Citigroup playing IT Jenga

The announcement that Citigroup is slashing its IT budget is a normal banking reaction to the sudden attack on profits and the risks that future profits will be much harder to attain in the coming year. They are not the first nor will they be the last in taking stock of IT expenditure this year. However, with no end of regulatory changes that are still driving IT requirements and the need to maintain existing systems capability, the mass reduction of development budgets is going to mean that legacy systems are going to have to take even more strain. This is a double edge sword as systems deficiencies often entail people to plug the gaps! However, a downturn in market fortunes also encompasses job cuts and there have already been estimates published that tens of thousands of City jobs are about to go. Does this mean that the temps market is about to explode?

There is also a question of the risk of maintaining legacy systems, which needs to be answered as budgets are slashed.

Are legacy systems good or bad? That was a question that was raised at last week's corporate actions processing conference in London. The question was raised from the presentation by John Jenkin, Lead for Corporate Actions IT, Lehman Bros. He said that legacy means the system works and followed up with that it's far easier to support changes needed to systems from a legacy position. This is a view that has always been supported within banking, especially by those that build rather than buy technology. It also accounts for the reason that the global financial system has its foundations still laden in legacy and why as time goes by the legacy system time bomb ticks further towards potential meltdown.

The risks of legacy systems have never been quantified and it might be churlish to worry about something that might never happen but it's surely equally logical to imagine a day when a potential systems change, creates the Jenga effect. Continually taking functionality out, enhancements or developments over an extended period of time will eventually lose the initial value of systems architecture. To some degree the use of middleware technology has provided a period of consolidation within legacy which has enabled an extended lifespan. There are limits to the value of this solution however, with many of the integration software vendors aware that middleware's greatest value is to enable the legacy problem to be nibbled at. With budgets being slashed it looks like the legacy time bomb will tick on for years yet.