Banks are often hampered by outdated IT systems, says Chris Potts, CEO of Rule Financial, a firm specialising in IT consultancy. It is not uncommon to find systems whose origins go back 20 years or longer.
The potentially dilapidated state of banking infrastructure is something for concern, but improving the systems was not always on Potts to-do list. After a PhD in geophysics at Cambridge University, Potts set off exploring for oil for several years in West Africa, South Asia and Asia Pacific with Schlumberger, the world’s largest oilfield services corporation.
The experience of running field operations in jungles and deserts across the globe gave Potts a taste for management. An MBA led to the position of salesman for a future arm of CapGemini, selling outsourcing solutions to the City. After a seven year spell at Gemini Consulting, Potts took up the role of deputy CEO at Mondex, an electronic payments business and a subsidiary of NatWest. After 2001, Potts moved to Misys, running the asset management business, and in 2003 led a management buyout of the business. After the sale of the unit to 3i Infotech Potts joined Rule Financial in 2010.
This wide and varied career may have contributed to Potts almost stoical outlook concerning the outdated nature of banking technology. It is one of those things that is just a fact, he says. For Investment banking in particular, technology is a fundamental part of their business, and over the years well intentioned people create, buy and implement solutions that become crucial to what they do. They become integrated with everything else that they have, and changing them is a considerable effort. It is therefore inevitable that systems remain in place for a long time.
To paraphrase Lady Bracknell, leaving a system in place for 10 years is unfortunate, but leaving a 20 year-old legacy system in place seems careless. Potts disagrees: It is very much an issue of risk and certainty. You have an old system that works, and very often with old systems, all of the possible bugs and flaws have been ironed out over the years, and they work very reliably. What you want above all else is reliability. Every time you make a change, you do not want to change to something that will set you back.
When to make the change from old to new is something that troubles many of Rule Financials clients. Typical of those that it troubles the most are clearing and settlement platforms, which often hold the oldest legacy systems. One classic example of a clearing and settlement IT failure was the attempt to integrate the technology platforms of London Clearing House and Paris-based merger partner Clearnet. Merging the 30-plus legacy systems resulted in a 13.9 million write-down and eventually cost CEO David Hardy his job.
[LCH and Clearnet] have had several goes at integrating their platform and they are not unique in that respect, explains Potts. They are very complex environments and they both service very active minute-by-minute markets. Failing to process accurately in a timely way is vastly more damaging to them than being as functionally advanced as they might hope.
Despite, or perhaps because of the melange of technology platforms that litter the past, connectivity remains vital going forward. The ability to give clients direct access to a range of services has become a primary demand. From paper, to telephone, via networks and now increasingly through mobile devices, more and more firms are offering clients access while on the move, explains Potts. We are now seeing a lot of interest in single trader platforms where banks offer clients access to all of their services via one internet based interface. This is the investment banking equivalent of electronic banking for consumers. In order to capture and keep your end clients interest and business you need to offer them access to as many of your services as possible, simultaneously, reducing more the need, say, to phone and talk.
Potts sees this new world as more competitive and offering higher standards of service. It also increases the importance of reliability, integrity and security. All of these things come into focus when you start interacting more, electronically, with clients.
There is an interesting parallel that is between modern London and Victorian London, Potts concludes. The old city carries with it many generations of different architectural and urban layouts, stretching back to Londinium. So whenever you do anything new in London, as all urban planners will tell you, you have to undo quite a lot of the past, before you can build the future.
Giles TurnerNews Editor