Evolution of a Legacy System for business and regulatory adjustments: challenges and opportunities

Legacy systems in the financial sector: here are the main critical issues to be addressed and the opportunities to be seized in the IT world.

Introduction

A legacy system is a system developed on backdated technologies but which, for various reasons, there is no interest in replacing. Often, it is a system on which core business procedures have been developed and a large amount of resources would have to be spent to replace them, both in terms of time and costs.

Legacy Systems

At Technology Reply Financial Services we have acquired important know-how in various projects relating to the maintenance and transformation of legacy systems, with a particular focus on the financial sector.

"Legacy Systems" use technologies that are outdated by today's standards, yet continue to play important roles especially in the financial sector.

It is essential for financial institutions to adapt and innovate their legacy systems to keep up with the increasingly competitive market and increasingly stringent regulations. Technology Reply Financial Services has developed important know-how in relation to the management, maintenance and transformation of legacy systems, with a particular focus on the financial sector.

Challenges


The first obstacles encountered on a legacy system are the following:

Understanding existing logic
Over time, the understanding of why a certain business logic was implemented in the system has been lost. This makes it complex to adapt future developments to these now obsolete logics, which often cannot be eliminated or replaced to avoid the onset of major regressions on the functioning of the entire system. In-depth reverse engineering work on the system is necessary to extrapolate the current operating logic.

Complexity and dependency of procedures
After understanding the functioning of a procedure and its business logic, it is necessary to understand how this procedure integrates within the system. Some systems have been implemented with monolithic paradigms, so there are often dependencies between procedures that are not easily identifiable. It is necessary to analyze the system as a whole, highlighting the technical, functional and operational relationships between the various procedures and the various steps.

Resistance to change
Dated systems have been used for some time and companies are used to working with certain patterns, resulting in them being reluctant to change, even if it improves: it is likely that some users will resist changing the legacy system. It is important to have an improvement plan that can immediately show the benefits of transforming the legacy system.

These general obstacles contribute to significantly increasing the complexity of carrying out the improvement interventions requested day by day by the customer. Financial institutions nowadays have to face numerous challenges, the most critical of which are:

  • Tightening of regulations (a phenomenon which had a strong increase following the 2007 financial crisis) which, in general, require greater transparency and therefore effective, efficient and timely communications towards supervisory bodies ;

  • Business needs linked to commercial initiatives (ad hoc offers and promotions) for which time-to-market represents a primary driver to be achieved in order to remain competitive.

These drivers lead to evolutionary scenarios that must accommodate the existing system, often through technological compromises and operational overhead.

Opportunità


The challenges of a Legacy System open up numerous opportunities for the organization that decides to evolve its system

Modularity of the system
One of the greatest opportunities is to change the paradigm of the system, moving from monolithic to modular. The modularity of the system allows you to acquire greater flexibility and connect more easily to external services.

Greater knowledge and control of the system
Evolving a legacy system means first of all shedding light on the current logic and allowing the organization to make more informed decisions regarding the interventions to be planned.

Flexible and continuous evolution
Modernizing a legacy system allows you to work in continuity with the operational activity and to have a good degree of flexibility in evolutionary requirements. On the contrary, replacing the legacy system means defining stringent requirements for the new system that are unlikely to vary in line with regulatory and business needs.

"Rejuvenation" of the legacy system and efficiency and effectiveness in new developments
With each evolution, it is possible to gradually improve and modernize the old system with more current and high-performance programming languages.

With each new intervention released, the new developments will gradually be faster and easier to implement. Clearly this is only possible after acquiring in-depth knowledge of the legacy system.

Evolution of Financial Legacy Systems

Technology Reply Financial Services has developed important know-how in relation to the management, maintenance and transformation of legacy systems, with a particular focus on the financial sector. In particular, the experience of Technology Reply Financial Services is based on these distinctive characteristics, which define the competitive advantage deriving from experience:

Taking charge of the system: this phase is fundamental to "assimilate" the know-how of the as-is system and to define how the legacy system can evolve.
- Reverse engineering: knowing the procedures that guide our customers' business is the most important activity in the first phase of taking charge; depending on the complexity of the system it can last from a few weeks to several months.
- Previous documentation: where available, the acquisition and analysis of previous documentation allows you to speed up the learning of existing procedures. Technology Reply Financial Services has implemented AI solutions capable of processing a large amount of technical-functional documents to effectively summarize useful information and facilitate knowledge transfer to the new working group.
- Focus Re-hosting: we have guided customers in re-hosting projects to innovate host systems (migrating them to the Oracle Tuxedo platform), allowing the system to be freed from mainframe environments, moving it to modern/cloud architectures (with immediate savings in costs related to MIPS consumption), and enabling the possibility of evolving the legacy system towards integration/evolution with modern and innovative services.

Modularization of the system: developing new evolutionary modules allows you to partially perimeter the original monolithic system, limiting dependencies on core legacy procedures with high business impact. A real use case as an example: the development of a modular system for the entire technical-financial management of Irish investment funds. This system, designed to operate independently of the legacy procedure, made it possible to integrate old systems with modern platforms such as Appian, using microservices.

Rejuvenation of the legacy system: once you have acquired the correct knowledge of the legacy system, you are able to remove much of the legacy code, redoing it on modern technology stacks/frameworks and adding new features. A real use case as an example: the complete "legacy" software conversion for the technical-financial management of alternative investment funds (AIF).

In conclusion

Having a system made up of modules, therefore not monolithic, is essential to keep up with modern technologies and undertake ambitious projects capable of giving our customers a competitive advantage on the market. The speed in the implementation of the evolutions, in continuity with the ordinary operational activity, has become a minimum requirement to be adapted to the regulations, now increasingly stringent, and in step with the business needs dictated by an increasingly competitive. Control over your core procedures is essential to correctly manage the organization's Operations.

In conclusion, we can say that projects for the evolution and modernization of one's legacy system are challenging for a company but, with the right technological partner, they are also highly advantageous, in terms of scalability, knowledge management, regulatory compliance, maintainability and speeding up development and testing times for new features.