Sunday, March 13, 2016

Impact of "legacy" on "ways of living and working"

Note: These are my personal views and not those of my employers, Tata Consultancy Services
I read this excellent article by Robin Merttens and quickly sent an update based on it "Juniors in London market are worried about that the inaction of seniors is jeopardizing their future, because non-London places might implement the required actions and reduce London's share of global market by offering lower financial/solvency risk, better price, more covers and better service. Why reduce just 9 basis points if more can be reduced? Why share operations but not data, despite obvious benefits in reducing financial/solvency risks, improving pricing, increasing covers and improving service esp. if the problems can be avoided?"
Then I saw an update by someone complaining how British broadband speeds are behind broadband speed in some developing countries. And knowing how many Banks and Insurers are struggling with FinTech and InsTech, due to legacy, I quickly realized "Everywhere it is the same story. Legacy prevents bank/insurers/brokers/telco's match the productivity levels that those unburdened by legacy can leapfrog to. And its the older folk guarding the fort jeopardizing the future of the young".
But thinking further, I realized more fundamental points about differences in business cases and the abilities to invest. Some have stronger business cases than others to invest, since the productive capacity that the investments will unleash are higher and so the investment is attractive. Secondly debt-laden folks can scarcely facilitate the investments required to rip out legacy and replace with the new, shiny things.
If the present ways of living and working are "good enough" for the older folk and the business cases of investment are not strong, because the benefits of the new ways of living and working are "abstract, fuzzy and difficult to predict", it is far too easy for the older folk to reject the investment. The burden's of previous borrowings for previous investments prevent flexibility anyway in incremental investments. So the decision becomes even more easy to make.
But someone elsewhere, unburdened by legacy is jumping on the next wave directly and leapfrogging. Their business case will be obvious and if they have the flexibility to borrow and invest in their own future, they will do so as many developing countries are doing.
Those who invest protect the future of their young and those who do not risk the future of their young. But we make investment decisions using net present value techniques and the pain and gain of future generations has less value in our present decisions. 
Is there any way, present generation investment decisions can be made by private, public and government actors in UK so that the future ways of living and working of the future people of UK are not compromised?
I think this theme deserves some deep thought extending Robin's proposal.
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