The Cost of Complexity Survey 2005 by HAL Knowledge Solutions places a number of critical IT practices into question. It highlights how a lack of understanding of legacy IT infrastructure is creating acres of unnecessary cost and restricting compliance programmes.
Key findings from the survey include:
- 59% of respondents agree that IT governance is impossible without full visibility of all legacy applications code and systems
- But, on average, only 40% of the applications portfolio of financial sector firms is visible for constructive analysis
- 60% of respondents believe that this lack of visibility also presents compliance challenges, and a similar number see the need for audit capability growing due to regulatory pressure
- But 65% of businesses state that complexity makes auditing unfeasible in areas of legacy architecture
- Despite the hype, over a third of financial sector organisations are still struggling to meet regulatory standards such as Basel II and Sarbanes-Oxley, and the complexity of legacy applications is the major IT factor in the failure to comply
The study raised two important issues; Firstly, while financial sector IT departments have a clear understanding and commitment to developing IT governance strategies, (with 70% having an internal management committee, and 68% viewing IT governance as a high, or highest priority for the business), they cannot implement effective governance programmes without a clear view of their legacy code – and as the study shows, this they do not have.
Secondly, the responses clearly state that the major compliance issue facing IT professionals in the financial sector today is the complexity of their IT systems, and the corresponding need to audit and control them. However, as the research shows, organisations are struggling with this issue, and many see the lack of transparency as a costly and difficult problem to solve.
Mark Kusionowicz, VP Marketing at Hal Knowledge Solutions, said: “Such poor levels of application visibility undermine any attempts to create valid auditing or quality improvement processes, presenting immediate exposure to corporate risk for IT departments from internal and external bodies.
“For example, with Outsourcing high on the ‘ to do’ list, the survey states that outsourcing accountability is the primary driver for IT governance in the sector. However, if an institution only understands 40 percent of its applications code, it is impossible to tell which code is business critical, and which is simply redundant. This eliminates the ability to correctly assess the operational cost of IT, reducing the ability to develop accurate and achievable support metrics and SLA’s with outsource partners, or for internal charge-back programmes.”
Billy Hamilton-Stent, Director, Loudhouse Research, concluded: “Our key objective was to explore how IT governance is managed and delivered in a sector synonymous with strict regulatory control and significant reliance on legacy IT to deliver against business goals.
“The figures clearly highlight significant issues of cost control and efficiency within IT departments, and hit upon major organisational challenges, such as compliance, should current levels of application management, visibility and auditing be maintained. At a fundamental level, this research is a call to action to develop a transparent applications portfolio within today’s largest banking and financial institutions.”
The Cost of Complexity research was carried out by independent research consultancy, Loudhouse Research, in April and May 2005. The research sample is comprised of 60 senior financial sector IT professionals working for global financial institutions.
About HAL Knowledge Solutions™
HAL Knowledge Solutions is the market-leading provider of Application Portfolio Management software products and services that drive IT Governance initiatives. The hidden intelligence about their applications revealed by the HAL solutions has enabled customers to reduce application support costs, make strategic sourcing decisions and manage both outsourced and in-house teams plus deliver on regulatory compliance requirements.
Founded in 1984 and with investment from Apax Partners, HAL has offices in Germany, Italy, Spain, Switzerland, UK and Brazil with development laboratories located in Italy and Bulgaria. The company markets its solutions both directly and in collaboration with partners such as major service partners including IBM, EDS and Banksiel. HAL’s customers rank among the most prestigious organisations in the world, including UBS, Banca Intesa, Linea Directa, Assicurazioni Generali, TNT, Kuehne & Nagel, Telefonica and Renault Nissan.
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