The true costs of outdated data management
As technology develops and requirements change, businesses sometimes find that they have a diverse collection of legacy technology platforms. These systems may have played key roles in business operations at one time, but if they are not looked after, they will not age well and may become a costly and unscalable burden.
Whether the result of previous mergers, a failure to keep up with technological advances or a reluctance to budget for development, legacy platforms are certainly not uncommon. Most businesses recognize the need to update their data management systems, but the cost of change and perceived difficulties of integrating existing systems with new solutions can slow them from taking action. At the same time, continued use of legacy platforms can hold businesses back from reaching their true potential and severely impact business operations. With this in mind, we look at the true costs credit unions are likely to face if they fail to bring their data management capabilities in line with 21st century requirements.
Why Failing to Update Will Be Costly
According to our research, more than a third of financial institutions say that legacy data platforms are the biggest obstacles to improving their data management and analytics capabilities. This is a worrying statistic, as financial institutions are heavily reliant on easy access to quality data and analytics to operate effectively.
However, a further 31 percent of financial institutions cite that cost of change is holding them back from updating their legacy systems. For these organizations, there is a mistaken idea that it is cheaper—and therefore more cost-effective—to stick with legacy systems than to update them. Yet, this doesn’t take into account the indirect costs of legacy platforms and their effects on a business, which can be felt across a number of other areas, including information security and user productivity.
It is crucial that organizations consider how much their current data management systems are holding them back operationally. Outdated systems typically take longer to carry out processes, delaying data delivery to end-user applications and reports, therefore lowering productivity. Legacy systems can also be costly to maintain, depending on the level and availability of vendor support. They may lack audit or lineage functionality and often cannot scale to new volume requirements, . Data discrepancies, because a business lacks a clear and comprehensive view of its data sourcing and validation process, can be another costly by-product of legacy platforms.
With frequent new regulatory requirements regarding data quality and due diligence, the cost of compliance can be formidable—especially when working with a system not designed with current needs in mind. Additionally, such platforms are a higher security risk as they tend to no longer be supported or patched. This leaves financial institutions vulnerable, including potentially breaching the European Union’s General Data Protection Regulation or other data security regulations.
Moving to Insight-Driven Data Management
With investment in the right tools, businesses can move beyond the shortcomings posed by legacy platforms. Although the initial cost of replacing systems may be daunting, our research shows that many businesses have a good understanding of what they need from new data management solutions. According to our recent study, when considering new data management and analytics capabilities, organizations remain focused on the fundamentals, with more than a third citing ease of use and flexible deployment as their top business considerations, while 41 percent consider return on investment to be the biggest factor. Therefore, organizations must deploy data management platforms that can be easily integrated with other systems within their business.
Undoubtedly, changing data management strategy and tactics can be a difficult task, as it is not only expensive to start again in terms of systems spend, but also with regard to the time and resources required to undo a solution that is typically deeply embedded. However, complacency can lead to much higher risks and costs, with a potentially devastating impact on business continuity, security and reliability. We are finding ourselves in an ever more data-intensive environment, and this data is under more scrutiny than ever before. Credit unions, therefore, must ensure they have the most efficient and effective solutions in place to avoid discrepancies and non-compliance and optimally support their operations.
Martijn Groot is VP/product management at Asset Control, an international company with North American offices in New York. Asset Control is a leader in providing reliable, high performance systems for the management of financial data, helping financial organizations deliver high-quality reference, market and risk data to the people and applications that need it.