Why Modernize Now? Like their counterparts in other industries, Capital Markets participants manage to three primary challenges: cost, growth and risk. Depending upon the circumstances, these are addressed individually or in some combination of the three. Currently they all come together as the industry faces dramatic change resulting from shrinking profit margins on mature products and the offsetting movement to higher risk and more complex products. As a result, industry participants have intentionally or unintentionally segregated themselves into two tiered operating environments: • Tier one — mature products • Tier two — complex products. For mature products, the industry has been trying to generate more transactional activity while at the same time transform their operating environments into low-cost scalable models – in effect simultaneously managing cost and growth agendas. For complex products, the industry has been inserting new processes on top of legacy operating models while deploying countless spreadsheets to manage performance and risk – in effect simultaneously managing cost, growth and risk agendas. Clearly, this multiple operating environment structure creates significant process and technology challenges – leaving industry leaders to determine the best approach to address it. From a process perspective, every industry participant is reviewing their operating models and has invested in process-centric exercises. From a technology perspective, there is a buy versus build trend as industry participants take advantage of viable vendor solutions. Historically, technology and operations organizations have operated in this fashion. Now is the time to change this paradigm by moving towards a business-driven approach. Business-driven application modernization enables capital markets participants to transform existing and/or develop new business systems assets (processes, application and services) to improve their business performance. With variable entry points, this approach can be applied regardless of where a participant is in their modernization program. Using an Modernization Maturity Model capital markets participants can focus first on aligning IT strategy with business strategy, and on developing a business case to support a modernization program. It also addresses the establishment of service oriented infrastructure, the design, development and deployment of reusable business services, and the management and governance of both the modernization initiative itself and the resulting architecture and infrastructure. By allowing application modernization to be driven by the business strategy, capital markets participants can: • Leverage existing systems in modernization frameworks • Target the use of modernization techniques such as SOA-based solutions and platform rationalization • Improve business process performance through enterprise application and data architectures • Enhance regulatory reporting with better data integration and standardization • Support more informed decision making across a broad spectrum of stakeholders through business and customer intelligence solutions. Capital Markets participants should explore business-driven application modernization as a viable option to address the challenges they are facing. While it is a relatively new concept, the dynamics associated with cost, growth and risk agendas requires it be considered.