Like many banks of its era, Credit Suisse runs on set of antiquated information technology systems. The Swiss bank's tech boss explains why that isn't necessarily a bad thing.

«IT legacy system» is a widely-used term in Europe's banking sector and an especially hot potato for big banks. Replacing them with something newer is a Herculean task which eats hundreds of millions of Swiss francs, ties critical resources, takes time, and most crucially, carries considerable operational risks, as Credit Suisse tech chief Claude Honegger elaborated in an interview with IT publication «Inside-IT».

Raiffeisen, for example, a bank far smaller and less complex than Credit Suisse, is in the process of spending nearly 500 million on a planned IT migration (not everything has gone to plan). Retail lender Postfinance is about to move to a new core banking system at the end of next month – a delicate undertaking which Honegger dryly comments with, «I wish them much luck.»

Big Bang Vs Baby Steps

Among tech chiefs, the migrations are known as a «big bang,» referring to many months of preparation ahead of the do-or-die changeover moment. Credit Suisse is choosing another approach, according to Honegger: a so-called managed evolution, or step-by-step renewal of its IT infrastructure.

Credit Suisse decided against a «big bang,» which could paralyze the bank for months, Honegger said. «I estimate that we would need for a complete renewal is four to seven years,» he said, without commenting on the costs.

The bank can look to countless failed «big bang»-style projects in Europe to replace universal banking IT infrastructure for guidance. «All the efforts that I know of were halted, most of them due to their complexity,» Honegger said.

Billion-Franc UBS Renewal

By contrast, Credit Suisse's staggered renewal strategy allows the bank to target its investments while lowering its risk during execution, he said, adding that there simply is no single IT package on the market that would cover Credit Suisse's various platforms.

Thus, the bank has decided against an approach chosen by UBS, which recently rolled out «One Wealth,» a 1 billion franc platform which will eventually unite all the bank's wealth management business in one place. For Credit Suisse, such a move would be too expensive and time-consuming, Honegger said.

He compares the bank's IT strategy with a city of old and new real estate and a public infrastructure which has to be replaced or renewed from time to time. «Much of what we think of as legacy today is actually stable and cost-efficient,» he said. The trick is to replace the right system at the opportune time.

Cool on Blockchain

For the most part, Credit Suisse buys its IT infrastructure from outside vendors, but has also worked with partners towards compliance solutions that have found demand from third parties. «It's not like we want to become a software provider,» Honegger said, but the bank could certainly share its costs by selling software to rivals.

And what of the recent hype surrounding digitization in finance and blockchain? «Digitization for the sake of digitization is very dangerous,» Honegger said. Banks are in danger of spending considerable money for little gain – or even risk of harming their business models.

He is also cool on blockchain, where Credit Suisse is part of an investment bank-led blockchain consortium called R3. Just because the technology exists doesn't mean «we need to find a problem that we can solve with it.»