Smarter Approach to Modernisation in Financial Services

A smarter approach to modernisation in Financial Services

What works, what doesn’t and how to turn tech modernisation into business transformation

Content Introduction

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Why modernisation matters

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Challenges in modernisation

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Learning from the mistakes of others

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Modernisation made real

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What’s in the toolkit?

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Nine steps to smarter projects

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Accelerating change with Version 1

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Our experts share their expertise and reflect on their experiences across the industry and application modernisation

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Andy Parsons

John Bolger

Industry CTO and Financial Services Digital Advisor

Global Lead for Application Modernisation and Integration

When standing still is not an option

Transforming for the future

Modernisation isn't about replacing old systems with new ones. It's about rethinking how we operate, how we serve our customers, and how we prepare for the future. The journey can be challenging. But it offers incredible opportunities for growth, innovation, and transformation.

In this guide, we explore the strategies that help organisations modernise smarter, faster, and more cost-effectively. Drawing from Version 1’s experience of real-world customer projects, we look at what works, what doesn’t and how to learn from the hard-won lessons of others.

By considering our ‘nine steps to smarter modernisation’, you can de-risk change and deliver tangible business outcomes today—positioning your organisation for sustained success in tomorrow’s evolving digital landscape.

Let’s get started.

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Why modernisation matters

IT leaders are perfectly aware of the limitations of their legacy technology. So why aren’t more doing something about it?

Skills shortages, budget and resource constraints, keeping the business operational, and the very real risks of disruption are all reasons for inertia.

Anecdotally, however, the biggest barrier we see

As applications get older, they often become misaligned with business need.

is one of prioritisation. New projects are more likely to be prioritised over modernising old because the former is assumed to deliver more business value than the latter. And that’s not always true.

As applications get older, they often become misaligned with business need. It may be a gradual process, but it’s happening…all the time.

It’s silent and invisible—this lack of alignment only becoming apparent well after the app is past breaking point. Then the costs really start ramping up.

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20–30% _

30% _

The “why?” of modernisation

Modernisation is essential to achieving these goals.

typically increase in performance efficiency with modern technology and infrastructure.

IT is seen as a strategic enabler—but it remains subject to defined (and often constrained) budgets. Growing technical debt from legacy applications means that more of that budget is being consumed just to ‘keep the lights on’.

And that prevents organisations from investing in more of those new projects that will drive the business forward. In short, there’s a huge opportunity cost associated with continuing to spend money and allocating team resources on activities that don’t create value.

The benefits of modernisation are substantial.

Gartner says that leaders who actively manage and reduce technical debt will achieve at least 50% faster service delivery times to the business1.

McKinsey estimates that companies investing in modern technology and infrastructure typically see a 20–30% increase in performance efficiency2.

This isn’t just an upgrade, rather a fundamental shift in approach—realigning applications to

AI can cut operational costs by up to 30%.

Of course, modernisation is a daunting task. It requires a careful balancing act between maintaining existing operations and transforming them. It’s not as simple as flipping a switch and becoming digital overnight—it’s about thoughtfully rethinking how the organisation operates at every level. And it’s not just about the tech. In fact, with culture and process in the mix too, the technology is often the easy bit.

Change brings challenges, but maintaining the status quo has hidden costs. As above, existing systems and applications become less aligned to business needs. Supportability issues, maintenance costs and technical debt grow.

The older the system, the bigger the risk from cyberattack. The existing environment may not be broken, but it’s not always fit for purpose and may not deliver the agility and innovation needed today and tomorrow.

business need to remove friction and drive efficiency.

In public sector organisations, for example, the objective is making citizen services more

If standing still isn’t an option, how do we move forward? Let’s find out.

straight forward and accessible, accelerating the pace of change and surfacing insights from data to do it. Businesses of all sectors strive to increase operational efficiency, mitigate risk and leverage the potential of artificial intelligence.

How to Assess Infrastructure Technical Debt to Prioritize Legacy Modernization Investments, Gartner 1

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Unlocking Success in Digital Transformations. McKinsey & Co

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Challenges in modernisation Modernisation can seem straightforward—out with the old, in with the new. Of course, it’s not that simple, and it’s not a guaranteed ticket to success. Across industries, from the public sector to financial services, modernisation efforts are riddled with pitfalls and challenges that often leave organisations wondering where it all went wrong.

Lack of business alignment

The culture clash

Too often, modernisation is considered a technical

McKinsey’s research shows that organisations

exercise rather than an initiative aligned to solving

failing to address cultural resistance to change

business needs. As such, many projects deliver

experience up to a 50% failure rate in their

limited value and the lack of ‘transformational

modernisation initiatives. Modernisation is about

change’ frustrates business users. If this has been

more than swapping out old tech for new—it’s a

the organisation’s experience, it’s hardly surprising

shift in mindset and operations. Consider the

budget holders will be resistant to assigning more

evolution in methodologies: waterfall is out and

budget to future projects.

agile is in. However, agile can be a hard sell— especially where there’s reluctance to fully embrace ‘new’ practices. Even in more progressive organisations, the speed of change can create friction between departments.

Product teams may champion agility, while their technical counterparts may cringe at the term— assuming it means rushed implementations that compromise security and compliance.

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Up to

50% _

failure rate in their modernisation initiatives.

The inertia of legacy systems

The capacity to modernise

Many organisations, especially long-established

Don’t underestimate the need for new skills.

like traditional banks or government departments,

Modernisation requires more than just new tools

are hindered by legacy systems. These aren’t just

and technologies—it demands new skills and ways

outdated technologies—they represent outdated

of thinking. You need people who understand

ways of thinking and operating. Transitioning to

modern development practices, like DevOps,

modern, agile, and digital-first approaches

microservices, and containerisation. The catch,

requires a complete overhaul of how work

however, is that finding and retaining this talent

processes. This transformation is challenging,

can be a major challenge. Companies have

particularly when fear of change and a lack of

learned that investing in continuous training and

clarity on the path forward can create substantial

development is crucial for keeping their teams up

resistance.

to date with the latest trends and technologies .

Hidden costs of lost knowledge Current systems are often quite poorly understood, there’s a lack of documentation and, in many cases, (particularly in core banking

But it’s not just about the right people, the right processes—be they business or change management—are needed, too. Without investing time here, even the best-laid technology modernisation plans can fall apart.

systems) the software engineers who developed and maintained these systems have left the industry. All of which leads to additional complexity and cost, and missed or misinterpreted functionality that has to be remediated.

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Learning from the mistakes of others Learning from your mistakes is invaluable.

Learning from others, before you make your own, is even better. We’ve brought our experts together who’ve navigated the complexities of modernisation. They’ve seen what works, what doesn’t and they’re here to share their insights to help inform your own modernisation strategies and implementations.

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When standing still is not an option

By Andy Parsons Industry CTO and Financial Services Digital Advisor FINANCIAL SECTOR FOCUS

Many banks are facing the challenge of

First and foremost, it’s important to note that tier

modernising their apps and systems while keeping

one banks are typically a long way along the road

up with regulatory demands and shifting

of their digital transformation journeys. While

customer expectations. With new competitors

there may yet be a few legacy issues to manage,

emerging and digital transformation becoming a

focus has naturally shifted to maximising the

necessity rather than a choice, traditional banks

benefits of these already modernised

need to rethink their strategies and find ways to

environments.

innovate without disrupting their core services.

Modernisation isn’t just about upgrading systems or moving to the cloud. It’s a comprehensive change that affects every part of the organisation, from core systems to customer interfaces. IT leaders need to define what modernisation means for their specific context—considering the costs, impacts, and ripple effects across their operations. This includes understanding the potential disruptions and the need to balance speed with stability and security. For example, building a modern loan acquisition journey requires balancing the integration of internal and external data sources at pace, adding in enough friction into the journey to allow for risk/ decisioning, then creating a seamless API-led journey.

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Modernisation isn’t just about upgrading systems or moving to the cloud. It’s a comprehensive change that affects every part of the organisation, from core systems to customer interfaces.

With data being the lifeblood of today’s financial institutions, a solid data strategy is a critical component of any modernisation programme.

This involves optimising processes to either remove or add friction, depending on the context.

Removing friction can streamline customer journeys, making them more efficient and userfriendly. While adding friction might be necessary for compliance purposes, such as adhering to regulations like the EU AI Act. Building on this, there’s huge potential for banks to further accelerate their modernisation efforts by leveraging new technologies. AI-powered automation, for instance, can help organisations achieve more with less manual effort, reducing costs and improving the overall engineering experience. These tools can also speed up testing and documentation, allowing for quicker, more effective rollouts.

Automation also offers firms the flexibility to fine-tune their operations by eliminating unnecessary steps or implementing essential compliance checks like Know Your Customer (KYC) and Anti-Money Laundering (AML) protocols. The better the onboarding experience, the more satisfied the customer.

Modernisation is not a silver bullet. It’s not going to solve all your probelsm overnight. In fact, in the short term, it might create new ones.

Of course, levels of digital maturity vary across the

across the estate into structured, usable formats—

sector, and older firms can struggle with legacy

taking advantage of modern data lakes and

systems that don’t easily adapt to new

analytics. Firms that fail to address data

technologies or regulatory requirements. It’s an

management as part of their modernisation

obvious point perhaps, but an important one.

efforts will struggle with compliance, customer

Indeed, legacy tech still forms the backbone of

service, and the ability to innovate.

most banking operations. It’s been around for decades and is deeply embedded in the organisation’s core IT environment. Modernising these systems is not a task to be taken lightly.

Many financial institutions have learned the hard way that ripping out old systems and replacing them with new ones can cause massive disruptions; data migration issues, integration problems, and unexpected downtime all leading to significant headaches.

The lesson here is clear: take the time to understand your legacy systems, plan your modernisation efforts carefully, and be prepared for the unexpected. Conduct thorough audits to understand the current state of your systems, identify potential risks, and develop a comprehensive migration strategy. This might mean running old and new systems in parallel for a period to ensure a smooth transition. It’s not glamorous, but it’s necessary.

In a sector where even minor disruptions can have huge financial implications, caution is most definitely the better part of valour.

With data being the lifeblood of today’s financial institutions, a solid data strategy is a critical component of any modernisation programme. It’s

Modern institutions are increasingly moving towards cloud-native, API-driven architectures, which allow for greater flexibility, scalability, and integration. This approach can enable firms to offer new services more rapidly and to integrate easily with third-party providers. However, this transition needs to be managed carefully, especially for the aforementioned older banks with extensive legacy systems that are not cloudready.

It’s been said before, but it’s worth saying again: modernisation is not a silver bullet. It’s not going to solve all your problems overnight. In fact, in the short term, it might create new ones. It’s also important to note that this is often a journey of multiple steps. Migrating applications to the cloud, for example, is a big step—but it’s nowhere near the final one. And assuming it is risks disillusionment with results from the business and users.

So it’s important to set realistic expectations from the outset—with your board, employees and your tech team. Have a clear and shared understanding of what everyone means when they say ‘modernisation’.

a priority to access and consolidate data from

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Be honest about the challenges you’re likely to face and the time it will take to see real results. Being honest and getting everyone on the same page will pay dividends in the long run, building trust and buy-in from all stakeholders.

Lastly, there’s a constant tension between the need to innovate quickly and the need to maintain stability and security. IT leaders must navigate this carefully, especially in regulated environments where mistakes can be costly. Agile methodologies and rapid development can drive innovation, but they also need to be balanced with rigorous testing, security checks, and regulatory compliance to avoid unintended consequences.

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Transforming for the future

By John Bolger Global Lead for Application Modernisation and Integration APP MODERNISATION FOCUS

Modernisation often carries different

We’re also seeing a move away from managing

interpretations. While moving systems to the

multiple isolated applications, with companies

cloud is a significant step, it doesn’t alone deliver

now focusing on creating reusable, composable

true transformation. Real modernisation involves

capabilities that act like building blocks for IT

aligning technology initiatives with business goals,

solutions. This approach emphasises adaptable,

whether by updating or replacing applications to

modular architectures and a more product-

meet evolving needs. This alignment ensures that

focused mindset. It’s about being agile, reducing

each technological shift adds tangible business

duplication of effort and enabling reusable

value.

capabilities to be consumed quickly and easily.

Involving the business from the outset is crucial for success. Collaboration helps align IT decisions with strategic goals, making technology a driver for broader outcomes. A simple lift-and-shift

This way, you’ll keep initiatives aligned with evolving business needs—moving away from one-time projects towards continuous transformation.

approach, while a practical start, won’t make applications more efficient or scalable long-term.

True modernisation is all about realigning applications to business needs. So, take the time to analyse your applications, understand their dependencies, and figure out how to best optimise them for the cloud. It’s not just about where your applications run…but how they run and what the business can do with them.

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Modernisation can’t just be a lift-and-shift exercise.

It’s a great starting point but stop here and you’ll only achieve limited business value.

Modernisation is often seen to align applications with today’s needs or technology. However, with the rise of Generative AI, customer expectations are evolving at an extraordinary pace and this shift requires a focus not only on current demands but also on anticipating future needs.

To take full advantage of this technology, organisations need a growth-focused mindset that identifies the changes in business processes and requirements driven by Generative AI, and envisions applications that can meet these future demands. This makes user-centred design critical, along with a deep understanding of Generative AI’s capabilities and potential.

All that said, beware of the “shiny object

Many organisations have burned themselves by jumping on the bandwagon of the latest trends without fully understanding how they fit into their broader strategy.

syndrome.” In the rush to modernise, it’s easy to get caught up in the allure of the latest tech trends. I’ve seen businesses jump at technologies like artificial intelligence, machine learning, or blockchain just because they’re ‘hot’.

But not every new technology is right for every business.

Many organisations have burned themselves by jumping on the bandwagon of the latest trends without fully understanding how they fit into their broader strategy. The lesson here? Stay focused on your business goals and choose the technologies that align with them.

Modernisation should be about delivering real value.

Finally, remember that modernisation is a journey, not a destination. One of the biggest mistakes I’ve seen companies make is thinking that modernisation is a one-time project. In reality, it’s an ongoing process.

Technologies change, business needs evolve, and customer expectations shift. Companies need to be agile and ready to adapt to these changes. That goes for their application modernisation efforts too.

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Modernisation made real It may not always be straightforward, but when modernisation initiatives are tied to business goals, the impacts can be significant.

Income Protection (IP) claim management application modernisation for Irish Life Irish Life needed to address inefficiencies and system constraints in their claims management process, which were impacting business performance and customer service. The aging claims management application required a complete overhaul to enhance functionality and improve workflow automation. Collaborating with Irish Life, Version 1 developed a SaaS-based claims management solution using a new event-driven architectural approach to integration. This modernisation streamlined claims processes and improved overall operational efficiency, allowing skilled claims assessors to focus on the most critical cases.

Outcomes:

€ Established a modern

Achieved measurable

Successful solution adoption

and strategic integration

efficiencies and earnings

through best-in-class change

architecture and patterns

growth through process

management

automation and optimisation

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Portfolio modernisation through app modernisation for National Highways National Highways aimed to modernise their application portfolio to support critical business services and ensure the safe management of England’s highways. Version 1 partnered with them to migrate the legacy systems to a secure, scalable, and cloud-based environment. After a successful migration, the focus shifted to enabling digital transformation for key systems using cloud-native solutions, including bespoke .NET development and low-code Power Platform approaches.

Outcomes:

82% _

faster incident updates and closures

50% _

faster incident creation

150% _ faster reporting

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What’s in the toolkit?

Modernisation is all about delivering more business value. It requires a multi-stage approach and takes advantage of:

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AI and automation

Cloud computing

AI and automation can be transformative;

We’ve been talking about the cloud for

eliminating manual, repetitive tasks that drain

years, but now migrating isn’t enough. If

resources and slow progress. By integrating AI

organisations treat cloud like an extension of

and automation, you can streamline operations,

their old data centre (and many do), they’re likely

reduce errors, and free up your team to focus on

to miss out. Modern cloud strategies are about

driving the business forward. AI can enhance

tapping into true flexibility and scalability. With

efficiency and customer interactions through

cloud-native applications and managed services,

intelligent chatbots , virtual assistants and now

you can focus on what really matters—innovating

agents, providing instant, personalised responses.

and growing your business—while cloud does the

Applying AI and automation to software

heavy lifting. Infrastructure costs are reduced,

developments and testing can significantly reduce

scalability is enhanced and, by truly optimising

deployment time. Indeed, McKinsey found that

cloud, you’ll enjoy lower operational costs

leveraging automation and AI can cut operational

(because everything’s easier to manage).

costs by up to 30%.

McKinsey reports that companies using cloudnative applications enjoy a 50% reduction in time to market for new products, and a 20% reduction in IT costs4.

Low code frameworks

Data modernisation

With the rise of low-code and no-code

A major trend and an undoubted catalyst

development platforms, creating new apps and

for change. By modernising your data

tools has never been easier. Gartner estimates

infrastructure with cloud-based platforms

that by the end of 2024, low-code application

you’re not just efficiently storing information—

platforms will account for over 65% of all

you’re able to transform it into actionable insights

application development activity . Your team,

by taking advantage of AI and machine learning,

whether seasoned developers or business users,

These platforms provide a single source of truth,

can quickly build and deploy applications without

upon which to deliver real-time analytics that help

complex coding. This doesn’t just speed up

you make smarter decisions, spot trends before

development—it unleashes creativity, solves

they become trends, and personalise customer

problems and helps you respond to market

and citizen experiences like never before. They

changes fast. Suddenly, that IT backlog becomes

also offer better data governance, security, and

a thing of the past.

accessibility, all essential for meeting the rigorous

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compliance requirements now facing both public and private sector organisations.

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Magic Quadrant for Enterprise Low-Code Application Platforms, Gartner Why Digital Strategies Fail. McKinsey & Co

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Nine steps to smarter projects To ensure modernisation efforts are successful and deliver meaningful value, consider these key recommendations:

01 –

Align to business needs. Obvious but not

02 –

always acted on, and not just the most

goals from the outset. Whether it’s

pressing today. As much as possible, aim to

improving efficiency, reducing costs, or

anticipate the future direction of the

enhancing user experience, having clear

organisation, the industry and the evolution

goals will guide your decisions and keep

of technology to futureproof your

the project focused.

Start with clear objectives. Define your

initiatives.

03 –

Prioritise people and culture.

04 –

Modernisation is as much about people as

temptation to overhaul everything at once.

it is about technology. Invest in training and

Start with smaller, manageable projects

change management to ensure everyone

that allow you to test, learn, and adapt. This

understands the benefits and is equipped

approach reduces risk and helps build

to use new systems effectively. Foster a

confidence and support for larger

culture that embraces change and

initiatives.

encourages collaboration across all levels of the organisation.

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Embrace incremental changes. Avoid the

05 –

Focus on user-centric design. Keep the end user in mind at every stage of the modernisation process. Whether it’s an employee using a new tool or a customer interacting with a new service, their experience should drive design and implementation decisions.

06 –

Balance ambition with realism. Set

07 –

realistic timelines and budgets based on a

Establish clear governance structures

thorough understanding of the existing

to oversee the modernisation process.

systems and the challenges involved. Be

Regularly review progress against

honest about what can be achieved and

objectives, budgets, and timelines to

don’t overpromise. Ensure there is room for

ensure the project stays on track. Effective

flexibility to adapt to unexpected changes

governance also helps in making timely

or challenges.

decisions to resolve any issues that arise.

08 –

Leverage best practices and lessons

09 –

learned. Don’t reinvent the wheel. Learn

from both your own experiences and those

accelerators. Tools like Version 1’s cloud modernisation accelerators can

Ensure strong governance and oversight.

Speed up with modernisation

of others. Review case studies, engage with

significantly reduce the time and effort

industry experts, and adapt proven

required for modernisation projects. These

strategies to fit your organisation’s unique

accelerators provide standardised

context.

blueprints and best practices that speed up development, lower the risk of errors and cut costs.

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Accelerating change with Version 1

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Version 1 is a trusted leader in application modernisation and integration, helping

organisations navigate the complexities of digital transformation. With over 28 years of experience, we prioritise understanding our clients' unique challenges and aligning

technology investments with their strategic goals. And we continually assess and

develop our approaches and technologies to learn from, and accelerate, customer success through:

Business-led modernisation

Cutting-edge technology

Our approach starts with a deep

We leverage advanced technologies—

understanding of your business needs,

including AI, cloud-native solutions, and

ensuring every modernisation effort aligns

automation—to drive efficiency and

with strategic objectives and delivers

innovation, enabling organisations to stay

tangible outcomes.

ahead in a competitive landscape.

Proven methodology Our structured process supports

Unique modernisation accelerators

organisations end-to-end—from business

Our cloud modernisation accelerators

assessment to delivery to continuous improvement.

significantly reduce time to value, offer a robust foundation for digital transformation, and de-risk the process.

Trusted partnerships

Extensive expertise

As Microsoft’s Global Partner of the Year

With a team of over 1,500 skilled

for Modernising Applications in 2023, we

developers and over 1,000 certifications,

have a proven track record of delivering

we offer a breadth and depth of capabilities

high-impact modernisation projects across

across multiple technology stacks, ensuring

multiple industries.

we can meet any modernisation challenge.

We know that modernisation’s not just a technical endeavour. It’s a strategic business initiative. That's why we focus on building strong partnerships with our clients, working closely with them to foster a culture of continuous improvement and innovation. We’re not just a service provider, we’re here to help you transform your business—in whatever way we can.

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Want to see how we can help your organisation implement a smarter approach to modernisation?

Talk to us today: info@version1.com version1.com