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Slide 1: Saket Sinha – Global Core Banking Framework Leader August 2010 Core Banking Transformation © 2010 IBM Corporation
Slide 2: Building a smarter planet There are dramatic forces of change across financial institutions Economy Trust Competition Regulation Clients Capitalization 2 © 2010 IBM Corporation
Slide 3: Building a smarter planet Core banking systems today are outdated, expensive to maintain, inflexible and unable to support growth and innovation Cannot support complex, highly interdependent products and relationships BANKS’ DISSATISFACTION WITH CURRENT CORE SYSTEMS’ ABILITIES Customer Data Analysis 43% Cannot accommodate new and more complex risk management frameworks Do not provide the necessary information required for today’s banking control environment Do not support an efficient and flexible environment leading to higher cost of maintenance Do not integrate easily with new applications, third-party packages and other IT assets © 2010 IBM Corporation Do not provide multidimensional customer views or management information New Product Time to Market Efficiency and Cost 40% 40% Are inflexible due to reliance on old technologies, singlepurpose design and high customization Require a lengthy development period to introduce and support new products 3 Integration With Other Systems Incorporating Regulatory Requirements 29% 33% 0% 10% 20% 30% 40% 50% % DISSATISFIED Source: IBM Institute of Business Value
Slide 4: Building a smarter planet Banks have began to realize the importance of Core Banking Transformation Core Banking IT Spend Analysis Complexities of core banking system can almost add ~30%-40% to the operating cost  Complexity in core banking system can result in almost 30%-40% overhead on the total operating cost of the bank  Old legacy core banking systems almost Consume 90% of core banking spend  Siloed and fragmented architecture of the old systems results in around 20% revenue leakage through the door © 2010 IBM Corporation Non IT Spend ~95% Total Operating Cost Other IT ~50%spend ~10% tionary Spend Discre- ~50%Core ~5% IT Banking Spend ~90% BAU Spend Spend 4 Source Datamonitor Group, Forrester and IBM Client analysis
Slide 5: Building a smarter planet Today’s banks are looking to grow top-line revenue by deepening customer relationships Yet they also need to reduce costs in response to increasing margin pressures. The solution? Re-architected core systems that can capture and analyze the data generated by every transaction—continuously providing the insights to drive new products and services and to increase efficiency throughout the enterprise. 5 © 2010 IBM Corporation
Slide 6: Building a smarter planet Core Banking transformation has three key control points. Architecture led approaches have proven to be more successful in the past Architecture-led Define architecture first Determine appropriate platform based on architecture decisions Make application decisions based on architecture 1. Architecture 2. Platform 3. Applications Package Traditional (Based on Legacy architecture, e.g.. CICS/ COBOL) Operating System & & Database or or Custom or or Next Generation (Based on new technologies; open architecture) & & Middleware or or Service & & Programming model or or A Hybrid Model Progressive transformation: IBM’s Banking Industry Framework for Core Banking Transformation Dynamic Infrastructure & z/Platform Growth Framework and/or ISV Core Banking transformation Framework / ISV Strategy Architecture largely defined by package applications selected Make platform decisions based on package selected Select package Package-led 6 © 2010 IBM Corporation
Slide 7: Building a smarter planet IBM core banking transformation approach is based on progressive renovation— Helps to modernize existing assets with a well defined transformational roadmap Traditional vs. progressive approach Traditional Replacement Project Progressive Transformation Market gap Months to Realize ROI  Step orderly approach that can be paced up and down  De-risks implementation  Change for course possible if the market factor changes  Allows banks to pace the investment  Focuses on architecture first before applications © 2010 IBM Corporation 7 Market Requirements
Slide 8: Building a smarter planet IBM’s approach provides multiple entry points to banks to pursue transformation of their core banking systems High Progressive Renovation Objectives x 1. Quick Fixes Cost 2. Application Modernization X’ Change The operating model and the way we do Business 3. Enterprise Architecture Modernization 4. Operating model Transformation Business Transformation Focus 1. Quick Fixes 2. Application Modernization 3. Enterprise Architecture Modernization Volume Degree of Complexity 1. Quick Fixes x X’ Reduce FTE, minimize overlap, improve control Strategy & Architecture Focus 2. Application Modernization Different entry points for progressive renovation Application Area Focus 1. Quick Fixes Cost Tactical Focus Volume 8 Low Time © 2010 IBM Corporation
Slide 9: Building a smarter planet IBM’s progressive renovation focuses on  Transformational Planning  Foundational Architecture  Legacy Modernization  New Capability Development  Package Implementation  Execution based on industrialized factory concepts  Governance and change control 9 © 2010 IBM Corporation
Slide 10: Building a smarter planet What Are The Objectives of Progressive Modernization? Legacy World Green Screens Monolithic Applications Inflexible Architecture Multiple Point to Point Interfaces At Application & Data Levels Embedded Business Rules Embedded Data Access Logics Progressive Modernization Step By Step Modernization (COBOL to JAVA AND/OR COBOL) • Business Domain By Business Domain • Application By Application • User Interface • Multi-Channel • Application Architecture • Integration • Data • Governance Develop new capabilities in modernized world • New Development to meet business requirements Migrate existing capabilities into new environment • Code conversion • Data Conversion • Application Retrofit Harvest existing capabilities from legacy environment • Embedded business logics & business rules • Product Engines • Data models Modernized World GUI Screens Modular Application Constructs Reusable Business Services via ESB Modular & Flexible Architecture Message Broker Mediated Interfaces Exposed Business Rules That Are Re-Usable Across Applications Integrated Data View • • • • • • Lower Cost of Maintenance Lower Operating Cost Lower Time to Market Improved Business Flexibility Higher Efficiency & Productivity Significant Ability to boost revenue & Growth © 2010 IBM Corporation • • • • • • 10 High Cost of Maintenance Higher Operating Cost High Time to Market Business Inflexibility Poor Efficiency & Productivity Reduced Ability to boost revenue & Growth
Slide 11: Building a smarter planet IBM’s Banking Industry Framework A combination of assets, tools, accelerators, methods and software products that help banks modernize and run their core banking systems 1. Process, data, & service Models 2. Master data templates for customer, product and contract master 3. Solution templates for overarching banking processes e.g. account opening, product bundling etc. 4. Reusable service components to aid application build up e.g. fees & charges, rate calculation etc. 5. Reporting templates and services for analytics 6. Common application level IT foundational services 7. Integration message models 8. Legacy analysis & discovery tools 9. Architectural work products 1. Integrated banking transformation workbench 2. SOA service components development infrastructure 3. Integration tools with support for mediation & transformation 4. Legacy extraction & transformation tools 5. Business rules development 6. Integration tools for Master Data Management 1. Runtime infrastructure and software products 2. Banking extensions and bundles 3. System management tools Core Banking Transformation Analysis & Design Customer Care and Insight Integration Optimization Analytics Collaboration Security Resiliency Payments and Securities Develop Integrated Risk Management Runtime The framework gives you speed, flexibility and choice in deploying solutions while reducing cost and risk! 11 © 2010 IBM Corporation
Slide 12: Building a smarter planet IBM’s Core Banking Transformation Framework offers key benefits Accelerates core system transformation while minimizing risk and disruption. Key Benefits: Core Banking Transformation  Faster deployment  Lower Risk Infrastructure Transformation Integration Optimization Analytics Collaboration Security Resiliency  Support for adoption of open & industry standards  Offer choice of business applications from IBM & its partners  Simplified enterprise architecture © 2010 IBM Corporation Process Agility Application Modernization 12
Slide 13: Building a smarter planet Examples of framework assets and accelerators for Core Banking Transformation include  IFW  Banking Data/ Message Model  Banking Extensions for Master Data Management  Common Shared Services  Services Components Building Blocks  Solution Templates  Banking Transformation Workbench  Design Rules 13 © 2010 IBM Corporation
Slide 14: Building a smarter planet IBM’s Core Banking Transformation Framework enables banks to undertake one or more approaches to modernization based on strongest alignment of business needs with IT transformation efforts Facilitated by Framework Top Down Identify new “To Be” process models, service components & architectural constructs Modernization Approaches Implement Package Re-Write / Develop Legacy Modernization Modernized Banking Environment Strategic Priorities Design “To Be” architecture for modernization Determine how legacy can be harvested and/or migrated to support “To Be” model 14 Hybrid Bottom Up © 2010 IBM Corporation
Slide 15: Building a smarter planet IBM Core Banking Transformation Framework enables organizations to start with any solution and build upon it over time to achieve a simplified, strategic infrastructure a 1 Chooseand project implement it to achieve immediate ROI. 15 the 2 Build on previous 3 Achieve a value of simplified, projects, reusing assets and implementation patterns. strategic infrastructure. © 2010 IBM Corporation
Slide 16: Building a smarter planet Banks benefit from added speed, choice and flexibility, and the support of a vast IBM Business Partner network  Speed: Pre-configured solutions can be implemented faster than ever  Choice: Banks choose the solutions that provide the most value to them, in the order and at the pace that makes the most sense.  Flexibility: Techniques built on business process management and service-oriented architecture means easier deployment and interoperability of solutions.  Lower risk: Incremental projects, each with a defined payback period, are more easily scoped and implemented—and build on infrastructure deployed in previous phases.  Business Partner network: An array of powerful applications integrate seamlessly with IBM middleware. 16 © 2010 IBM Corporation