Financial services never sit still. Geopolitical shifts, regulatory change, evolving client expectations, new and increasingly bespoke financial products ensure the landscape is always moving.
That constant motion is the foundation for real opportunity: better client outcomes, new revenue streams, smarter ways to grow.
The challenge is that every new opportunity creates new demands on the Operations teams responsible for keeping everything running. And to meet those demands, you need technology that can keep pace: systems that are robust, reliable, and ready to adapt as the business evolves.
Too often, that's not what teams are working with. We brought together three Duco experts to discuss the challenges caused by outdated and inflexible legacy reconciliation solutions. Our panel was:
- Steve Walsh - Managing Director, Reconciliation
- Grace Curry - Head of Professional Services, EMEA
- Laurie Schuster - Head of Professional Services, Americas
Each has considerable experience working in capital markets, dealing with the same challenges firsthand that they now help Duco clients to overcome.
The virtual event was attended by an audience of financial services professionals. Many were actively thinking about replacing their legacy technology, or at least considering it. But 30% of the respondents weren’t considering it at the top of the conversation, so we started the discussion with the reasons why they should.
Key challenges of on-premise reconciliation platforms
Steve, Grace and Laurie all have firsthand experience of the challenges created by legacy technology. Even though that was years ago for some of them, those challenges have remained the same.
“Legacy technology will slow you down,” Steve said. “As the world moves forward with regulation, with wholesale change, [and] industry change, ultimately solutions take too long.”
He gave the classic example of the business requirements document (BRD). Operations teams can’t make changes to complex legacy systems themselves, so instead must document their requirements. These are then passed onto the IT team, who prioritise the request alongside everything else in their development pipeline.
This slow time-to-market creates opportunity cost. “It will take you months to enforce change,” Steve said. This is especially frustrating for Operations teams because “if you ask someone what their top five problems are, they will tell you outright without having to write a doc”.
So, whether adapting to a business change, such as a new trading counterparty, or to surging volumes, these systems lack the agility to scale in the face of new demands.
There’s another issue with their lack of flexibility: Ops teams often can’t wait the weeks required for a change request to make it through an overloaded IT pipeline. They need to move fast as the demands of the business evolve. That means new controls to support growth - for instance as the front office starts trading in new markets, or the business launches a new fund.
“Often the quickest way is to create an EUC [end-user computing solution] or an Excel,” Steve said.
“Gosh, this one hits so close to home for me, having been a buyer,” Laurie said. It’s the presence of these opaque and risky controls that drives many clients to come and speak to us in the first place.
“It's just so important to be able to get that ownership back into the business's hands. We hear it from our clients and so often they just want to make those changes quickly on the fly, within the structure and governance set up, within the risk tolerance of your organisations.”
Steve agreed. “They've built a tonne of controls outside of that vendored or internal solution. And now internal audit are on their backs. They're not SOC compliant, they don't have the relevant controls, there isn't the audit trail. You can't trust the data.”
On top of these indirect costs is, of course, the overt cost of legacy software. These systems are usually on-premise and come with mandatory upgrades every 6-12 months. We’ve heard from clients who spent millions of dollars on these upgrades, only to receive no additional functionality. On top of this, you have to spend a good deal of your change budget testing your existing processes and integrations to ensure the update hasn’t broken anything.
All in all, Steve summed it up: “[legacy tech] creates a huge drag in what is a complex data and regulatory environment.”
Why should firms replace their legacy systems now?
The challenges of legacy systems outlined above have been around for years - sometimes decades. This technology has caused problems for a long time, so why should firms do something about it now?
“Capital markets Operations has reached a huge inflection point,” Steve said. "I think there have been an awful lot of risk-accepted controls. Processes that, to be frank, have kept people up at night factor in what is a real lockstep change in the industry.”
That change is coming from multiple fronts, he explained. Regulation is currently evolving, more jurisdictions are moving to T+1 settlement, and assets are evolving.
“We've got a whole new world order of assets coming into the market. We've got tokenised, we've got distributed ledgers, we've got brand new assets. If my underlying technology can't cope with a security or an equity or a basic derivative, when those worlds collide, the chances of bringing all of that together are slim to none.”
The AI question(s)
There’s a new challenge on the block when it comes to legacy technology: artificial intelligence. The market is moving fast here; jump back just twelve months and the agentic solutions people are using to unlock value today were just a hypothetical.
“Legacy tech could be getting ahead of themselves,” Steve said.
"If you can't manage the data as it is, be it structured or unstructured, you're not going to be in a position to leverage the benefits of agentic technology.”
There is still a long way to go, but AI is now a core requirement for any data solution. “It used to be a nice-to-have capability, but it's now so critical and really embedded in the need for the urgency that we see with our clients,” Laurie explained.
“Pretty much every customer we visited of late [has] at least two pillars [of] AI strategy in their roadmap,” Grace added. “It includes not just internal work, but also adoption through vendor partners.”
“The brave and the bold change managers know what they need to do,” Steve said. “We speak to them on a daily basis. They know where they need to go.”
There are two sides to this coin: capability and security. Your new platform should enable you to harness the latest innovations, such as agents and agent-to-agent interconnectivity. At the same time, you want to be sure that you retain control and the necessary guardrails are in place.
“Whilst we can see huge benefits of AI and agentic technology, we need to retain control and be in a position to give both internal and external audit comfort that we have a handle on those processes,” Steve explained. Your system should keep “the human in-the-loop to be able to make those decisions”.
An audience member asked a crucial question, however: AI and agentic tools are widely available, so why wouldn’t they just build their own capabilities in house?
For Grace, it goes back to the speed at which building and signing-off such a solution is realistically possible. She highlighted “the time it takes to redesign compliance procedures, legal procedures, just operational ways of working when it comes to something like AI.” As discussed earlier, the pace of change can be slow in financial institutions, even when going through well-established governance procedures. AI, especially agentic technology, opens up a whole world of new potential that firms will have to scrutinise very carefully. This is likely to slow down AI adoption significantly when building internally.
Vendors, by comparison, can be much further ahead, not just in terms of the technology they’re offering you, but in terms of the experience they can bring of using AI themselves.
“This AI movement demands adoption by not just the financial services world, but us as well. We can evidence that ourselves. Just last year, [Professional Services] delivered around 75% more projects than the year before with the same headcount.”
“A migration of 246 processes off of the legacy platform two years ago maybe averaged a few hundred [full time] days. With agentic workspace we expect to see a material decrease in the analysis and build portion of that. We're going to go even faster now.”
Grace also highlighted that the buy-versus-build debate is a false dichotomy.
“One very important part of our roadmap is ensuring [agents] are designed with integration in mind. Enabling them to work on their own or with other agents that have been deployed across your Operations. It's very important to us that both are available, and having that multi-pronged approach to your strategic rollout will help you do more and go faster.”
Steve raised another important point: that in-house development risks recreating the same disparate web of point solutions, albeit with fancier tech.
“I don't want a point process. I want scale and I want longstanding change, STP and automation, eradication of exceptions over time.”
The discussion of AI readiness was timely, given the results of one of our audience polls. While many attendees had ‘other’ reasons driving their desire to get rid of legacy technology, of the options we gave, the fact outdated technology isn’t AI ready was the most common reason, chosen by a quarter of our audience.
Capabilities and expertise: Choosing the right system and vendor
Firms across the industry are looking to replace their legacy systems, and the manual processes needed to cover their shortcomings, with automated controls for a wide variety of use cases. Steve said these include “the good old fashioned front-to-back reconciliations” involved in post-trade processing; trade lifecycle management, fees and commissions, collateral margin, and so on. “All of the good reconciliations that, to be frank, over time have probably been neglected or passed over.”
Ultimately, Steve said, these processes were often carried out manually because of inadequate technology, at a time where Operations was underfunded for innovation. “There's a 180 in-house now. Organisations need to be on top of controls.”
New use cases and market developments, such as the rising popularity of private credit and more jurisdictions moving to T+1 settlement, are further burdening this outdated tech.
“You need to be in a position to be accurate and comfortable if you have any chance of settling within a T+1 environment.”
So, based on these requirements and the challenges outlined above, what should you look for when replacing these legacy point solutions?
The first thing should be a single system that is flexible enough to automate all your data in one place. “Clients look for a platform now,” Steve said. This has many advantages, including unlocking total visibility over your processes - a far cry from the ‘shadow’ world of hidden EUCs like spreadsheets.
“Double down on speed and agility,” Grace advised. “We've talked a lot about some use cases that are quite predictable, but then there's the unforeseen events that are less fun - such as things like data security breaches.”
She shared the story of a time during a data breach at a customer where they were able to use Duco to immediately validate intersystem data during the incident. “They were able to go home on time and move on to some of the more important stuff as well.”
Beyond platform capabilities, look for a vendor who has the necessary industry knowledge. Your solution provider should have a partnership mindset. It’s not just about providing software and walking away. You get the most value from a system when the vendor helps you to understand your controls and shares their expertise from having successfully implemented legacy replacements for other firms.
This is because a legacy replacement is an opportunity to rethink the way you work, not simply deliver marginal efficiency gains, Steve said.
“Ultimately this isn't just about core controls and being in a position to interrogate exceptions, it's being able to remove them full stop."
Key factors of a successful legacy migration
Replacing a legacy system is understandably a daunting prospect for many Operations leaders. These systems tend to be deeply entwined in your architecture, orbited by custom processes and workflows to make sure things get done.
It’s no wonder people in the industry often refer to replacing a legacy system as performing ‘open heart surgery’. So how do you make the project less daunting, and increase your odds of reaching the promised land of benefits at the other end of the journey?
For Grace, who has overseen many legacy system replacements during her time at Duco, it all starts with ensuring you are aligned internally on strategy.
“I think more people skip that step than not,” she said. “I would like everything to start there, but it usually doesn't."
"If you don't already know your short and long-term strategy for tech modernisation - start there and get a proper understanding of where your business is looking to go.”
As well as aligning on strategy, you also need to decide how you will measure the return on investment (ROI) of the migration project.
“Putting that stuff in numbers in a way that gets people to listen can be quite tricky, especially when you go to activity-based costs and things like that,” Grace said. “We've got loads of different variations and levers that can be pulled there.”
A time-tested way of achieving this is to start with a project where the perceived risks are lower, and the ROI is much easier to prove.
“An easy way to achieve that is starting with those EUCs that have spawned off from the systems we're looking to replace. There's a lot less fear associated with changing that.”
In the legacy world, most migration projects have worked on a ‘rip-and-replace’ basis. This is because the on-premise technology is so embedded in your architecture and ways of working. Also, you’re replacing it with a similar type of system that needs to fit in the same ‘hole’.
But one of the advantages of a flexible cloud platform like Duco is that implementation works in a different way. It’s entirely possible to integrate around “a system that lacks workflow, lacks proper audit”, Grace explained. “You can keep the existing world the same, make one part better, and start to educate [people] on the tool over time.”
So, rather than ‘rip-and-replace’, a better way to think about it may be ‘reinforce, then replace’. “Showing ROI to the business as soon as possible, even if it's not the full suite, is very important to de-risk our customers from falling on the wrong side of things like budget season.”
On the topic of mindset, the most successful legacy replacements are the ones where clients come ready to tackle their assumptions about how things should work, Steve explained.
“It works well when clients come to the table and they're happy to reimagine and interrogate their operational processes and procedures. Everything that we do as an organisation is to challenge the status quo, [to] improve throughput and scalability and reduce operational risk.”
He added that when clients engage with this approach of abandoning not just legacy technology, but the mindset it has shaped, they “walk away with a very happy outcome.”
Once you have internal alignment on your strategy and the goals for the replacement, the next step is to understand your data’s journey from start to finish through your organisation. Your Operations team are the subject matter experts here, and it’s important that they are included in the migration project as well as your technology team. The sooner you involve people who understand the current platform, whether it's Excel or an on-premise vendor, and how it’s connected within your control framework, the better.
Another key point is to ensure that you have designated a stakeholder for the project who can keep everyone on track. Meet with your Duco counterparts regularly to discuss progress towards milestones, identify issues quickly, and ensure the project remains on track.
And what about hitting those milestones? When can you expect to see ROI? This is a question one of our audience members asked.
Steve gave an example of getting a reconciliation live for a client in three days. That’s just one of many examples where we have rapidly delivered value. We summarise it all neatly with our promise: Duco deploys in 24 hours, gets results in 30 days, and delivers ROI in the first year.
Making the move
Legacy technology has been holding Operations teams back for long enough. The challenges Steve, Grace and Laurie described aren't new, but the cost of living with them is growing. The industry is accelerating, and the gap between what legacy systems can deliver and what the business needs is only getting wider.
The good news is that the path forward doesn't have to be as daunting as it sounds. Start with strategy. Get aligned internally. Pick a project where the value is clear and the risk is low, then build from there. You don't need to rip everything out on day one. You just need to start.
And you don't need to do it alone. Work with a partner who understands both the technology and the operational reality of capital markets. It makes a significant difference, not just in how quickly you go live, but in how much value you unlock when you do.
The firms gaining ground right now are the ones treating this moment as a chance to rethink how Operations works entirely. To move from reactive to proactive. From fragile to scalable. From keeping up to getting ahead.
If you're ready to make that move, we'd love to talk.
