Technology increasingly influences everyday life and business operations. It is always evolving, creating more efficient processes, offering new capabilities, and opening doors to new ways to fundamentally do business.

The additional future costs and loss of flexibility that a company sustains resulting from a depreciating system architecture is known as technical debt, or tech debt.

Impact of Tech Debt

Tech debt is hampering real innovation in the asset management sector and contributing to ballooning annual tech spends. Gartner reports that typical organizations spend over 70 percent of their IT budget on simply operating their technology platforms — and in some industries that figure is as high as 77 percent.

Can your products, processes, or applications be simplified? Can they be more uniform? Are multiple apps working to complete an action that one app could do?

It’s an occupational hazard for many financial firms, including mutual funds. It impairs a mutual fund’s effectiveness to respond rapidly and continually to emerging market opportunities and client demands. To address these risks, and manage technical debt, financial service industry companies need to modernize the legacy systems at the core of their processing environment.

Because asset managers have put so much money into their legacy systems, they often feel they have invested too heavily to change course. Essentially, they feel “indebted” to their 20+ year old technology systems.

How to Alleviate Tech Debt Burden

Regulatory compliance is also a motivating factor for financial institutions, as modernized platforms provide a more appropriate foundation for the compliance updates that the industry continues to face. Legacy platforms and their intricate integrations create security risks and compliance reporting challenges.

Needed industry and regulatory changes are built into Delta Data’s model and save our clients time and resources in dealing with change. These solutions help to alleviate some of the scrutiny asset managers are facing from regulators on data collection and management.

Technology debt often exists in the mission-critical platforms that support daily operations of an organization. Upgrading or replacing this infrastructure requires careful planning, effective testing, and active risk management.

Most of these systems are written in COBOL, a programming language developed more than 50 years ago that’s supported by a diminishing workforce of aging programmers — many of whom are approaching retirement.

With much of this workforce nearing retirement, almost all training and education available today is focused on more modern technologies, which Delta Data solutions are equipped to provide, in addition to cleaner data, as well as a suite of products focused specifically on core distribution and asset management needs.

Cloud solutions offer several benefits related to avoiding future technical debt while shifting some of the maintenance burden to the cloud services provider.

Service-oriented architectures, including application programming interfaces (APIs), are another approach that can be applied in many ways. Specifically, they can be an important tool in the implementation of “phased upgrade and replacement.”

When faced with the decision of whether to update aging infrastructure or explore new, front-line technology, it’s critical for asset managers to think about the long-term implications of the decision. While patching old technology might be a cheaper option in the immediate term, it’s not a permanent solution.