2. Dealing with legacy systems can pose a major hurdle to many companies when the realization is made that a new IT infrastructure is needed to keep up with the times. Incompatibility issues with newer technology, residual process complexity, local adaptation and non-standard data definitions are just some of the problems that arise when a company tries to figure out how to handle their legacy systems. Jay Dvivedi came across some of these problems when he was charged with overhauling the IT infrastructure of the newly conceived Shinsei Bank.
Dvivedi quickly realized that the old legacy systems were almost entirely useless to the new business model Shinsei was attempting to implement. However, legacy systems are not so easily discarded. He had to ask himself questions such as how will new infrastructures affect ways of working and communicating not only with the customer but also within the company or what is the long term strategy for renewing legacy systems?
Dvivedi realized he needed to completely replace the IT infrastructure in order to ensure that Shinsei, a new entrant in the Japanese banking industry, could be as competitive as possible.
He was faced with a number of choices. He could have chosen to gradually overhaul the whole system, replacing one process at a time. While this approach would have been the least disruptive it would have taken too long. Alternatively, he could have chosen an “all-at-once” approach which however was deemed to risky, disruptive and costly.
Ultimately, Dvivedi decided to firstly create standardized platforms, meaning one network protocol, one operating system, and one hardware platform.
Dvivedi and his team decided to implement new processes as they were needed, first parallel with the old infrastructure but with the intention of ultimately superseding the old legacy systems. When implementing the new model Dvivedi focused on a five fold strategy. He focused on a relatively speedy implementation (ca. 18 months), low cost, new capabilities, flexibility and safety.
His main problem however was that he wanted to ensure that the change was as unnoticeable to the end user as possible. In focusing on parity, small incremental steps of implementation, transparency, and inclusiveness, it almost seems as though Dvivedi was attempting to use the enterprise application integration method, meaning here to change the interface of old systems by as little as possible so that the transition from old to new systems was as smooth as possible for the end user. The ain difference between the EAI approach and what Dvivedi was actually doing is the fact that he was designing the interfaces of new systems to be as similar to the old ones as possible – in other words, rather than adding to legacy systems he was designing the new systems to be as similar as possible to the old one, if only on the surface. Indeed, Dvivedi was successful in his plan. By switching to standardized Dell PCs running the Microsoft Windows platform, he and his team achieved a compact new standardized platform for the organization.
Not only were they able to smoothly transition between the old legacy systems and the new Windows based processes they were also able to add new exciting services, for example eliminating the need for cash and paper when tellers dealt with customers thusly providing a superior customer relationship experience. Considering that Shinsei overhauled it’s entire IT infrastructure in less time than anticipated and perhaps more importantly, under budget, is a truly remarkable feat. . New technology always comes with inherent risks. This is clearly evidenced by the example of Microsoft who came under pressure following the release of Windows Millennium Edition, which was plagued with bugs and security holes. Interestingly, at least one problem that Shinsei now faces also arises from the use of Microsoft products. Shinsei switched from mainframe computers to so-called server banks, all running on a Windows platform.
This is of course a smart move, making back-ups data transfer much easier however, considering that Microsoft products are always a major target for viruses and other security loop holes exploitations, Shinsei needs to make sure that they have a well designed firewall in place in order to thwart attacks by potential intruders. Also relating to the issue of switching between mainframe computers and server banks is the fact that the case does not mention whether Shinsei provided for an alternative data back up facility (so we must assume they did not).
This is absolutely paramount in case something should happen to the existing location of the servers and subsequently poses a big security risk which must be addressed. Another problem arises due to the fact that Shinsei opted to use public internet lines rather leased lines. This cost-efficient approach has its advantages which are mentioned in the case however it also has inherent disadvantages. For example, in order to avoid congested public Internet junctions, Shinsei should use back-bone providers.
This would ensure that the public internet lines are used to their maximum capacity while still ensuring an extra speed-boost by circumventing congested junctions. Furthermore, what if due to some unforeseeable incident, some or worse all public internet lines in some part of Japan fail? A company can rest easy knowing that even in such an event, it has a backbone provider to rely on. In conclusion we must mention that Shinsei did take some of the necessary steps in order to protect itself from attacks.
For example, the bank opted to encrypt all of its data that is sent over the internet, which however rather than being a luxury is an absolute essential. Shinsei needs to be mindful of the risks that come from running Windows platforms and using public internet lines. As a young company, Shinsei cannot afford any mistakes and the organization needs to protect itself and its customers from potential security risks in order to ensure the best quality of service possible.
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