The community banks that use legacy systems for core technology applications are in for some challenging times.

Most legacy systems are written in Cobol or RPG, two computing languages that get little interest from young technology enthusiasts. Though these systems seem to be performing adequately today, banks should anticipate a radical change in service performance within two years.

By 2010 many of the seasoned programmers and software engineers who support these systems are likely to retire. Though many of these legacy programmers may still be available in the marketplace, demand for their services will be great, and the competition to employ them even greater. Banks relying on these legacy systems will experience delays on enhancement requests.

More importantly, providers will begin to discourage product innovation by pricing enhancements to reflect their challenges in retaining the technical expertise to make the enhancements.

With most legacy systems having accumulated hundreds of thousands of lines of code, the ramp-up time for any technology employees succeeding retirees means enhancements may contain less reliable and less bug-free code.

Providers' need to replace legacy systems generally prompts the use of ancillary products to make up for old systems' inefficiencies. This seems like a reasonable stopgap, but it leads to slower deployment and interface issues that leave the system far more complex to manage and maintain. This complexity means a slower rollout of enhancements should be expected, and less-than-bug-free deployments will occur.

Banks that have made sound technology decisions, moving away from legacy system foundations, and nonbank competitors using new technology will quickly erode community banks' market share and curtail their capacity for organic growth.

Banks must insist that legacy system providers instill confidence in banks through more rapid deployments. SAS 70 audits should include a review of written strategic plans outlining the resource challenge. They should require an explanation and regular reporting on changes in personnel as they pertain to the systems the banks use for support.

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