Banks battle with cost of creaking legacy IT systems

Years of under-investment have left banks with a complex tangle of ageing core IT systems that are increasingly costly to maintain, according to a new study.

Nearly three-quarters (70 per cent) of the 1,500 worldwide bank executives questioned for the study said inflexible IT systems are impeding their ability to be competitive.

High maintenance costs and lack of system integration were also cited by half of the bankers as factors holding their business back.

The Accenture and SAP-sponsored survey was conducted in Asia Pacific, Europe and north America by research firm Celent,

Stuart Taylor, partner in UK banking at Accenture, said a lack of resources and fears about undertaking such a huge task has left many banks with problems after trying to tackle it piecemeal.

"The changes banks have been making have been somewhat fragmented and as a result they have all these point solutions with multiple applications from multiple vendors," he said.

But banks are gearing up to finally tackle the problem of updating core banking IT systems once vital compliance work is completed and more resources are freed up, with almost a third of European bankers saying they are planning replacement programmes within the next five years.

Taylor said: "During the course of the next 12 to 18 months banks will be through the worst of the investment for the likes of Basel II which has redirected investment funds away from some of the core banking applications."

He said there is an increasing acceptance by banks that inflexible, old IT systems are holding them back in the fiercely competitive financial services sector and that replacing them is the only option.

"The IT people now believe it needs to happen if they are to meet the business needs," he added.