Application Modernization in Business Agility in Finical Sector Industry

Full research proposal

Doctor of Business Administration

25th February 2022

Assignment – 1 Coversheet

Candidate Family Name

Khorami

First Name

Abdullah

Candidate ID Number

DBA-Batch 6 (ID No. 12352)

SBA DBA Intake

Feb 2021

Course

DBA Dissertation

Assignment Topic

The effect of Application modernization in

business agility in Finical Sector Industry

Lecturers

Dr. Beenu Mago

Due Date

30 June 2023

Plagiarism Statement

This assignment is the original work of the person whose name is given above. I am aware of and understand the School´s policy on plagiarism, as well as the SBS Swiss Business School procedures, which are detailed in the handbook.

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Executive Summary

Research Proposal

The Effect of Application Modernization in Business Agility in Finical Sector Industry

Main Business Discipline: Technology

Abdullah M. Khorami DBA-Batch 6 (ID No. 12352)

Lecturer: Dr. Beenu Mago

DBA Research paper

Date: 25th June 2023

Word Count: 2974 (excluding section headings, reference list, and appendices)

Table of Contents

Assignment – 1 Coversheet 1

Research Proposal 2

Technology: The effect of Application Modernization in Business Agility in Finical Sector Industry 4

1. Introduction 4

2. Background of the study 5

a. Conceptual Diagram 8

b. Research Objectives and Research Questions 8

3. Research Methodology 10

a. Population and Sample 10

b. Data Collection, Editing and Coding 11

4. Research Problem 12

5. Structure of the study 13

6. References 13

7. Appendices 16

Technology: The effect of Application Modernization in Business Agility in Financial Sector Industry

1. Introduction

Application modernization refers to the re-defining of the software system of any business so that it must be aligned with the modern business needs to fulfill the newly arising customer demands (Johnson and Mulder, 2015). The refactoring of an application should be done so that the reduction of business costs is observed so that maximum benefit for both customers and the business itself could be produced equally (Rapyder, 2021). Therefore, the codebase and business application features are becoming of main concern in modernization. Keeping up with the changing customer preferences with quickness in product and service delivery and creating an innovative customer experience should be highlighted. Organizations must be thoughtful about deploying application modernization for enlarging business opportunities and facilitating customer satisfaction, augmenting sales, and expanding profits.

Organizations are going through many changes due to the rabid and quick global changes in the way that customers are behaving towards their needs, these needs are driven by very fast consumer-based requirements and global events that are having a direct effect on the way these consumers are consuming the services. Online services are taking over many regular traditional services and organizations are trying to adapt to these disruptive changes. Nowadays, the current IT status is under a lot of pressure to change dramatically, and the ask to evolve to full digital transformation is becoming a necessity, this requires a heavy change in the way they handle IT operations and the DevOps cycle as it is one main stream and a major pillar in any digital transformation project because it has a direct effect on the business and how customers perceive companies. Yet, many IT teams are not able to meet their users’ and customers’ expectations due to their legacy infrastructure as it cannot cope with the required evolvement of the digital revolution. Old legacy application and infrastructure is a challenge and sometimes a road blocker in their route towards true digital transformation. A lot of IT leaders consider that failing to modernize their legacy applications and infrastructure will have a direct negative impact on their organization’s long-term goals and growth. It is also important to share that many executives and C-level leaders lack information about application modernization and its subsequent advantages which sometimes makes it difficult for IT leaders to push for this technology if it is not backed up with a good business case and clear ROI studies.

2. Background of the study

Banks are facing a lot of competition including and not limited to other banks, technology companies driving Fintech technologies, retailers that have loaning capabilities, Mortgage companies and telecommunication companies entering the finical space, and many others. In addition to that, major challenges come from bank mergers, cross countries’ operations, different market regulations, and rapid changes in policies and regulations within the country or globally. While systemic banking crises top the list of bank supervisors ‘and policy makers’ concerns, individual banking fragility can also be worrying, putting countries’ financial safety net under pressure (Beck, 2004). These difficulties require the banks to change how they approach the market with new financial services that are quick, modernized, user-friendly, and governed by solid security processes and systems.

Why the internet became an indispensable necessity is a need of time. Businesses or industries that did not yet capitalize on the internet had to face a large customer base relying on online services, under which the banking industry was also influenced. The supply and demand of the traditional economics and the attributes that were enjoyable by a large customer base in the resourceful financial arena were becoming less fruitful without the induction of the internet within financial services (Iman & Tan, 2020).

Since an economy of a country is heavily dependent on the financial sector, it has to be aligned with the modern needs of the state and its people so that globalization and international trade become convenient. With the expediting growth of regulatory principles across geographical regions and the adoption of standardized mechanisms for hiring, training, and deploying the best people in the financial sector, it was not deemed enough unless a modernized banking system was undertaken (Kroszner, 2000). For this, the domestic and international financial sectors had to be managed effectively so that public and private sectors were tackled simultaneously and shrewdly. The problems in the banking sector cannot be ignored or let go unchecked in the previously adopted manual system, for which the dire need for internet banking and application modernization was felt to the core.

Innovations in the financial sector are countless since no one would want to return to the barter trade time. It is the certifier of economic growth and sustainability. The policies that boost lending and borrowing, directing the business developers to produce beneficial products and services, make a whole running economic cycle attempting to further strengthen a country’s economy (Johnson & Kwak, 2012). The economic policies enable the investment borrowers to assist in securing their money, which could only be balanced with a strong financial system. Research has corroborated that innovation in the financial sector has contributed to raising the bar of social value and living standards, which could be ensured through technological infusion (Johnson & Kwak, 2012).

One of the methods that can help the banking industry overcome some of these obstacles are adapting to new technologies that fit the current needs and help advance the vision of the banks towards the new generation finical services such as easier payment services, easier global trading, cryptocurrency adaptation, seamless payment, advanced mobile banking applications, and the growing need of automation. Today is the software age, where software and applications are driving the business needs. Many customers would like to have full accessibility of their finical services from their mobile devices with the assurance of being fully secured from theft and fraud. On the other hand, banks must comply with the heavy regulations that central banks keep imposing monthly.

It cannot be overstated that innovation in the financial sector gives a bank a competitive edge over its rivals. Innovation in the financial sector, such as ATM banking, mobile usage for baking activities, and online banking, have given an extra mileage to the banks to go extra mile in serving their customers (Domeher et al., 2022). The quality of money management and the quantity that must be handled with additional services through the infusion of technology has maximized contribution to the economy. The range of the services covered by the technology-induced financial sector is limitless. The reduction of risk and broadening of opportunities to promote the financial development of each public and private business are rising to create a positive impact on savings, assets, and output for the entire economy (Domeher et al., 2022).

Financial scholars had verified that the need for technology in the banking sector was felt when industrialization in England emerged (Kapidani & Luci, 2019). The transfer of resources from one point to another without risk and better capital mobilization had to be fulfilled, majorly due to globalization. With more remote working, money management on a global scale vigorously called for a transformation in the banking sector so that salaries could be managed from one geographic location to another. Hence, financial intermediaries had to revamp the innovation degree for well-adjusted banking requirements and make the businesses profitable with employees working in other locations (Kapidani & Luci, 2019). The permanence of innovation became an inevitable element in the financial industry that led to increased market competitiveness and further market developments.

This paper aims at providing full research regarding the selecting area of interest, which is the focus of the research question: examining the effect of application modernization on business agility in organizations, specifically in the banking sector. As part of their long-term strategic plans, banks are seeking to capitalize on their legacy applications. Acquired through decades of IT investment, as well as acquisitions, these applications represent deep know-how, drive core business processes and support mission-critical operations that differentiate banks in the market. (cgi.com, 2014).

In this paper, we will discuss how application modernization would help financial organizations take a further step into the digital world by studying the effect of some business and operational variables such as time to market needed to issue a new service or the number of services offered through one application and how that is affecting the customer experience. In addition to that, this paper will study cost-saving elements within the operations and the performance enhancement of the DevOps teams in relation to the adaptation of the application modernization technologies. Moreover, this paper will shed some light on cloud-natives readiness for banks with the complex regulations that central banks have and how this is affecting the way banks are operating today with an eye open for future demands. Finally, this paper will discuss how the security offering around the application modernization is being stated and explain some of the challenges between the application development teams against the security requirements the banks must comply with.

a. Research Objectives and Research Questions

The main objective of this research is to give the financial business industry more elaboration on the relationship between application modernization technologies and their business agility, this will help management to take an informative and quicker decision about their strategy of adaptation to this new technology.

Research questions are summarized in the below points:

• What are the major technological challenges that face the financial industry today in relation to applications?

• Does Application Moderation have a direct effect on Costs? Including application maintenance, application development, or in the DevOps cycle?

• Would Application Modernization adaption help organizations to faster time to market?

• Is there a positive/negative relationship between application Modernization and the number of services offered to customers?

• What are the operational advancements if any through adapting to App Modernization?

• How secure is the application modernization method in comparison with the current security systems? and can it cater for the future way of work?

• Why is it important for finical service providers to be cloud-native ready?

3. Research Methodology

As the study design is selected to be quantitative, a quantitative survey or questionnaire would be conducted among multiple banking employees, managers, IT managers, application managers, developers, and directors who have either seen improvement in their bank service after application modernization or gained their insight and opinions on the need and expected outcomes for application modernization so that its effects could be measured in terms of the selected dependent variables. For a detailed quantitative survey, see appendix 4 in section 10.

Since it is a correlational study with independent and dependent variables, quantification is inevitable. The quantifying numbers in the survey results would help mousers the extent to which the bank managers think application modernization is valuable for improving their customer services and producing lesser costs.

In addition to the survey, the study will have interviews with some of the same candidates to explore their insights about the current challenges and the expectations of such technology if implemented and to measure their understanding of its expected output of it. While discussing some of the new features that might be unknown and obtaining their feedback about them, these interviews will touch on technical aspects such as operations excellency, application maintenance issues, personal technical resources, IT resources consumption, and others. Also, the interviews will have a business and finical aspects such as current costs, implications of competition, current KPIs achievements, and new business plans.

a. Population and Sample

The target population would be the banks that have adopted the application modernization technology in some manner and have made changes to the new technology within their business culture. A bigger target sample is needed to find more candidates for survey filling. The reason for focusing on managers is that they are the ones who are closer to formulating policies within the financial institution that would help reduce the overall costs while at the same time providing the best services to their clients. Employees could have been included in the survey. However, it was deemed better to take viewpoints of these responsible for overseeing the operational functions and creating a working culture within the bank that would impact the introduction of a new possibility. Bank managers, including financial and IT managers, have to foresee sales projections and ensure that the bank employeeS provide a high level of customer service with the infusion of new technology and faster service; hence they are closer to the functionalities and the outcomes of application modernization in the bank services.

Since 10% of the entire population is considered to be the best minimum sample size, it is anticipated that at least 30-40 business decision-makers in each category, such as bank managers, financial and IT managers, etc. would be included in the sample (Bullen, no date).

The reason for selecting the quantitative research method over the qualitative is that it would provide authentication with numbers, stats, and mathematical techniques (Ahmed et al., 2019). It would serve to answer the particular question that would be used for generalization purposes later. The particularistic approach of the quantitative method would assist in objectively deducing the results rather than subjective (Ahmed et al., 2019). The results are definite and easily measured rather than relying on emotions, feelings, and opinions as done in the qualitative study. The study is expected to produce result-oriented and tested results in numerical data. The inclusion of the Likert scale is contemplated for this very aim as examining the cause-and-effect relationship would become more conspicuous. The cause of infusing application modernization and its effect on the financial sector’s working, functionality, and intended effect would be fittingly shown through those numeric. Although a slight qualitative aspect has been kept in line with the quantitative methods to verify the initial understanding gained from the preliminary literature review, the main focus would be on quantitative results. It would help determine the final course of action and set future directions (Ahmed et al., 2019).

b. Data Collection, Editing and Coding

Data collection would be done through emails since it is the most convenient way for the managers to fill the questionnaire in the emails whenever they feel comfortable. A time span of one to two weeks would be provided to them for thoroughly completing the responses to avoid haphazard responses that might create response bias. Also, it is well-understood that the response rate must be high for a study to be reliable to prevent nonresponse bias (Fincham, 2008).

As the study would involve a quantitate survey, statistical analysis would be conducted, for which editing, and coding would be done accordingly. A 7-point Likert scale would be used to gain responses from managers and targeted people about the effectiveness of application modernization within their bank facilities so that accurate opinions could be gauged after quantification through central tendency and variation in statistical software like EXCEL or SPSS. The higher the significant relationships score between the dependent and independent variables, the greater the effect of application modernization over the model aspects.

Four types of validity would be ensured to remove any possible response bias or error in the data collected through surveys, including face validity, content validity, internal validity, and external validity (Ball, 2019). Online surveys are under extensive examinations for several disadvantages that they might be pose for the researcher; therefore, validity would be certified beforehand to ensure that the collect data can produce reliable results.

4. Research Problem

The banking industry for a long time used to have solid applications based on mainframe and other legacy applications, “developers fairly say: if it works don’t touch it” (Glaschenko, 2022). The current issue is the applications are no longer feasible from neither maintaining the point of view nor from new consumers’ requirements direction. The business is failing to adapt to the fast-changing business requirement due to huge limitations this application has when it comes to delivering new digital services with the right speed coupled with tight security.

There are many consequences of not solving these challenges as it might lead to losing market share, increasing operational costs, not meeting customer demands, and slowly being pushed out by the competition. The effect of that is heavy especially to big organizations being challenged by new smaller and agile organizations with state of art digitized infrastructure and services.

Part of this research goal is to minimize the gap in understanding both the technical and financial benefits of application modernizations through investigating the real challenges the finical industry facing in this space and to answer some unknown questions that might appear during the conversations and surveys.

5. Structure of the study

Number

Description

Chapter 1: Introduction

The first chapter would set the scenario under which the forthcoming project would be examined. The need for application modernization and how the transformation affected the banking sector would be investigated under the previous as well as currently proposed study. The chapter is an ice-breaker for the research focus commenced.

Chapter 2: Literature Review

This chapter is based on the previous studies that have been connected to the same area of research. The old banking sector and why the need was felt for a modernized mannerism of handling finances would be elaborated with an insight gained from the scholars in the mentioned field. The true validity comes when it has been thoroughly researched and to check whether prior studies have been successful enough in addressing the gaps of the research question of the current study.

Chapter 3: Method

The methodology is explained in this chapter where the proposed notion is to conduct a quantitative survey among the application managers, bank managers and several IT professionals across the financial sector. It is to gauge how they have perceived effectiveness in their respective banks of the methods of carrying out banking services after having incorporated technology in financial services.

Chapter 4: Results

The results would be obtained from the survey by using a 7-point Likert scale, which would be later codified to run for the analysis. The chapter talks about the final results that would be attained from Excel and SPSS software so that authentication of findings could help in endorsing the study.

Chapter 5: Discussion

This chapter would be based on the results obtained from the previous chapter and whole process of research. It would help in broadening what has been found based on the initial research and whether the results are in line with the previous research literature. The gaps and new insights would be explored, which is only possible when an enlightenment is gained from the results.

Chapter 6: Case Study

Chapter 7: Conclusion

This chapter would highlight the previous literature against what has been established in the current research paper. The traditional versus contemporary methods of new banking would be concluded with a future direction. The upcoming presentation of application modernization along with the possible challenges that might occur within the banking sector would also be expounded so that research provides a pathway for future investigations. Limitations would be included in this section as well.

DRAFT

6. References

Ahmed, S., Wasim, S., Irfan, S., Gogoi, S., Srivastava, A. & Farheen, Z. (2019). Qualitative v/s quantitative research- A summarized review. Journal of Evidence Based Medicine and Healthcare, 6(43), 2828-2832. https://doi.org/10.18410/jebmh/2019/587