Hopperman says banks were reluctant to shift budget away from customer experience products to address infrastructure depreciation and mounting software incompatibility. Moreover, with hundreds of applications depending on one another for information, banks feared decommissioning one would be akin to pulling a key thread on a sweater: the system would unravel. So long as the revenue curve remained halfway stable, banks favored minor adjustments over significant overhauls, he says.
That hold-the-line attitude became part of the corporate culture, proving to be a bigger hurdle than the technical challenges, says Latimore. “It’s very easy for senior management to slow walk the solutions so that they can make it to retirement, and keep things working but not prepare their legacy for the next generation,” he says. “That is a classic activity at banks.”
The result is that banks operated back-end applications strung together in a slapdash fashion years beyond their planned retirement. This is problematic because banks’ current infrastructure is not capable of supporting the proliferation of mobile, omnichannel, and other solutions influenced by the slick, consumer-friendly software created by such giants as Google, Facebook, Amazon and Apple, says Latimore. “They are forcing banks to play catch-up faster than they would if left to their own devices,” he says.
Banks modernizing IT with cloud, virtualization
Banks are modernizing their IT systems in different ways, many of which involve the traditional client-server model for cloud computing and virtualized infrastructure. Bank of America and Goldman Sachs, for example, are modernizing their infrastructure with open source commodity hardware. Capital One is using public cloud software from Amazon Web Services to run a new mobile banking app.
The Bank of New York Mellon has built a hybrid cloud, allowing developers to provision servers in minutes, rather than subjecting themselves to a traditional labyrinthine approvals process for requesting and configuring hardware. A modular architecture that allows the freedom to pick and choose hardware and software infrastructure helps the company avoid vendor lock-in, says BNY Mellon CIO Suresh Kumar.
BNY Mellon CIO Suresh Kumar.
“Hybrid cloud is the reality for most large enterprises because all of us have data centers and a fairly large amount of investment so we need to figure out how to transition from where we are to where the future is,” Kumar says. “You have to have a strong architecture roadmap that allows you to introduce new capabilities without necessarily having to destroy what you had before.”
Deutsche Bank, meanwhile, is accelerating its private cloud deployment, supported by a 10-year deal to have HP Enterprise manage the company’s servers, data centers and storage. The bank last month also promoted CIO Kim Hammonds to COO, where she maintains responsibility for the company’s technology upgrades. The goals are lofty, befitting a company under duress. By 2020, Cryan says, the bank expects to pare its existing 45 operational systems to four, quadruple its use of private cloud systems to 80 percent, and increase application virtualization to 95 percent from 46 percent, at an estimated cost savings to run the bank of 800 million euros. "We will be a state of the art digital standard,” Cryan says.