Legacy Modernization in Japan’s Financial Industry, Part 1: Survey Analysis and Status Update

by Eiichiro Yanagawa, September 16, 2015
Industry Trends
Asia-Pacific

Abstract

This report draws on a spring 2015 Celent survey on legacy modernization. More than 60 firms including banks, insurers, brokers, and asset management firms participated in the survey.

This report sheds light on the current state of core business systems and core system modernization, the outlook for the future, and industry challenges.

Survey questions included:

  1. At what state are Japan’s financial institutions in terms of legacy system modernization?
  2. To what extent are business cases being considered in the legacy modernization process?
  3. To what extent are companies looking at employing new technologies, and how is this affecting modernization?

“Through mergers and system integrations, Japan has exhibited a peculiar pattern of forging ahead with patchwork solutions,” says Eiichiro Yanagawa, a senior analyst with Celent’s Asian Financial Services practice and author of the report. “Today, legacy systems have become so bloated that their applications and data models have lost flexibility, and there is duplication of systems and processes. Therefore, they fall short of producing value for the customer.”

This report, Part 1, provides an overview and summary of the survey results. Part 2 includes an analysis of survey results and salient thoughts expressed in interviews, addressing the implications of both while offering recommendations for Japan’s financial industry.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

1

 

Key Research Questions

1

 

Definitions

2

Introduction

3

 

The Industrial Revolution and Modernization

3

Legacy Modernization Survey 2015 Overview

6

 

Survey Items

6

 

Overview of Survey Participants

6

The State of Modernization

8

 

System Replacement Goals and Strategies

8

 

Replacement Project Consideration

9

 

Challenges and Vendor Expectations

13

Business Case Perspectives

16

 

Legacy System Impacts and Merits of Modernization

16

 

Role of Business Cases

17

 

Changes in Cost Allocation

18

New Technology Adoption and Its Impact on Modernization

22

 

Changes in the IT Arena

22

 

IT Unit Assessment

23

 

Changes in Division of Labor Between IT and Business Units

24

Toward Part 2

26

Appendix

27

 

Respondent Profile

27

Leveraging Celent’s Expertise

29

 

Support for Financial Institutions

29

 

Support for Vendors

29

Related Celent Research

30

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