We’re in an everchanging industry. Macroeconomics, regulation, technology, market demands, financial products – these things never stop evolving.
This endless change is the mother of many fantastic opportunities; to better serve clients, unlock new revenue streams, acquire new businesses, and so on. But these things also create challenges for Operations teams, who have to keep pace with shifting demands.
To meet these challenges you need technology that has your back; systems that are robust, reliable and ready to adapt to anything you need to throw their way. Yet many tools are falling short in their duties.
On-premise data technology is one example. Where Ops teams need flexibility, it is stoic; where speed is of the essence, it is sluggish.
And it’s not just that the technology itself lacks agility, but that the lack of agility spreads across your Operations. Your teams are forced to adopt suboptimal ways of working to compensate for the shortcomings of technology that isn’t meeting your needs.
Let’s take a quick and efficient look at how on-premise technology is anything but.
Fixed capacity causes volume bottlenecks
Financial markets are known for their volatility. Geopolitical news can push equity prices through the floor; FX rates can leap on the latest central bank forecast; earnings reports smash expectations; oil production undershoots predictions.
Each of these creates new trading opportunities for the front office, but too much volatility sees volumes go through the roof. Your Operations teams have heaps more data to process.
What they need is more computing power. But they’re relying on the resources in your data centre that are allocated to your on-premise technology. And for cost reasons, it’s unlikely you have much excess capacity spare, as this would mean you’re paying for and maintaining hardware that only gets used during particularly volatile periods.
So you end up with a bottleneck that delays processing and has your teams playing catch up.
Vexed by variety
On-premise systems are rigid, built to expect data in a certain format and with hard-coded rules on how to interrogate and process that data.
For example, software often relies on data schemas – set formats that ensure the system knows what data is where in a file. But variety is a fact of life in financial services. New data, or even slight variations in existing formatting can confound a system that is rigidly expecting all files to adhere to a particular schema.
And we haven’t even touched on unstructured data yet – data such as PDF files, emails, invoices, images (such as signatures) and so on.
All this means that the only way to put your on-premise system to work on checking these types of data is to transform it into the schema it is used to. This is often a very time-consuming manual task that distracts your Operations teams from much more valuable (not to mention satisfying) work – more on this later.
Even when your data is in the right shape, you then have to build or update the necessary processes to validate and reconcile the data, then manage any exceptions the system finds. This is likely to see you stuck in one of the biggest agility bottlenecks: the change management process…
Navigating change management
The hard-coded nature of most on-premise reconciliation systems means that IT developers are required to make even simple changes to processes.
Operations teams are left briefing everything into IT as though it’s a major system overhaul, even if they just want to build a new reconciliation or tweak an existing rule.
This process can take months from beginning to end – IT are busy dealing with competing priorities from across the business, after all. That’s a serious blocker on agility; teams often need to make changes to processes, or spin up new controls, in days or weeks.
Slow to evolve
Innovation does happen in an on-premise world but, like the technology itself, it is slow and limited. Upgrades to on-premise software can be complex and costly undertakings.
Why? One of the things about on-premise technology is that it ends up getting adapted for each customer’s needs. Every firm’s requirements and ways of working are different, and therefore so is their software.
This means that there is often no single version of any given on-premise software. Upgrading and patching it, therefore, may not be as simple as installing the next one. Firms spend a lot of their change budget on regression testing new updates to make sure that no downstream processes have been broken by changes to the software.
It’s not a very appealing prospect – which is why many firms don’t bother to update their on-premise software if they can help it. The result is that some firms are running instances of software that are ten years old.
Neither approach results in a system that is on top of the latest demands and ready to solve tomorrow’s data challenges. Your next upgrade could be six months away, assuming your software isn’t six years behind…
The cost of missed innovation
The latest technology innovations are pushing the boundaries of efficiency and reshaping how Operations works and what it can achieve. On-premise technology, however, often serves as an anchor against this tide of progress.
One of the hottest topics for the industry right now is artificial intelligence, particularly agentic AI. But in a legacy on-premise world, AI is often deployed to compensate for the shortcomings of the technology rather than to bring greater, unprecedented efficiency.
There has always been a capability gap between on-premise systems and the latest technology. Advances and adoption of agentic AI will turn this into a chasm, preventing you from leveraging the efficiency gains that are keeping your peers competitive.
Conclusion
There are many costs to on-premise legacy systems – and often they aren’t immediately apparent. One of the hardest to measure is the opportunity cost caused by their lack of agility. Operations becomes slow and unresponsive, despite the speed with which the business needs to move.
The gap between how fast you need to go and the speed that you can go is only going to widen as technology innovation, regulatory change and market evolution continues to push the boundaries of what’s possible.
By ditching your on-premise technology you unlock the speed, scale and flexibility to keep pace with the market today – and whatever comes tomorrow. It’s not as daunting a prospect as you might think: get in touch with us to learn how leading financial firms have successfully transitioned to the cloud.
