Financial Services Tech and Business Leaders Split on whether Legacy IT is Delaying Digital Transformation
By: Luke Thomas, Regional Vice President APAC at Appian
CIOs in the financial services industry believe legacy IT is a significant problem for their firms. Research from the Economist Intelligence Unit, sponsored by Appian, finds that just over a third (34%) of IT decision makers believe the reduction or elimination of legacy IT would do most to help their organisation achieve its automation objectives.
That figure is more than double the proportion of financial services business decision makers (17%) who believe that overcoming legacy IT would be a key factor in helping their firms to embrace automation. So, while CIOs believe old systems will delay their digital transformation efforts, their line-of-business counterparts are unconvinced.
This split is redolent of a larger theme uncovered by the research: respondents in the financial services, banking and insurance sectors are more likely than executives in other industries to identify inadequate collaboration between the IT function and business units as a chief barrier to their organisation achieving its digital objectives.
Collaboration the missing link
Over a third (35%) of financial services respondents believe inadequate collaboration is a top barrier, compared with 24% in government and 26% in energy and utilities.
Worse still, there is a lack of consensus within finance firms. While 44% of IT decision makers believe inadequate collaboration between the IT function and business units is a chief barrier to digital transformation, just 27% of business decision makers feel the same.
What emerges from the research is a significant split in perception between IT and the rest of the business, one more acute than in other sectors. Almost three-quarters (73%) of IT decision makers believe considerable or moderate improvement is needed when it comes to changing technology systems and processes quickly, compared with 59% of business decision makers.
Shift the mindset or become irrelevant
These findings lend credence to analyst Gartner’s suggestion that digital transformation in traditional financial services firms is largely a myth because institutional mindsets, processes and structures stand firm. Non-IT executives understand the threat that digital disruption poses, but they’re not as convinced as their IT peers about the need for a new approach.
Failure to shift this mindset and to embrace digital transformation and automation could be catastrophic: Gartner estimates that four in five heritage financial services firms will be irrelevant by 2030 if they don’t use technology to change the business models of the industry.
One of the first priorities for executives in incumbent financial services organisations will be to build stronger bonds between business and IT. Slow-moving finance firms are under pressure due to the high level of disruption in the industry, with global digital platforms, fintech companies and other non-traditional players gaining greater market share.
The good news is that the research suggests business and IT decision makers are aware of the need for a stronger working relationship. Close to half (42%) of executives in financial services firms believe closer collaboration between technology and the rest of the organisation would help their company to achieve its automation aims.
COVID-19 the catalyst for change
In many ways, COVID-19 has created a burning platform for collaboration. As many as 87% of financial services respondents said their organisation encountered operational difficulties in addressing the challenges posed by the pandemic, with 40% describing these operational difficulties as ‘significant’.
Across the financial services industry, executives report that 95% or more of their office workers switched to working from home during the crisis, according to PwC. However, by and large this switch worked well, with 69% of executives reporting to the consultant that their employees were as productive or more productive than before the crisis.
The success of this transition elucidates how IT teams stepped up at the business’ critical hour of need and kept operations running and customers serviced. For some financial services businesses, employees were able to log-on and stay productive due to their previous investments in cloud computing and collaborative platforms. This IT spending meant that, when lockdown came, employees across the business could stay connected and productive.
EIU research suggests the valuable contribution of the cloud hasn’t gone unnoticed. Financial services executives believe cloud will be the most important technology to the success of their organisations over the next 12 months. For IT decision makers, that level of surety is even higher, with 52% believing the cloud is key for driving success.
The power of automation on the cloud
The cloud has proven it can help financial services firms to scale operations quickly and effectively. Collaborative tools that might once have been used occasionally were also used almost continuously through the pandemic. What’s more, the infrastructure coped admirably.
It’s hoped that this recognition from both IT decision makers and business decision makers, that technology has played a crucial role in helping many financial services organisations weather the COVID-19 storm, might bring these two groups closer together. By coming together with the same mindset – that in order to reach the organisation’s digital automation goals smart investments need to be made in the right technologies, which are also capable of overcoming the very common challenge of legacy IT – financial services organisations have a much better chance of achieving real change.
Low-code automation is one technology that is helping financial services to simplify and accelerate innovation on the cloud for meaningful transformation. Low-code is capable of unifying data and processes (from both new and old systems), as well as people through automation to quickly respond to the rapid pace of change in financial services, while also reducing costs and managing risk.
To learn more about the research download the full report.
