3. Re-shaping the LegacyTech discussion
Transforming LegacyTech is seen as a largely reactive theme today.
But there's much more to it than just fixing problems
A new way of viewing change
Our research is conclusive in showing that LegacyTech transformation stands on the critical path to almost every major market dynamic today. From data to regulation; from sales to cost efficiencies, the ability to optimise legacy platforms is an essential part of every development project.
Yet we would be wrong to see the LegacyTech theme as simply changing systems to meet the latest management or regulatory priority. Those leading the market today see legacy management as a core part of a much wider transformation - that focuses not on outcomes but on changing the way in which we manage our entire businesses every day.
This means doing things differently and for different reasons.
Today, we evaluate, approve and execute investment projects largely based around system costs and headcount savings. We budget on a periodic cycle, starting at the top of the firm each year and cascading down available budgets through the organisational chart, for individual departments to then spend. That funding is most often incremental (i.e. a small percentage variance versus the previous cycle) and heavily focused on remediating pressing production issues. How often have we seen discretionary spend disappear in a year in order to accommodate short term fixes for new regulatory reporting or specific client demands?
Tomorrow's LegacyTech conversation could be very different. Projects should focus on the wider customer experience, on maximising the value of a firm's human capital and on leveraging an organisation's strengths today. In place of large global functions, innovators talk of 'process mining' and the creation of micro-centres of excellence - where specific teams or units (anywhere in the world) can scale quickly to provide a consistent task to growing numbers of internal customers. In execution, these projects can be funded on an ongoing basis, start smaller and be more incremental - quick to start, quick to fail and quick to learn from.
" 60% of our human capital today is invested in low-level, repetitive processing.
Digitisation will help us to have 70% of our human capital generating ideas, supporting our client experience and enriching our products every day”
(Global Head of Change Strategy, leading custodian bank)
Human capital: From processors to managers
Nowhere is the LegacyTech issue more pressing than in the space of human resources.
Across the investment cycle, our processes and platforms rely on extensive number of people every day - not to analyse and interpret, but most often to simply re-key and verify.
The opportunity cost of using our human talent in this way is significant - and it continues to grow. Since 2020, remote working has meant greater freedoms for employees, but has increased the risks and complexity firms face when training, monitoring and motivating employees. In parallel, the 'Great Resignation' shows little sign of slowing down, as key talent chooses to leave the industry in search of more fulfilling vocations. Finally, as a result of chronic under-supply, salaries in key offshoring centres (such as India) have doubled in the last year.
We are spending more and more to recruit, train and retain, yet we derive minimal returns on this investment when all we expect is data entry.
LegacyTech transformation is central to the solution in this space. Whilst the role of automation (and the replacement of out of date processing technologies) in removing critical risks and reducing costs is well understood, the benefits of transformation now extend much further.
By removing the need for manual processing, employers can increase their staff retention by repositioning their staff as subject matter experts - moving roles from processing to analysis, insight, support and leadership. In doing so, employers can also accelerate the resourcing of high-growth areas and radically transform their levels of customer service and innovation.
Automation and legacy management is not just about key person risks, it is about supporting the future viability of our businesses.
