Industry
Banking
Banking Services Transformation: Unlocking Exponential Value
Solution
IoT and Digital Engineering
Bringing Together IoT and Digital Engineering to Create Rich Experiences
Cloud
Enabling Enterprise Agility & Resilience with a Robust Cloud Strategy
Highlights
- Banks continue to grapple with legacy applications, which result in high maintenance costs, longer time-to-market, and error-prone business operations.
- Modernization of legacy applications has emerged as a crucial prerequisite for the rapid digital transformation of financial institutions.
- We explore how a containerized approach underpinned by microservices is helping Credit Suisse become cloud-ready.
In this article
In this articleinpage
Abstract
The financial services industry operates with legacy systems and applications that are decades old.
These applications lack the ability to adapt to fast-changing business needs and cannot leverage modern IT infrastructure to the advantage of banks. This results in poor performance and customer experience and longer time-to-market for new offerings, thereby affecting banks’ competitive position. In addition, legacy application landscapes adversely affect banks’ digital transformation programs and delay cloud migration. While banks recognize the urgent need for legacy modernization, an efficient and cost-effective solution has so far been out of reach. We present a cost-effective and efficient approach to legacy application modernization leveraging cloud and containerized microservice technologies.
Legacy modernization: A prerequisite for rapid digitalization
Operating with outdated systems has resulted in a plethora of obstacles for banks.
These include lack of skilled resources to maintain legacy applications, high maintenance costs, inability to adapt to changing customer demands, and error-prone business operations. In addition, legacy applications are unable to provide the required availability, scalability, agility, and resilience demanded by the shift to digital banking models. Even a small product upgrade goes through a lengthy release cycle resulting in increased costs and longer time-to-market. All these factors result in poor customer experience, leading banks to lose their competitive edge.
Legacy application modernization has emerged as a critical imperative in the financial services industry, as it is a crucial prerequisite to rapid digital transformation. In addition, cloud adoption is gaining rapid traction in the industry given the massive growth opportunities it provides. Legacy modernization is also essential for a quick transition to a cloud-ready application landscape.
Putting banks in the fast lane
Banks stand to gain a lot from a legacy modernization program.
The benefits are manifold: business agility, faster time-to-market for new offerings and feature upgrades, ability to adopt new technologies such as artificial intelligence (AI), machine learning (ML), and internet of things (IoT), reduced total cost of operations, and more.
Furthermore, legacy modernization enables banks to scale up digitalization programs and migrate to cloud platforms. However, the transition is not easy—the primary challenge is in identifying the right modernization path considering organization-specific IT infrastructure pitfalls and requirements.
In our view, adopting a container-as-a-service (CaaS) approach underpinned by a microservices architecture paradigm can help banks modernize legacy platforms and revamp old applications to become cloud-ready. Microservice architecture splits large monolithic applications into small manageable and isolated microservices, cutting release cycle times. CaaS platforms can be hosted on-premise and create a bridge between cloud and on-premise applications. Coupled with the DevOps approach to software development, this is a cost-effective way to help banks become agile and expedite their software delivery cycle. Automated testing and integration, which are characteristic of the DevOps software development approach, enable continuous monitoring. This allows banks to quickly identify bugs and conduct rapid debugging, thereby cutting time-to-market for product launches and feature upgrades to existing offerings.
Putting theory to action
Migrating legacy applications to the cloud is not easy and is costly.
In addition, public cloud adoption, with its inherent security and compliance constraints, poses a major dilemma for financial institutions and delays a quick move to cloud infrastructure. Many banks adopt a wait-and-watch mode and prefer to observe their peers’ strategies and follow a similar path for their transition. However, this delay denies banks the early-mover advantage and affects their market position and customer confidence.
Banks can choose from three approaches to migrate legacy applications to the CaaS platform:
- Lift and shift – This approach is relatively fast and inexpensive and helps banks to rapidly containerize legacy applications without major code changes. It requires minimal configuration changes during migration. Additionally, the approach expedites the decommission of old components and frameworks, infuses agility, and allows banks to auto-scale the application, using minimal resources to meet sudden spurts in demand. However, the application will still be monolithic in nature with a longer development life cycle and time-to-market.
- Improve and move – This approach helps banks revamp applications to make them cloud-compatible, integrate seamlessly with the target infrastructure environment, improve performance and customer experience, add more features, and reduce costs. Migrations using this approach take longer than the lift and shift method as applications need to be refactored to enable integration with the infrastructure and consequently results in high costs as well.
- Rip and replace – With this approach, financial institutions can completely redesign and rewrite their applications to make them cloud-compatible and unlock all the benefits of a modern platform. Legacy applications are moved to a cloud-native, CaaS platform using a microservices framework. However, this approach is expensive in terms of both time and money compared with the lift and shift method.
Moving to the target state
We recommend a combination of the lift and shift and rip and replace approaches for application modernization.
Though the decision on the transformation approach depends on the individual organizational strategy, in our view, the rip and replace approach is preferable for financial institutions because it has the capability to deliver quick wins—agility, faster time-to-market, rapid application deployment, and complete utilization of the modern data platform.
Legacy application modernization, however, is not an easy journey, as financial institutions have thousands of applications in their inventories. Banks face challenges related to functional coverage—absence of functional tests can result in additional time and effort during migration. In addition, the unavailability of third-party libraries on the new platform can delay the migration process.
In light of the above, it is essential to define a detailed migration strategy and adopt a step-by-step approach to ensure hassle-free implementation, as described below:
- Perform in-depth analysis of all the applications in consultation with all the stakeholders to determine the best path and priority for migration.
- Identify the right third-party software and libraries used in the application, prepare a complete list of dependencies, and check their availability on the target platform.
- Prioritize applications for migration—those that are not dependent on external libraries or where the third-party library is available on the target platform can be migrated in the initial phase.
- Identify applications for which functional tests are missing and write new test cases.
- Categorize applications based on their state (active or inactive), number of users, and investment mode.
- Use the lift and shift approach to migrate rarely used legacy applications in maintenance-only mode—applications are containerized and deployed on the CaaS platform (see figure 1).
Figure 1 - The lift and shift approach to migrating legacy applications
- Adopt the rip and replace approach (see figure 2) to migrate active applications in investment-mode—applications are split into multiple microservices and then deployed on the CaaS platform.
Figure 2- The rip and replace approach to migrating legacy applications
- Involve the application development team in all phases of the migration.
- Upskill and train the application development team so that they have the ability to run and maintain applications in the new platform.
In our experience, 80% of the applications will be suitable for rip and replace while the remaining 20% will need the lift and shift approach for migration to the CaaS platform. Adopting this approach can drive a rapid shift to cloud platforms, thereby equipping banks with the capability to capitalize on the huge opportunities that such a shift will offer.
Application modernization: Case in point
To illustrate the benefits of modernization, let’s look at the approaches Credit Suisse adopted.
The Switzerland-based banking firm is implementing an on-premise CaaS migration program at a lesser cost to modernize its legacy applications and to become cloud-ready. The bank is using a combination of the lift and shift and rip and replace approaches for the transformation. As the number of applications are many, the bank has adopted a phased migration. In the first phase, existing repositories were migrated to modern control repositories and continuous-integration-continuous-delivery (CICD) tools were used to quickly build and deploy applications over the containerized platform. As the implementation is still in progress, data on benefits is not yet available. However, Credit Suisse was able to realize some early wins:
- Reduction in total cost of operations (TCO)
- Improved time-to-market
- Agility, auto-scalability, and higher availability of applications
In a nutshell
A cloud-ready, containerized microservices platform helps financial institutions modernize legacy applications.
It also makes them compatible with modern digital technology infrastructure and agile and DevOps practices. The benefits are manifold—banks acquire the capabilities to take advantage of new growth opportunities, improve customer experience, and gain an edge over peers. While the transition is not without challenges, the benefits far outweigh the obstacles. Banks must prioritize legacy modernization to march ahead of the competition and attain a leading position in the post-pandemic new normal.
