Investment Firms: Approach to Transitioning from Legacy Systems
Background
Mid to large IM firms traditionally have a large footprint of legacy systems that are core to their daily operations.
Key Characteristics of Legacy Systems
- Manual workflows needing user/IT support for exceptions — Risk of increased unplanned operational expenses and loss of productivity
- Integration using legacy technologies such as FTP — Difficulty to support/maintain such integration points
- Dependency on scheduled 'Batch' jobs — Need additional monitoring/recon due to data 'push' instead of being event driven
- Key person dependency on few IT/operational members who have the 'know how' — Difficult to attract/retain new talent; BCP risk
Benefits of Existing Legacy Systems
- They have proven for business in terms of operational workflows and are considered more mature in terms of functionality
- Business/systems knowledge of workflows and knowledge of what works and does not work is invaluable for firms – This is an asset that is a key differentiator in determining success when planning move to newer technology
Challenges to Transition
- "Don't fix if it isn't broken" thinking — Even though it is inefficient and costly to run
- Incentives tied to just 'keep the lights on' — Need to also reward risks on newer initiatives for long-term success
- 'Fear of Failure' for adopting new technology — May be a result of being comfortable working on existing workflows
- Talent acquisition risk — Especially Gen-Z who may not be keen to work on legacy systems
Key Considerations for Transitioning
1. Define a Roadmap
Define a roadmap with clear timelines on the transition plan and get buy-in from business. Key is to define phases/milestones by each month/quarter. Business should align their team and make it their goal to transition to new system per plan.
2. Plan to Sunset Legacy Systems
Build a new support team. Transition members from existing legacy support to new support team with defined timelines and making this part of their performance goals. Measure progress using key metrics such as number of hours spent on supporting legacy systems. The time spent should see a gradual reduction till planned end date.
3. Align Resources
Align existing legacy team resources to each of the target systems by including them as part of the transition team.
Summary
Given current market conditions this is the right time to focus attention and key existing resources on positioning the firm for when 'growth' mode will be back. Therefore firms need to prioritize their efforts on helping reduce operational expenses and increase 'Operational Alpha'.
By executing the roadmap for transition to modern architectures the business can scale up or down as necessary thus enabling 'Pay-per-use' operations model – a key competitive differentiator in the future in the IM space.