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Choosing the right path to banking IT modernization

As part of their strategic planning, banks are rethinking their legacy environments and looking for ways to capitalize on their legacy investments. Today’s IT modernization paths enable banks to retain their valuable, mission-critical legacy applications while simultaneously enhancing them to drive future business growth. The challenge is to choose the right path.

Before deciding on a modernization approach, it is helpful, as a first step, to identify where you are now and where you want go. A complete analysis of your application code and data, as well as current and future business requirements, is recommended. This analysis will form the basis of a modernization plan or roadmap, which should ideally define the following:


  • Vision: Outline of business and IT context and future direction, along with the development of an engagement plan
  • Current state: Conceptual and logical models of your current business and IT landscapes
  • Desired future state: Conceptual and logical models of your desired future state for business and IT
  • Roadmap: Performance of a gap analysis and development of a benefits dependency network and an IT strategy roadmap
  • Solution options: Assessment of leading commercial off-the-shelf solutions and of the four key modernization approaches (i.e., rehost, convert, rewrite, replace)

 Modernization roadmaps often combine a number of options to reach the right end state, as well as to lay the foundation for future evolution. The following are four main approaches, each with its own risks and tradeoffs:


  • Re-hosting and encapsulation of core applications: This is often the best option when the code is good, the functionality is likely to remain the same, and the bank is seeking quick and substantial cost savings, as well as ease of integration.
  • Conversion of core applications: When the business logic is good, but the legacy knowledge is poor, this is an approach to consider. It involves bringing in new staff, exposing legacy business processes and enhancing core applications.
  • Rewriting core and supporting applications: This approach is recommended when legacy applications are so complex that automated conversion tools cannot be used. It might be the only modernization option for avoiding new customization.
  • Replacing core and supporting applications: Few banks consider this option, preferring instead to minimize costs and risks by taking the other modernization routes. However, this option may be a good one for replacing some mission-critical components.


Building an effective roadmap and choosing the right modernization approach requires experienced IT professionals with the tools and methodologies for conducting a complete analysis of a mainframe environment, expertise in developing modernization strategies and a track record of successful modernization project execution. Finding the right partner is key to success.

With a sound modernization roadmap and approach, banks can achieve all of the benefits of modernization, including increased agility, shorter time-to-market, cost savings and reduced security risks, among others.


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