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Taking a strategic approach to software architecture is a priority for 2022 and financial firms are re-evaluating and modernising their underlying architecture. Digital transformation projects lean hard on IT teams – and developers have become increasingly stretched. Consequently, they have limited availability to undertake critical and time-sensitive tactical development work to knit together legacy systems and new applications, or to create add-on code to enhance legacy systems. As a result, the business is experiencing far longer lead times before necessary development work can be completed. A pragmatic solution is to empower developers with technology that can accelerate their own capabilities. One such approach is to utilise low-code technology components, which can be assembled by developers to rapidly build applications using standardised features, allowing them time to focus on proprietary components that have high business value.

By: Rachel Lindstrom                  GreySpark Senior Manager

There are six key reasons for software development in financial firms: to respond to newly identified business opportunities; to reduce the complexity of systems; to enhance a system’s performance / scalability; to reduce operational risk associated with manual or unobservable factors; to reduce the cost of supporting and maintaining current systems; and to comply with new regulation that has made current solutions no longer viable. Much of the technology in financial firms is used for non-differentiating purposes and is similar from firm to firm. Indeed, many vendors offer effectively commoditized platforms to undertake these non-differentiating tasks. Even so, new systems – those built in-house and those provided by third-party technology vendors – need to be integrated and maintained within a web of applications that link complex processes together. The integrations between the applications and platforms make each financial firm’s technology landscape effectively unique. So, even buying a platform or application requires substantial development work.

Over the last five years, financial firms followed in the footsteps of big tech and migrated away from monolithic architectures, favouring instead a microservices architectural approach. The reasons for this shift are plentiful and include modularity and scale of the platforms, maintenance and agility of the release cycle. However, this change of approach by IT teams in financial firms is still not sufficient to reduce their workload; the rapidity of ongoing digitalisation of firms and the need for modernization has simply far outpaced the current rate of IT delivery. Therefore, the business often finds that waiting time for IT changes are far longer than is optimal. The solution to this growing problem may rest with low-code technology and its ability to reduce development time, and hence maximise the effectiveness and efficiency of IT teams.

Carrying the World on Your Shoulder

IT teams in financial firms bear on their shoulders the weight of extremely complex technology ecosystems; maintaining inhouse-built systems and legacy technology, as well as creating new platforms. These teams of highly-skilled individuals are almost universally resource light and can have a backlog of work that will stretch out for months, and sometimes years. The difficulty of sourcing engineering talent is being exacerbated by both the pandemic and by challenges associated with the cross-border sourcing of staff, making developer talent expensive and spread thinly – especially, given the volume of development work that must be done. Often, talent is driven away by antiquated systems and platforms as developers want to work on modern technology.

Change needed in preparation for incoming regulation illustrates some of the challenge for IT. In the financial services, not only is regulation highly voluminous but is also subject to almost constant change. This has overt as well as subtle impacts on the technology underpinning those processes. Regulatory compliance projects create a significant amount of work for IT teams, because change across multiple systems requires large numbers of fully utilised developers.

This pressure on IT teams leaves little bandwidth to work on the roadmap that the business needs to develop their franchise. Instead, quick win changes are often made to address tactical requirements. It begs the question of how to achieve large digital transformation amid a complex ecosystem with hundreds, if not thousands, of legacy platforms. Success demands many things; front and centre is the challenge of transcending the buy versus build dilemma.

Modernising systems and platforms through third-party vendor technology – the ‘buy’ approach – should not be the default approach. The deployment of any application within the financial firm’s ecosystem can be a lengthy process with significant custom integration development required. Business users typically experience prolonged and highly disruptive multi-year programs before seeing any benefit. In addition, out-of-the box functionalities, sometimes with disappointing levels of customisation, require the involvement of business users in numerous testing and validation cycles that takes time away from achieving their business goals.

The desired level of customisation can be achieved through inhouse development of the application – the ‘build’ approach, but that is also not always the panacea. Development of standard third-party adapters with no real competitive advantage can feel like wasted effort. A similar frustration may also be experienced during the initial phase of an inhouse development project with expectations not met. As the digital maturity of financial firms evolves, so does the baseline of functionalities and the user experience that is expected. Getting a project up to speed and maintaining the applications to modern standards is laborious.

Boosting the Efficiency of Developers

Making products and services available through digital channels has become one of the primary ways for clients to access a financial firm’s offering. For instance, financial firms’ e-commerce platforms offer clients the ability to view and request price quotes and to execute transactions digitally with some control over the actual execution. This is achieved either via a third-party system integration or via the financial firm’s own digital portal. In this ecosystem, only a fraction of components and services give a financial firm a real competitive advantage.

The infrastructure supporting the products and services offered by financial firms is constructed, in part, from applications and technical components that do not include any differentiating intellectual property. A number of these technical components simply provide the ‘pipe work’ necessary to pass data and sometimes enrich it, from one application to the next in a format that can be understood or processed. For example, data captured by a trading desk for a complex structured trade is entered into the books and record system where it is enriched and then copied into the risk management system. The ‘pipe work’ for this process flow can be deferred to a low-code platform (see Figure 1). A low-code platform provides a viable solution to support business workflows with minimal impact on the existing system and development teams. Beyond the specificities of proprietary data format the workings of this type of component are standardized, and this is also true for the technical components that form the infrastructure necessary to support business flows. So, much of the work done by developers to create the components that support business flows between applications is simply repeated over and again as more applications are incorporated into the platform.

Contrary to third-party vendor applications, a low-code buy-to-build solution provides developers with composable and customisable components; the arrangement of which makes up a feature or a business workflow. The various types of reusable components (see Figure 2) often take the form of a microservice responsible for specific functions, in essence pre-packaged functions for inhouse development teams to build upon. Whereas a third-party application provides features with limited customisation, a low-code platform can be used by developers to combine low-code components, including custom inhouse-built components and/or integration with third-party applications. This allows them to focus on the development of components that will be used to create aspects that have high business value and a differentiating factor. With a low-code solution, the blueprint of a scalable, repeatable, flexible, secure platform can be achieved in a reduced timeline. From a proof-of-concept graphical user interface with a theme that can be configured on the fly to a fully-fledged platform with core functionalities, development effort is shifting. Developers can expend less energy on coding that is generic, whether that be for a service, a connector or an adapter, leaving them time to focus on how the platform should be built and to what end.

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Less Disruption, More Construction

For all its promise, low-code is not a technology disruptor, it is a technology accelerator that benefits both IT teams and business users by providing efficiencies that can be achieved in no other way. IT teams can focus on what matters the most for the business, and business users get more focus on development that may have been deprioritised otherwise and IT teams have more availability to build out intellectual property for the firm.

In an environment where buy versus build is constantly assessed, and where total cost of ownership, time to market, technical debt, business adequacy and customisation must be balanced, a buy-to-build approach presents an attractive alternative as it removes the financial firm from this paradigm to a place where far less compromise is needed. This is especially the case where low-code platforms provide industry-specific business components as well as core unspecialised platform components and infrastructure technical components. For new projects, low-code provides a head start that drives development toward business value from the beginning, and it supports a softer, less disruptive approach to the upgrade of existing platforms by enabling a customised and targeted deployment of platform services.

Genesis Global is the only low-code application platform built specifically for the financial markets and offers a fresh approach to helping firms adapt and innovate their business and operating models in an ever challenging and constantly changing environment. Genesis enables agile and rapid application delivery through its platform and business component library. The Genesis platform empowers developers, speeding their work via a framework that breaks down business problems into small functional components and is built on the core principles that solutions must be highly performant, resilient, secure and compliant for the financial markets industry.

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Rachel Lindstrom co-manages GreySpark’s Thought Leadership Service Offering. Having spent 17+ years’ in consulting, project management and business analysis, she has worked on projects for some of the world’s largest investment banks. As an experienced technology researcher and writer, Rachel is also responsible for developing research papers and articles on hot topics across the financial services industry.