Information is integral to investment banking—and investment in new information technology has played a critical role in the industry’s pre-crisis growth and post-crisis adaptation to new regulatory requirements.
Historically, investment banks have been quick to innovate, adopting new programming languages and operating systems to facilitate new asset classes and trading strategies, better pricing and more efficient execution. When the global financial crisis hit and compliance obligations shifted, banks once again turned to technological solutions in the form of new trade and risk reporting systems.
The cost of unchecked innovation
So why did a recent Accenture study find that just 48 percent of investment banks feel somewhat equipped to deal with the next wave of digital innovation? The answer: legacy architecture. Under Basel II, most banks were run as loose collections of quasi-independent entities. Tech decisions were often made at the business line level with little thought given to cross-entity implications or enterprise-wide standards.
Several decades of continuous and uncontrolled IT accumulation later, organizations are facing vast and byzantine “technology estates.” These legacy architectures are slow-moving and expensive to maintain, making responsive investments in digital tech a real challenge. With the bulk of IT spending consumed by operations and support, there’s less discretionary funding and fewer staff hours available for new applications. Even when resources can be secured, banks face an uphill battle when it comes to testing and time to market.
Leveraging cloud based infrastructure to simplify and transform
Until now, IT simplification efforts have attempted to evolve—or even reinvent—investment with roadmaps and target states that establish common standards and centralize IT spending. The reality is that many organizations lack the funds and flexibility required for wholesale transformation. Most systems can’t be changed while in use, and pushing “pause” on operations is simply not an option.
Enter the cloud. Recent advances in cloud technology and legacy decommissioning have made it possible to virtualize legacy applications on an industrial scale. Imagine an automated process that migrates your organization’s systems and data into secure virtual containers that can easily be moved among internal and external infrastructure providers. By removing physical IT assets from the balance sheet, it’s possible to lower your cost base, make room for greenfield replacement systems and set the stage for legacy system decommissioning.
Check out the full report to find out how your investment bank can get started:
If you would like to discuss this topic in more detail, please contact me, James E. Burrows, for more.