The digital economy is no longer a subset of the broader economy but has evolved into the global economy itself, there is no longer a distinction. Digital native start-ups have tactfully inserted themselves between traditional players and their customers. The ability for these companies to consistently adapt to buyer demands and deliver great customer experiences is giving them a competitive advantage.
In a world that is changing rapidly where agility becomes an increasingly important differentiator, legacy systems can seem like a burden. The reality is they remain at the core of companies’ fundamental value propositions. Mainframes, legacy servers, and database execute transactions, manage customer data and follow proprietary business rules that have evolved over many years. This has led to systems with built-in knowledge, expertise and business processes that make firms unique and competitive. The challenge is to use API Integration to unpack and expose these assets to support better customer experiences, capture new opportunities and deliver innovative digital services.
The Value of Legacy Systems
Data is the lifeblood of any business and the foundation for any competitive advantage. Companies that have survived over the last few decades still rely on old school servers and mainframes to process the majority of their transactions. Seventy percent of enterprise data resides on mainframes. Historical info such as customer identities and details on past purchases, or real-time data on when and where credit cards are being used is captured in legacy databases. This data is like gold. It can be used to create new products, make specific offers to target unique market segments or identify fraud. Personalization is a key differentiator in the digital economy and the ability to use data to customize offerings is the key to greater profitability and loyalty. The challenge is that the data is locked in various silos making it hard to aggregate into a more detailed 360-degree view of the customer or extend to mobile applications.
Business logic and rules are also vital to companies’ core competencies. For example, banks and financial services firms exist to manage risk and move money and have become very capable of doing so. Investments in networks of ATMs, transaction processing systems, and risk management systems have incrementally enabled them to get better and better at what they do. These systems not only collect data but execute time-tested complex business rules. They manage rules to detect fraud, rules about who to lend money to, rules for securely transferring money, and insurance policy rules. The nuances of these processes are unique to each provider and are valuable.
Retailers, wholesalers and the supply chain that supports them also rely on unique business process and data to compete. These firms are experts in getting the right product to the right place at the right time. Legacy systems are instrumental in this endeavor and are very good at planning and executing the process. Just as in the banking sector, an endless set of rules that optimize tasks such as warehouse picking, shipping, and reordering, have been thoroughly vetted and baked into these systems. Nuanced logistic rules enable various parts of the system to work together empowering companies to reliably and consistently deliver product. This is a core competency. The key is to use API integration software to not only unlock the value, but also maintain the business logic.
API Integration Opens Legacy Systems to Expose Core Competencies
Just because the world has become more agile does not mean that existing capabilities become less relevant, they just need to be more accessible and flexible. Valuable knowledge and data needs to be unpacked and unlocked from rigid systems. Digital savvy start-ups are driving fragmentation into once vertically integrated industries and, to respond, established players need to expose valuable data and business processes so they can be consumed in new ways. By using an API integration layer with these legacy systems, firms can leverage their investments in IT infrastructure and know how. With API integration, lines of business and partners can quickly integrate service that leverage core competencies into new products or mobile apps to add more value. For example, greater visibility into the supply chain can provide partners better data to plan and match supply with demand. Greater access to data and business logic can also lead to new business opportunities. Banks could create an API that enables peer to peer lending companies to deliver cash through ATMs, or banks could leverage their risk management expertise to reinsure micro-lending operations. New business processes are evolving rapidly and enterprises need to take action. Paypal has already disrupted the payments industry by enabling consumers to transfer money with just an email and Mint is in the process of disrupting the personal finance industry by aggregating financial info and making it simple to consume.
The flexibility of legacy API integration enables businesses to extend their value propositions to new markets and innovate new business models around core competencies. This layer enables new innovation to be built on top of a reliable infrastructure. Vendors such as OpenLegacy specialize in API integration and API management for core (legacy) systems, with a focus on automatically and quickly creating APIs including the business logic.
What competitive advantages in your legacy systems can be leveraged with API integration?