Financial Institution Advantage and the Optimization of Information Processing

Chapter 2Strategic Hardware and Software Management

Overview

Managing the complex and evolving suite of hardware and software that a financial institution needs to operate effectively is a somewhat daunting task. It is usually made more difficult because the overlapping vintages of legacy systems and critical process dependencies make major design changes extremely difficult. The phrase “changing the wheels on a bus while it's still driving” is often used to describe large IT system changes, and with good reason. But to the extent that financial institutions are simply unwilling to take on major system redesign projects because they are too difficult, too risky, or both, they are creating great economic opportunity for those who are willing and able. Certainly, the best motivator and greatest risk mitigant is a clear vision for what a modernized system ought to look like, and what capabilities would be created or greatly enhanced by implementing such a system. Armed with this vision, an institution can plan to advance toward that vision using a combination of opportunistic and incremental changes and larger, more deliberate transformation projects. And, equally importantly, incremental or large steps that are inconsistent with the vision can be avoided.

One of the biggest questions and challenges when it comes to overall system design is the level of centralization and integration that an institution should target. By centralization we mean that data is all ultimately, officially ...