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The power of a Composable Application Platform for cost-effective IT modernisation
Fifteen years ago, one of Colombia’s largest banks embarked on its digital transformation journey. At the time, its accomplishments were pioneering, particularly within the Latin American market. One of its notable achievements was the introduction of its digital wallet which captured the interest of an impressive 13 million mobile users, driving the country’s shift towards cashless finance.
Building on this success, the bank aimed to advocate for financial inclusion and extend its reach to millions more underserved consumers lacking access to banking services.
But there was a problem: the limitations of traditional banking services became apparent. The bank faced challenges expanding its service networks because outdated banking methods still relied on over-the-counter or cash transactions. Additionally, establishing physical bank branches or installing ATMs across the vast country—roughly equivalent in size to France and Spain combined—was impractical.
Instead, the bank adopted an ingenious solution: partnering with local supermarket franchises to repurpose their point-of-sale (POS) systems into makeshift banking tellers. This innovative approach enabled consumers to conveniently access banking services at their nearest supermarket.
Then a new challenge emerged: the supermarket POS systems operated on a different network, posing integration hurdles with the bank’s existing systems. Now, the objective was clear: the bank needed a unifying force to bridge the gap between its monolithic legacy systems and modern agile solutions.
The bank faced two choices: It could invest heavily in purchasing cloud systems and building upon them, a process that typically requires significant capital investment and up to a year to complete, or it could opt for composable applications as a digital business platform.
The bank decided to partner with a digital transformation expert to implement a cloud-native micro-services platform. This strategic decision unlocked the bank’s existing IT capabilities and empowered it to scale its digital offerings exponentially.
The outcome? A seamless integration of old and new systems, where disparate technologies worked together to provide innovative banking solutions. By avoiding the expensive rip-and-replace approach to overhauling their existing IT systems, they achieved their first minimum viable product (MVP) within three months, slashing costs by 80%, followed by a second iteration within two months, and a third is on its way.
While this case highlights the use of embedded finance to tackle challenges, the Colombian bank’s experience is not unique. Many financial institutions in emerging markets encounter similar obstacles in integrating legacy and modern systems to cater to evolving customer demands.
Emerging markets’ challenges to digital transformation
Yet, despite the urgency to digitally transform outdated enterprise architecture, banks and financial institutions face numerous market challenges.
- Customer expectations are changing: Technological advancements drive customers to expect seamless digital experiences, forcing banks to adapt quickly to meet these evolving needs.
- Business changes happen in too many places and in different ways: Decentralised business changes across various departments and systems lead to inefficiencies in the transformation process.
- “Hidden” costs impact what the organisation can change: Beyond the visible expenses of digital transformation, costs from legacy system dependencies or cultural resistance impact an organisation’s ability to effect change.
- Tech and Business teams speak different languages: Communication gaps and goal misalignment between technical teams and business stakeholders hinder progress.
- Fewer people are learning about legacy systems: A declining emphasis on learning about legacy systems has caused a shortage of expertise in maintaining critical components of outdated IT infrastructure.
Furthermore, banks and financial institutions need to consider the hidden long-term costs of change and failure more carefully; migrating a technology stack can escalate beyond initial cost projections.
Today’s cost management typically focuses on handling explicit expenses like procurement, support, maintenance and implementation. However, solely opting for point solutions or selecting the cheapest cloud provider to address these aspects can overlook hidden or implicit costs. This approach may result in higher expenses in the future and the risk of vendor lock-in, impacting long-term business operations.
In simple terms, costly digital needs are causing businesses to slow down.
So, what is the most accurate approach to assessing costs?
Source: Momentum Works
Accurately estimating the total cost of modernising legacy systems involves considering both explicit and implicit costs. Implicit costs, which are challenging to quantify and predict, require organisations to address ambiguity from the outset. The Total Cost of Ownership (TCO) should encompass the cost of scaling up, which may involve multiple change requests as business priorities evolve to meet customer needs.
Implementing a flexible and scalable enterprise architecture is the solution, as it facilitates rapid innovation and adaptability. While building a platform of composable applications may require a slightly higher initial investment and time, it promises significantly greater long-term returns and investment security.
Composability and its benefits
The demand for composable business applications is on the rise. Gartner predicts that by 2025, 60% of new SaaS designs will support both “UI-first” and “API-first” access, indicating that readiness for composability will become a standard feature of cloud applications.
Fundamentally, composable innovation adheres to the principles of domain-driven design and event-driven architecture.
Domain-driven design focuses on aligning software design with real-world business domains. This approach involves breaking down complex business processes into smaller, more manageable components – often referred to as “building blocks” – which enable organisations to create modular, domain-specific solutions. The architecture is highly adaptable to changing business requirements because the building blocks encapsulate business logic and rules.
Complementing domain-driven design is event-driven architecture, which enables the seamless flow of information and events across the system. By establishing a “highway of event signals,” event-driven architecture facilitates real-time communication between different components within the application ecosystem. Consequently, each output of module combination allows organisations to address various use cases and consumer expectations quickly and efficiently.
Building an inherently agile common foundation of digital innovation can significantly lower an organisation’s costs in the long run.
But beyond mere cost reduction, composable innovation benefits enterprises in two ways: It offers flexibility, personalisation, scalability and speed-to-market in transformation.
Digital transformation doesn’t need to be daunting
Legacy system modernisation can be overwhelming, but it doesn’t have to be. With the right tools, it presents opportunities to:
- Unleash the existing capabilities of an enterprise to protect the investment and reduce the cost of change.
- Integrate with any technologies that provide desired business capabilities.
- Compose all unleashed and integrated capabilities into more appropriate products and services and offer them at scale.
- Collaborate with any ecosystem partners for business growth.
Aligning with Gartner’s model of Applications as Platforms, Sirius Technologies’ Multiverse Platform empowers banks and financial institutions with unparalleled agility and efficiency at a low cost. Its composable application platform consists of four key components:
- OpenX Framework enables collaborations and the building of an API-centric ecosystem.
- Studio provides AI-assisted low-code development with process governance.
- Packaged Business Capabilities offers modular components in different business domains to speed up MVP release and customisations.
- Distributed Cloud Runtime Management allows operations on any cloud-native infrastructure with 100% control over runtime.
Implementing a composable application platform as the central hub for innovation and a progressive layer for modernisation can unify fragmented business changes. By developing packaged business capabilities from various systems without direct operational integration, organisations can easily contain vendor dependencies and replace them as needed. This approach, along with an in-built governance framework, establishes a source of truth and improves innovation efficacy.
Banks and financial institutions must navigate IT modernisation with scalable tools that address integration, performance optimisation, and compliance, ultimately future-proofing against evolving requirements.