means little,
how it will benefit not the just the bank, but
unless it has the commitment of its end users.
their own situation, in the long term. Once
That’s the moment of truth in any transformation.
again, it is important to keep up a regular flow of
communication on how the project is coming
along, milestones crossed, and so on.
Chandramouli Kundagrami
Industry Principal, Infosys
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