A recent survey found that it is more expensive to maintain legacy systems vs. current “state-of-the-art” systems.  No surprise there. Legacy systems usually require additional staff who are familiar with the “quirks” of the specific legacy systems in question. In addition, these individuals are also usually versed in a “work around” philosophy where, to their credit, they often build elaborate, manual workflows around the lack of automation and inadequacies of the legacy system.

As a general rule with regards to technology, legacy systems in whatever form they exist will ultimately be replaced.  It’s just a matter of time.  For buy-side investment management firms, the ongoing maintenance of legacy systems has another negative residual effect that is extremely significant: it ties up otherwise very intelligent people who often use their keen intellects to manage fundamentally inefficient processes.  The result is often a gross mismatch of skill sets, not to mention it is a complete waste of resources for the firm.  It goes without saying that “smart” people’s energy should be primarily focused on the firm’s organizational goals of managing investments, servicing clients, maintaining compliance and growing assets.

In our experience, replacing legacy systems not only has the positive effect of improving operational efficiency, enhancing compliance and reducing long term costs, it also has the positive effect of freeing up the time of smart people in operations, technology, compliance and trading to do what they do best.  The end result is most often a happier and more competitive organization.  Saving money is important, but having happy and productive employees is priceless.