“Strategy decay” is the idea that by the time investments have been made on large IT implementations and the technology is rolled out, your “new” solutions have already been leapfrogged by the latest advancements. This is a serious concern for today’s financial services (FS) firms, which can be negatively affected when it comes to shrinking budgets, limited resources and overall ability to compete in a time of relentless progression. 

As a result, many large FS companies are being outmanoeuvred by their smaller, more agile counterparts, as recognised by the World Economic Forum in its June 2015 Future of Financial Services report. This issue may be self-perpetuating for larger organisations as they reason, “it’s too hard and takes far too long to update legacy systems to today’s technology, let’s just leapfrog our own systems” and their legacy systems only decay further.  

Many large FS organisations have small departments that are embracing new approaches and PaaS offerings, but when it comes to dealing with the big monster in the corner of three rooms of legacy IT, it’s a different story. Therefore, although it is encouraging to see a plethora of new offerings that embrace the connected omnichannel smartphone world, financial services organisations are largely only wrapping a core of legacy and outdated technology. Facilitating a fundamental shift in the organisation’s core technology is a much bigger task. 

To meet these challenges, we have seen a new breed of CIOs at IT companies. This is part of a wider cultural shift away from the largest IT organisations attempting to compete with service providers, to one where a focus on core business and IT agility is prized over IT ownership.

It’s easy to fail when it comes to scaling technology, especially if there isn’t a matching cultural shift supporting this growth. If an organisation continues to handle cloud-based IT projects in the same way they would have in a classical hosted services world, they will ultimately fail.

There can also be an incredible amount of friction concerning getting IT projects from concept to reality in large organisations. Changes at the top could help to eradicate by invoking a more bi-modal IT culture and adoption of a devops approach to new projects. Cloud adoption is disruptive, not just in terms of outmanoeuvring the competition, but also internally and requires a big shift in attitude throughout. 

IT infrastructure vendors are in a strong position to help FS firms stay one step ahead. Along with the need to surf the regulatory tidal wave, the need for enterprise contracted flexibility is vital if banks are to embrace new technology for their core systems. Enterprises must be able to tailor their contracted services, but remain enterprise friendly to deliver the same level of functionality and agility as the specialist platforms. Very few providers offer this at the moment.

It could take decades to unwind legacy systems since core systems, which hold all the information on customers and products, are based on very old technology. How do you tackle them in a way that you don’t spin up big projects that take years to implement only to be finished in time to be outdated already? We’re seeing a shift from large organisations having significant investments in infrastructure to using service offerings where it makes sense, so that they can concentrate on their core business.

Does a “one size fits all” service offering work or is it a Hobson’s choice (a “free” choice in which only one option is offered)? The core enterprise market cannot truly be unlocked for widespread adoption of cloud services with inflexibility in the service providers’ cloud platforms and contracting process. The pure cloud play vendors have set the standard for agile orchestration of virtual compute services but if FS organisations are going to see cloud technology deployed for core functionality, and used to tackle the big legacy problems, they must embrace the need for a much wider hybrid IT capability with enterprise contracting flexibility.