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Banks, Replace Your Legacy IT Now

Posted by Jeff Pelliccio on Aug 27, 2018 9:00:00 AM

In ICS insights, IT, Accounting and Finance, client

Does your bank offer an innovative mobile application for your smartphone? If so, that’s great. What you may not realize is that a large amount of its critical IT infrastructure may be built on technology right out of the era of “The Jetsons.”

There are several issues involved in running critical banking or any other operational functions on these systems. There are some banks, and other types of financial institutions that are using technologies for their core systems that are several decades old and that are also extremely hard to maintain. Some of the IT professionals who operate these systems have since retired or are extremely costly to hire. These outdated systems also expose banks to various cybersecurity risks since they are typically hard to patch.

If something happens to go wrong with the systems and they wind up going down, it may cripple the operations, and it could take quite a while to get them fully back online.

The question is, how can financial institutions navigate these specific challenges? Some of the banks have made the decision to hire contractors or technicians who know how to manage this aging system. Others train younger coders on the older programming languages. There are some that have migrated legacy systems to the cloud. Unfortunately, this can take quite a bit of time and be costly. Each strategy presents a number of unique challenges for financial firms; however, they are all telling of the challenges related to the maintenance of legacy IT.

Shifting the Legacy IT Systems on to the Cloud

There are a number of banks and other financial institutions that are moving their legacy IT systems over to the cloud. This move allows them to use other's IT infrastructures for hosting their systems and their data and to tap into the most updated cloud-based applications.

There are hurdles related to migrating over to the cloud, which includes the actual transition itself, facilitating audits on the cloud to the location, and the security and management of data.

Regardless of if a bank is making the move to a cloud environment or not, taking on any large, transformational IT project can be a daunting task for all organizations. It always entails certain elements of risk, which when talking about banks, includes moving from a somewhat stable system that even though it has limitations, have provided continuity of service to all customers, to a newer system where the long-term readability still needs to be proven. Additional risks include not-yet-known vulnerabilities in the new technology and the actual threat that is posed to the networks and the customer data and other sensitive information.

It takes time for significant legacy-to-digital transformations to be complete. This is something that is even truer in the banking market due to the regulatory issues that all financial firms are forced to address.

While this is the case, there are more companies that are making this move more than ever before. For example, there are some financial institutions, including Capital One, that are now “going big” with their internal technology solutions, and hiring the top talent from big-name companies such as Microsoft and Amazon. There are other institutions, including HSBC that are actually moving in the opposite direction, and making their technology partnerships with various cloud companies, such as Oracle, in order to help overhaul their existing legacy systems with more modern and sophisticated cloud infrastructure. According to experts, these are both viable solutions.

It’s important for today’s financial firms to adapt. If they aren’t all in or all out, the legacy system realm is going to continue haunting financial institutions with the increased looming thought of critical limitations, outage or other issues.

COBOL: Catching Up

The question some are pondering is how banks reached this point? Some believe that quite a bit of the latest functionality that banks have delivered to their customers, which includes apps, as well as other digital interfaces, have been developed by using systems that actually plug-in to the preexisting legacy IT infrastructure through something referred to as “middleware.” After years of system updates, and integrations post-merger, many IT systems used by banks have become a complex web of software and hardware solutions.

Large banks and financial institutions, especially the ones that are created by mergers, have stated that banks face issues past just finding the right IT technicians that are able to service the older and more outdated systems.

It is extremely complex. The legacy systems still being used from generations past are often heavily layered and intertwined.

There are some legacy IT systems in banks that actually run on COBOL or the Common Business-Oriented Language. This is something that was actually created in the 1950's, and that hit its peak of popularity in the 1960's. Over time, COBOL has been slowly replaced by the newer and more versatile languages, such as Python, C, and Java. Many banks never bothered to replace their IT systems that were still running COBOL, and since there are few IT technicians today who can use this language, and who can manage these, then it makes the systems vulnerable.

According to statistics, more than three trillion in daily commerce is moving through the COBOL systems. This results in many people’s banking information and even their money being vulnerable due to the outdated programming language.

There are some companies, such as IBM that sells the mainframe computers that still run on COBOL that make the argument that an entirely new generation of coders can gain the knowledge needed to use and manage COBOL systems. However, many wonder if this is enough to support the banks and financial institutions throughout the U.S. To date, the company has trained almost, developers in just 12  years’ time. They claim that just because the language is older, it does not mean that it isn’t good or that it still isn’t viable.

Hire Those Who Can Help

If you need help creating a team to transition your bank out of legacy IT, call ICS. We have experience with staffing for teams that handle transitional periods and even after that when you need permanent positions. Click below to contact our staffing professionals and we can get started on your road to success. 

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