Information systems at many large North American banks are outdated, putting pressure on information technology budgets and staffs and raising risk management questions, according to Computer Sciences Corp.
General ledger systems have been in use the longest-12.5 years on average, a Computer Sciences study found. Forty percent of 35 respondents said their systems were more than 15 years old; 18% said they were was more than 20 years old.
The average age of all the accounting systems asked about-which also included payroll, accounts payable, procurement, and fixed assets-was 8.4 years.
"Systems designed that long ago simply do not possess the functionality and flexibility needed to meet present and future information demands," the study said.
A fundamental problem was "surprising lack of integration across core financial systems," the study said. Without integration, bank data can be redundant or incomplete, updates unsynchronized, and reconciliations time- consuming.
"A significant amount of dollars is being spent to keep old systems functional," said Vaughn C. Pearson, consulting principal of Computer Sciences' financial services group in Dallas. Banks spend 15% to 20% of their information technology dollars to fix applications with unreliable output, Mr. Pearson said.
In raising risk concerns, the firm referred to a definition by E. Gerald Corrigan, the former president of the Federal Reserve Bank of New York: "At its core, risk management entails the time-honored task of getting the right information, in the right format, to the right people at the right time."
Computer Sciences said accurate, flexible information technology systems are central to the process.
Many systems have outlasted the people who installed them, and the lack of on-staff expertise leads to a "maintenance-only" mode of operation, the report said.
Only 17% of the survey respondents had redesigned their core financial processes, but 55% planned to or had a project under way, Computer Sciences found. Mergers and year-2000 remediation often delay the projects.
Outsourcing was not seen as a remedy for outmoded financial systems. Most respondents with more than $15 billion of assets were not considering that option. However, 20% of those with more than $15 billion of assets have outsourced payroll processing.