The “Innovator’s Dilemma” published in 1997 by Clayton Christensen is THE classic book on disruptive innovation. Disruptive innovations typically exploit weaknesses in over-built, overly-expensive, overly-complicated systems that have built up one expensive, proprietary bolt (and brain, leg, arm) at a time, like the ultimate Frankenstein’s monster.
If you haven’t read the book (!!!) it exposes why laggards can be so easily disrupted by competitors.
I’ll sum the dilemma up as “too many of yesterday’s decisions have piled up, and created a barrier to even conceiving of trying something slightly different, let alone disruptive.”
Call that a tribute to Newton's First Law of Motion, "An object at rest stays at rest." AKA the law of inertia.
I’m being generous with “yesterday’s decisions” when it’s often “decades of decisions” that have poured concrete around your technology choices and processes and “best practices” leaving you trapped in legacy systems and approaches that nobody in the right mind would pursue today. It’s an almost inescapable sludge gumming up your innovation motor.
This isn’t theoretical to me: I’ve spent the last 20 years of my life in Innovation roles of one form or another, as a Chief Technology Officer (CTOs typically being the future-facing role, with CIOs being the operational/day-to-day role), as a consultant (the external innovator) to Fortune 50 enterprises, Co-founder of four enterprise tech companies, Director of Business Innovation, Director of Consumer Innovation, and Chief Innovation Officer.
And the good news is… what’s always the most effective pain point to attack in order to unleash the art of what’s possible from out of the heads of your organization, and bring it into reality…
Is focusing on that massive budget and energy drain, the costly cycle where the vast majority of your technology budgets are consumed by maintaining outdated legacy systems, and all of the (let’s admit it) hacks of throwing armies of 3rd party professional services, premium licensing costs for solutions FAR out of normal support from the vendor, and an overbuilt 24/7 operation who pray on a daily basis that today is not the day that it all just falls apart.
All of that is leaving minimal resources for growth and innovation, not to mention the destructiveness to morale and the emotional well-being of your employees.
Financial Services vs. Everyone Else
Financial Services companies are right there, stuck as an industry, as the poster children for legacy spend bleeding out their ability to innovate.
This imbalance has created a critical strategic vulnerability that threatens the competitiveness and long-term viability of banks, credit unions, and other financial services companies.
Credit unions represent one of the most extreme examples of this budget imbalance. Credit unions reportedly spend approximately 90% of their technology budgets on legacy and existing systems maintenance, leaving only 10% available for growth, innovation, and future-focused initiatives.
This stark allocation reflects the challenging reality facing these member-owned institutions as they struggle to modernize aging infrastructure while serving roughly 142 million members across the US who increasingly expect digital-first experiences.
The legacy burden varies significantly across different types of banking institutions:
Large Banks:
Regional and Community Banks:
Government agencies provide a stark illustration of the legacy burden:
Insurance Industry
Banking Sector Overall
Cost Breakdown by Function
TSB Bank's attempted migration from Lloyds' legacy systems to a new Sabadell platform became one of the most catastrophic banking IT failures in modern history.
The Failure:
Financial Consequences:
Root Causes:
Wells Fargo exemplifies how legacy systems can cripple even major institutions.
The Problems:
Strategic Impact:
Allied Irish Bank (2007): Troubled Oracle FlexCube implementation requiring extensive remediation
Union Bank of California (2011): Scrapped Infosys' Finacle platform after failed implementation
Deutsche Bank (2023): $1 billion modernization project failure
JPMorgan Chase demonstrates how major institutions can successfully modernize.
Investment Scale:
Key Achievements:
Bank Leumi's modernization showcased rapid legacy integration.
Results:
Singapore's DBS Bank implemented a comprehensive digital transformation.
Achievements:
Commonwealth Bank leveraged modern technology for operational improvements.
Innovation Results:
Technology Investment Disparity:
Capability Gaps:
Fintech Advantages:
Traditional Bank Challenges:
Credit Unions:
Banking Industry Overall:
Successful Strategies:
Risk Mitigation:
The stark reality is that financial institutions continuing to allocate 70-90% of technology budgets to legacy system maintenance are fundamentally compromising their future competitiveness. While the cost and risk of modernization are significant, the examples of TSB Bank and others demonstrate that the cost of inaction—or poorly executed transformation—can be far more devastating. The institutions that have successfully modernized, like JPMorgan Chase and Bank Leumi, show that strategic technology investment can drive substantial business value, competitive advantage, and customer satisfaction.
The question for financial services leaders is not whether to modernize, but how to do it strategically, incrementally, and with proper risk management to avoid becoming the next cautionary tale while positioning for sustainable growth in an increasingly digital financial landscape.
Twenty years of innovation roles have taught me one unshakeable truth: the organizations that thrive are those willing to confront their legacy burden head-on, while those that don't become case studies in business school textbooks about "what not to do."
The math is brutal but simple. If you're spending 70-90% of your tech budget keeping yesterday's decisions on life support, you're not just falling behind—you're actively funding your own obsolescence. Every dollar that goes to maintaining that Frankenstein's monster of legacy systems is a dollar that could be building your competitive future.
But here's what my two decades in the innovation trenches have also shown me: this isn't a problem you solve by throwing more money at it, or by hoping your next vendor will magically fix everything. TSB Bank had plenty of money. Wells Fargo had resources. What they didn't have was the right strategic approach to untangle decades of accumulated technical debt without destroying their business in the process.
The successful transformations—JPMorgan, Bank Leumi, DBS—didn't happen because those organizations were braver or had bigger budgets. They succeeded because they understood something fundamental: modernization isn't a technology project, it's a business strategy that requires the right expertise, the right approach, and the right partners.
Newton's First Law works both ways. An object at rest stays at rest, but an object in motion stays in motion. The question is: which object do you want to be?
As someone who has guided organizations through this exact transformation—from both sides of the table as CTO and as the external innovation catalyst—I can tell you that the hardest part isn't the technical lift. It's knowing where to start, how to prioritize, and how to manage the transformation without betting the company on a single roll of the dice.
At Infocap, we've spent years perfecting the art of legacy liberation. Not through rip-and-replace disasters, but through strategic, phased approaches that turn your biggest cost center into your innovation engine—without the catastrophic risks that keep executives awake at night.
If you're tired of watching 90% of your budget disappear into the maintenance black hole while your competitors eat your lunch, let's have a conversation. Because the difference between the organizations that successfully modernize and those that become cautionary tales isn't luck—it's having the right strategy and the right expertise to execute it.
Your legacy systems didn't become a problem overnight, and they won't be solved overnight. But every day you wait, that concrete around your innovation motor gets a little bit harder.
The time to break free is now. The question is: will you be the disruptor, or the disrupted?