Modernizing Branch Networks: Evolution Beats RevolutionNigel Stokes
Banks and other financial institutions have been preoccupied with the idea of Banking in the Future and the Modern Branch. Exactly what a Bank branch will look like in the future is unclear, because so much is being is done by customers with online banking. Maybe branches will be Bank Genius bars, in the style of Apple retail locations today, where customers talk and trouble shoot with banking and financial service experts. Regardless of their ultimate service form, what’s clear is that the new branch will trend toward even greater self-service and the transformation of the traditional branch experience is well underway.
Banks are experimenting with changing and showcasing modern branch models. A consequence of branch modernization is increased investment in branch systems and a build out of increased branch server capacity. Modern branches require distributed intelligence and increased computing to provide a better customer service experience for older applications, as well as a delivery vehicle for modern banking applications.
At VirtaMove, we’ve been helping our financial services customers manage the modernization and transformation of the branch server network. Using AZ-Migrate, we’ve helped customers move legacy branch applications to new, secure branch servers and to modern, cloud-hosted VMs serving the branch. Hosting branch systems on private clouds offers significant DevOps savings as well as the advantages of dynamic capacity scaling and application recovery if needed.
Many financial services are still running their branches on a mix of legacy Windows servers, including WS2003, even though there are well known security vulnerabilities on those platforms. Branch servers often run a combination of software stacks that are developed and packaged in-house. Almost all of these include an emulation capability (such as Microsoft Host Integration Server) for transaction processing to back-end mid-range and mainframe processing systems that the branch relies upon.
The rip-out and replace revolution
Many consultants who specialize in banking and branch modernization advocate the rip-out and replace revolutionary strategy and tout the benefits of a ground up re-build of the branch customer experience. Banking consultants make their money from pushing customers to undertake major change projects. A revolution strategy leads to significant investment in new hardware and software as well as in complex and expensive application redevelopment.
Investing in new branch systems may well be warranted in some cases and new branch systems will always be set up in showcase locations. There can be great payoffs from experimenting with new service delivery models. However, it takes time to commercially justify the renovation of branch locations. The roll-out and transformation of the entire branch network isn’t likely to happen all at once, for obvious ROI reasons.
Revolutionary projects need to be tested and often suffer from delays. Revolution leads to new business requirements, new service models, scope increases, a learning curve for new technology, technical problems, and a host of other issues.
Most banks experiment with revolutions, but also need to extend the life and evolve their existing systems in parallel to ensure a consistent customer experience, a minimum of service disruptions, and the lowest customer churn.
…and the branch evolution strategy
At VirtaMove, we believe in a branch evolution rather than fundamental branch revolution. The evolutionary approach involves extending the useful life of existing systems by moving legacy branch applications to new, modern, and secure servers.
Branch evolution offers substantial payoffs for customers.
Unlocking a great return on investment
Banks are run and managed by people who focus on numbers. All CFOs will tell you that the biggest ROI comes from not spending money on risky projects with uncertain pay offs. You get a great ROI from not investing money, not retraining staff, and not disrupting your business. The best ROI is from stable business operations and that includes stable, cost effective branch operations.
Banking customers can get good returns from moving old applications to new, faster, secure servers.
- They get to evolve their branch systems and buy time as they experiment with new branch and service delivery models. For example, cloud hosted servers. Not having physical hardware at the bank saves significant time and money and can make it easy to virtually maintain and improve machine capacity and provide uninterrupted service during busy branch hours.
- When you extend the life of legacy branch applications, you get the advantage of the ongoing evolution of delivery systems without the risk of a failed revolutionary approach.
- You get improved security.
- You can plan and implement application improvements over time as needed, and perform selective branch revolution, when and where justified.
The upgrade cycle and maintenance process for branch applications stays the same. You can still apply upgrades to the legacy branch applications. You can manage development, test, and production instances as per usual life cycle processes.
While branch modernization is primarily a problem for banks, many other financial institutions, trust companies, insurance, and retail businesses share a similar suite of distributed, on location servers and technology stacks that all need to be modernized. The payoffs are significant when you use an evolutionary approach that extends the life of well understood legacy systems to support your branch operations. Evolution unlocks the best of both worlds: a great payoff from existing systems and a path to modern branches in the future.
If you’d like to learn more about how VirtaMove’s Migration Intelligence can help you move and secure legacy branch applications while you buy time to properly plan for branch revolution, give us a call, register for a free demo, or send us an e-mail. We’re always delighted to show you what we can do.