Skip directly to search

Skip directly to content

 

Tackling CIB Legacy at its Core

 
 

Banking | Pierre Kovacs |
28 February 2022

This article was written in collaboration with Markus Boehme and Toby Dixon.

Corporate & investment banks (CIBs) enjoyed strong results over 2020 and 2021. Whilst their revenue growth stemmed from increased volatility and volume, increased profitability was realised after years of shifting the cost base from people to platform as electronic trading and operations continued to proliferate. Platform cost (back-office staff and technology spend) now accounts for up to 70-80% of total cost, making efficiency gains through automation and scale game-changing.

The original core platforms that enabled this change were architected well before the millennium and are creating their own problems as technology has advanced, markets and business needs have changed, and operational risk has increased. The need to tackle this legacy is an imperative we are seeing across every aspect of the industry – both for global leaders, who are looking to differentiate through proprietary technology, as well as mid-tier and smaller players who, having built their platforms by integrating packages, are equally struggling due to the need for customisations and integrations.

MODERNISING LEGACY IT: DRIVERS, BENEFITS AND CHALLENGES

There are a number of ways to reduce delivery risk, enable faster time to market, and offer more differentiated products and services.

The key drivers for modernisation are well understood:

  • Business models have evolved beyond what legacy platforms were designed for as new products and the required controls continue to emerge
  • Poor results led to regulation being prioritised over modernisation and stifled change
  • Data is firmly integrated in applications and thus siloed, redundant, and driving reconciliation effort
  • Legions of logistics and control staff are still required to handle exceptions
  • Legacy platforms have suffered confidence-shattering outages, and skills for these platforms are becoming scarce


The benefits of modernisation are equally compelling, with firms such as Goldman Sachs, JP Morgan, and Bank of America having demonstrated the significant competitive advantage created by an early adoption of modern approaches:

  • Cost reduction by taking advantage of new lower-cost options
  • Improved time to market to launch products and services
  • Better data availability and quality improve analytics and reporting
  • Sophisticated collaborative delivery models such as value-stream management, a product-driven mindset, and data mesh


However, these imperatives have been counteracted by the industry’s poor track record when it comes to actually retiring old platforms when implementing new ones, rather than adding to them. Confidence is needed that the next wave of modernisation will deliver these benefits and result in less, rather than more, tech to maintain.

Some attempts to address the legacy burden have been made, but with limited success. Legacy decoupling appears nimble at the front end whilst maintaining legacy at the back end. Though this works for specific needs, the underlying issue of platform inflexibility remains untouched. Complexity is being compounded on the back end, as clearing and settlement, limit and risk management, product control, finance, and regulatory reporting are all on disparate systems. End users need to juggle multiple applications to perform their daily tasks, restricting innovation.

At Endava, we are working across the industry to break out of this cycle. Those companies that tackle legacy benefit from a reduction of total cost of ownership (TCO), a stronger focus on innovation, and a scalability that will support the future business growth. This, in turn, boosts customer and end user satisfaction.

HOW TO FUTURE-PROOF YOUR CIB PLATFORM

A transformation or modernisation of legacy systems can appear overwhelming and financially daunting because it’s perceived as a profound change that affects more than just the technology stack. It’s more than swapping one tool for another; often, it is a paradigm shift that brings a new mindset, new skills, new processes, and can even call for an organisational realignment.

The good news is that there are simple, pragmatic ways to tame the legacy beast:

A good starting point is an assessment of the existing systems to understand the landscape, separate the core functions from support functions, and identify risks and priorities to ensure value is delivered as fast as possible. For example, we used bespoke tools and our experience to draw a complete picture across the enterprise architecture of a target for a global asset manager.

Interoperability, e.g. microservices or an “API first” principle, is a key consideration for the legacy modernisations we undertake. For a significant market infrastructure customer of ours, well-designed APIs have unlocked immediate benefits and enabled a progressive replacement of the back end. Combined with micro front ends, this can quickly bring tangible value to the end users – think, a single unified view of market exposure or a real-time view of trade processing.

Simple automation is a good way to free up resources from the technical and operational toil. This includes DevOps CI/CD (continuous integration/continuous deployment) as well as automating testing and deployment. A hedge fund customer of ours has used RPA (robotic process automation) to realise quick wins in advance of getting full benefits from modernised back ends.

The infrastructure of ageing systems is often a problem due to the shortage of expertise, outdated cost models, and overall ownership and maintenance risk. Cloud solves this very well, from Infrastructure as a Service (IaaS) to Software as a Service (SaaS). A tier-1 corporate banking client has taken advantage of the benefits this brings. Another indication of cloud becoming mainstream in banking is that all major cloud providers now offer mainframe on cloud.

Embedding a data-as-a-product mindset and giving access to and governing this data can be challenging. Fortunately, the technology to build enterprise data platforms is now mature. Asset managers we work with, who have built data spines (centralised or as a data mesh) to provide controlled access to end users, are benefitting from self-service and a feedback loop for key trends, such as ESG, back to the business. This will also be a key increment towards further automation and insights via AI (artificial intelligence) and ML (machine learning).

Ensuring ways of working are optimised to enable agile delivery anchored in a product mindset proves to be the best way for all our Capital Markets clients to deliver with confidence and realise benefits early.

FROM LEGACY TO COMPETITIVE ADVANTAGE

Having identified the best way to safely dismantle legacy whilst continuing to service the demands of the business, modern technology solutions are able to de-risk and significantly reduce TCO of the next generation of platforms. Modern architectures and delivery techniques are enabling faster platform evolution to meet the demands of emerging markets. 

Many organisations have demonstrated nervousness around tackling their legacy burden despite a growing imperative to do so. Our experience shows: now you can do so with confidence.

Pierre Kovacs

Banking & Capital Markets Industry Lead

Pierre is our Banking & Capital Markets Industry Lead based in London. He has spent 20+ years delivering systems from leadership positions at Investment Banks and Asset Managers. Prior to joining Endava, he was Chief Technology Innovation Officer at a fintech providing cross-asset, front-to-back office systems to hedge funds, investment banks, private banks, and energy trading firms. Over the summer of 2021, Pierre took a short break to complete the UK Ironman fitness competition in Bolton and the Ventouxman race in France.

 

Related Articles

  • 11 October 2022

    Buy vs. Build in Banking: Which Option is Right for You?

  • 23 August 2022

    5 Ways to Fix Your Data Spine in Banking

  • 31 August 2021

    Personalised Banking: How to Get Ahead of Ever-Changing Client Value Propositions

  • 13 July 2021

    The Transformation Trifecta: Cloud, Digital and Open Banking

  • 05 May 2021

    Artificial Intelligence: Where Does The Real Value Lie?

 

From This Author

  • 11 October 2022

    Buy vs. Build in Banking: Which Option is Right for You?

  • 23 August 2022

    5 Ways to Fix Your Data Spine in Banking

  • 06 July 2022

    Data-Driven Impact: Don’t Settle for Less

Most Popular Articles

Current Challenges in the Transportation & Logistics Industry
 

Transportation & Logistics Insights | Brian Estep | 22 March 2022

Current Challenges in the Transportation & Logistics Industry

Empowering Underwriting and Unlocking Revenue with Legacy Insurance Data Sets
 

Insurance Insights | Nikhil Malik | 26 January 2023

Empowering Underwriting and Unlocking Revenue with Legacy Insurance Data Sets

Staying relevant in the buoyant cross-border payments market
 

Payments | Peter Theunis | 15 November 2022

Staying relevant in the buoyant cross-border payments market

Journey to the Centre of the Cloud with AWS – Part 3
 

Next Gen Insights | Zach Marky | 23 January 2023

Journey to the Centre of the Cloud with AWS – Part 3

Four Stakeholders Who Win the Most When Healthcare Innovates
 

The Endava Experience | Adrian Sutherland | 24 January 2023

Four Stakeholders Who Win the Most When Healthcare Innovates

G’day, I’m David Marsh
 

Meet the SME | David Marsh | 30 January 2023

G’day, I’m David Marsh

4 Buy Now Pay Later Trends Set to Disrupt the Industry
 

Payments | Annmarie Mahabir | 22 February 2022

4 Buy Now Pay Later Trends Set to Disrupt the Industry

The 4 Most Common Mistakes in Retail Site Design
 

Business | Satchell Drakes | 17 January 2023

The 4 Most Common Mistakes in Retail Site Design

ESG Data Architecture is a Business Imperative – How to Get Started
 

Insights Through Data | Lloyd Chapin | 06 April 2022

ESG Data Architecture is a Business Imperative – How to Get Started

 

Archive

  • 30 January 2023

    G’day, I’m David Marsh

  • 26 January 2023

    Empowering Underwriting and Unlocking Revenue with Legacy Insurance Data Sets

  • 24 January 2023

    Four Stakeholders Who Win the Most When Healthcare Innovates

  • 23 January 2023

    Journey to the Centre of the Cloud with AWS – Part 3

  • 20 January 2023

    Journey to the Centre of the Cloud with AWS – Part 2

  • 18 January 2023

    Journey to the Centre of the Cloud with AWS – Part 1

  • 17 January 2023

    The 4 Most Common Mistakes in Retail Site Design

  • 13 January 2023

    Boost and bolster your innovation. Three tips to help get it to the next level.

  • 10 January 2023

    5 Questions in Smart Energy That Will Define the Net Zero Transition

We are listening

How would you rate your experience with Endava so far?

We would appreciate talking to you about your feedback. Could you share with us your contact details?