Upgrading Legacy IT: Financial Services vs Healthcare

Dateline: March 14, 2014

Welcome to our Friday WRAP – one thought-provoking idea to think about over the weekend.

Recently, two different articles crossed my desk that showed vastly different outcomes to the way legacy IT was managed.  The first article, Big Banks’ Legacy IT Systems Could Kill Them, described the unfortunate circumstances faced by a number of large banks: their legacy IT systems are not able to keep up with current (and presumably future) demand.  This article highlighted the problems faced by Royal Bank of Scotland (RBS) and large banks in general,

Take Royal Bank of Scotland (RBS). Once a predator with ambitions to be king, it grew fat during the good times. Now the bank is but a shadow of its former self, with a litany of recent IT problems….In 2012 problems with IT systems at RBS left customers unable to access their accounts for days….The glitch in the CA7 batch process scheduler ended with 12 million customer accounts being frozen. Customers were denied access to funds for a week or more as RBS, NatWest and the Ulster Bank manually updated all account balances. …Then, in December 2013 – on the busiest shopping day of the year – IT problems stopped customers making online and card payments….RBS has since admitted its IT systems need an overhaul after decades of under-investment….

So could 2014 be the time when legacy systems [at global banks] go?  “Not a chance,” concludes the anonymous senior IT professional Computer Weekly spoke to. “Too expensive, too difficult, other priorities, no budget, and the legacy systems actually work (subject to human error of course). Yes, there will be a few cases, but I don’t expect a trend from what I know of budget priorities. Main focus is around risk, compliance, security, regionalisation, regulation and some new business requirements.”

At the other end of the spectrum is Walgreens, described in another article, Walgreen’s CFO tug of war between IT legacy systems and tech that could ‘take us to glory’ .  Walgreens has transformed from  a ‘corner drugstore to an international healthcare delivery provider’ in part, because of their willingness to invest in IT and replace legacy systems.  When asked about the toughest technology decisions of the past year, the CFO replied,

One area is that we have a lot of mega systems that are IT legacy systems. So, for example, in 1986 we put in three huge state-of-the-art systems: our point-of-sale [POS] system, our data server system, as well as the system that manages our entire pharmacy. Last year, we replaced two of them. The POS system, for example, is about a $400 million cost just to put the new system in our stores. The other legacy system was our data servers.

Another is what I would call ‘leaning-forward technology.’ We’re developing ‘HealthCloud,’ which is quite an extensive and expensive health system that links to HIT [health information technology] and billing systems and can reach out to hospitals and to physicians.  We’ve had to balance between these core legacy systems that pay our bills every day and these other ones that we think might take us to glory in the future. And it is that tug of war that is tough

What are you doing about your legacy systems?  

That’s a wrap!  Have a nice weekend.

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