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Copyright: Avi Rosenthal, Copyright: Avi Rosenthal, 2003. all rights reserve 2003. all rights reserve d 1 Banking: Business and Banking: Business and Technology Trends Technology Trends Avi Rosenthal Avi Rosenthal Independent Consultant Independent Consultant [email protected] [email protected]

Copyright: Avi Rosenthal, 2003. all rights reserved 1 Banking: Business and Technology Trends Avi Rosenthal Avi Rosenthal Independent Consultant [email protected]

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Banking: Business and Banking: Business and Technology Trends Technology Trends

Avi RosenthalAvi Rosenthal

Independent ConsultantIndependent Consultant

[email protected]@netvision.net.il

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Overall Presentation Overall Presentation GoalGoal

Understanding business trends and Understanding business trends and technological trends dependencies technological trends dependencies and their implications on and their implications on technological decisions in the banking technological decisions in the banking industury.industury.

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Speaker’s QualificationsSpeaker’s Qualifications

• 30+ Years in IT.30+ Years in IT.

• Technologies and Architectures Consultant Technologies and Architectures Consultant for 30 organizations.for 30 organizations.

• Working with leading Analysts Groups Working with leading Analysts Groups

• Consultant for Leading Edge Core Banking Consultant for Leading Edge Core Banking

endeavor (2000-2002).endeavor (2000-2002).

• Assessing software products initiatives for Assessing software products initiatives for VCs. VCs.

• Many years of experience as CTO, Technical Many years of experience as CTO, Technical Manager and Technical Expert.Manager and Technical Expert.

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Presentation AgendaPresentation Agenda

• IntroductionIntroduction• Business ChallengesBusiness Challenges • Decisions and SolutionsDecisions and Solutions• Technological perspectiveTechnological perspective• Business perspective Business perspective • SummarySummary

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Presentation AgendaPresentation Agenda

• IntroductionIntroduction• Business ChallengesBusiness Challenges • Solutions and decisions Solutions and decisions • Technological perspectiveTechnological perspective• Business perspective Business perspective • SummarySummary

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Traditional BankTraditional Bank

-

Branch

Branch

Branch

ATM

ATM

ATM

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Traditional TechnologyTraditional Technology

Product and Branch centricProduct and Branch centric

• Back End Legacy SystemsBack End Legacy Systems

COBOL, MainframeCOBOL, Mainframe

• Operations: By the clerks in the Operations: By the clerks in the branch and by ATMsbranch and by ATMs

• Batch Window at night Batch Window at night

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Presentation AgendaPresentation Agenda

• IntroductionIntroduction

• Business Challenges Business Challenges

• Solutions and decisions Solutions and decisions

• Technological perspectiveTechnological perspective

• Business perspective Business perspective

• SummarySummary

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Business ChangeBusiness Change

The banking Business Needs are The banking Business Needs are changing significantly:changing significantly:

• Customer CentricCustomer Centric

• GlobalizationGlobalization

• Distribution ChannelsDistribution Channels

• (Near) Real Time Enterprise(Near) Real Time Enterprise

• 24X724X7

• FactorizationFactorization

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Business ChallengesBusiness Challenges

The banking Business Needs are The banking Business Needs are changing significantly (2):changing significantly (2):

• Merges and AcquisitionsMerges and Acquisitions

• Increased CompetitionIncreased Competition

Bill Payers, Insurance etc.Bill Payers, Insurance etc.

• Smaller banks becoming a Niche Smaller banks becoming a Niche Business instead of complete solutionsBusiness instead of complete solutions

Business and Business and IT converge IT converge

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Customer CentricCustomer Centric

• Improved service to the customer.Improved service to the customer.

• Contact Center, self serviceContact Center, self service

• Understanding the customer.Understanding the customer.

• Analytical CRMAnalytical CRM

• CollaborationCollaboration

• Operational Systems vs. CRMOperational Systems vs. CRM

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Customer Centric (2)Customer Centric (2)

Customer Centric is dependent upon:Customer Centric is dependent upon:

• Multi-ChannelMulti-Channel

• ProductsProducts

• GlobalizationGlobalization

• Integration:Integration:

Data: Operational, DWH, ExternalData: Operational, DWH, External

Front End: Personalization, consistent Front End: Personalization, consistent

Middleware: The Glue for connectingMiddleware: The Glue for connecting

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Customer Centric (3)Customer Centric (3)

• 75% of US based FSPs will 75% of US based FSPs will attempt to adopt a customer-attempt to adopt a customer-centric by the end of 2001, less centric by the end of 2001, less then 25% will be actually then 25% will be actually customer centric by 2003 customer centric by 2003 (Gartner Group)(Gartner Group)

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GlobalizationGlobalization

• Support for Multi…Support for Multi…

Examples:Examples:

Multi-Language, Multi Time Zones, Multi-Language, Multi Time Zones,

Multi-Currency, Multi-BankMulti-Currency, Multi-Bank

• Banking groups and Merges of banks Banking groups and Merges of banks originated in different countriesoriginated in different countries

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Globalization Globalization DependenciesDependencies• 24X724X7

• Customer CentricCustomer Centric

• ProductsProducts

• IntegrationIntegration

• RegulationsRegulations

• MergesMerges

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Multi - ChannelMulti - Channel Branch

ATM

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Multi – ChannelMulti – Channel

• Consistency between channelsConsistency between channels

• Multi-Channels for a business Multi-Channels for a business operationoperation

• Adding new channelsAdding new channels

• Exploiting channel technological Exploiting channel technological capabilities capabilities

• Technological limitations of channelsTechnological limitations of channels

• Regulations Regulations

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Real Time Enterprise Real Time Enterprise (RTE)(RTE)

• Shortening decision time.Shortening decision time.

• Decisions Based on Real Time Decisions Based on Real Time Data.Data.

• Enabling Technologies:Enabling Technologies:

BPM, Other Integration BPM, Other Integration technologies, technologies,

Collaboration, InternetCollaboration, Internet

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Real Time Enterprise Real Time Enterprise (RTE)(RTE)

• The ability toThe ability to remove latencyremove latency or lagor lag times fromtimes from key business processeskey business processes, , to extend processes globally to to extend processes globally to "follow the sun," and to access "follow the sun," and to access real-time financial, managerial and real-time financial, managerial and operatingoperating datadata will increasingly will increasingly separate industry leadersseparate industry leaders from from also-rans (Gartner Group, 2003)also-rans (Gartner Group, 2003)

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RTE DependenciesRTE Dependencies

• GlobalizationGlobalization

• CRMCRM

• FactorizationFactorization

• 24X724X7

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24X724X7

• Business, Applications and Business, Applications and Technological aspects.Technological aspects.

• A prerequisite for complete RTEA prerequisite for complete RTE• 24X7 of Corporate customer24X7 of Corporate customer• Higher Availability of other customersHigher Availability of other customers

DependenciesDependencies RTE, Globalization, Multi-Channel, RTE, Globalization, Multi-Channel,

CRM, RegulationsCRM, Regulations

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FactorizationFactorization

• Building Banking ProductsBuilding Banking Products• By End UsersBy End Users• Minimal development, if anyMinimal development, if any• No dependencies on IT for Time No dependencies on IT for Time

to Marketto Market

DependenciesDependencies

CRM,CRM, GlobalizationGlobalization

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Business issues Business issues perspectiveperspective

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September 11September 11thth effects effects

• Economical slowdownEconomical slowdown

• Change of PrioritiesChange of Priorities

• ““Do more with less” mode of Do more with less” mode of thinkingthinking

• Market ConsolidationMarket Consolidation

• OutsourcingOutsourcing

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Priorities 2003-2004Priorities 2003-2004

• Costs SavingsCosts Savings

• ProcessesProcesses

• Understanding the CustomerUnderstanding the Customer

• Customer Identity verificationCustomer Identity verification

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Complexity and Complexity and FunctionalityFunctionality

Functionality

Com

plexity

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Presentation AgendaPresentation Agenda

• IntroductionIntroduction

• Business ChallengesBusiness Challenges

• Solutions and decisionsSolutions and decisions

• Technological perspectiveTechnological perspective

• Business perspective Business perspective

• SummarySummary

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Solutions and decisionsSolutions and decisions

Guiding Principles Guiding Principles

• Use of Assets and knowledgeUse of Assets and knowledge

• ArchitectureArchitecture

• KISSKISS

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SolutionsSolutions andand conceptualconceptual decisionsdecisions

Decisions to be madeDecisions to be made

• Where to begin the adaptation Where to begin the adaptation process?process?

Front End, Back End, Both ,Front End, Back End, Both , some some channels (e.g. Internet).channels (e.g. Internet).

All applications or only some of themAll applications or only some of them

• Buy vs. Build or bothBuy vs. Build or both

• Architecture (SOA, Object oriented, Architecture (SOA, Object oriented, Component Based, Traditional) Component Based, Traditional)

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Where to begin the Where to begin the adaptation processadaptation process??

Where to begin the adaptation process?Where to begin the adaptation process?• Many start with Front-End Modernization.Many start with Front-End Modernization.• Changing the Back End trade offs: Costs Changing the Back End trade offs: Costs

more but could add more business value. more but could add more business value. • This decision is orthogonal to the decision This decision is orthogonal to the decision

of Buy vs. Build of Buy vs. Build • Starting with an external channel and Starting with an external channel and

expanding to other channels is a possible expanding to other channels is a possible strategystrategy

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Buy vs. Build Buy vs. Build BuyBuy

• Core Banking packages are ERP like.Core Banking packages are ERP like.

• The considerations are similar.The considerations are similar.

• The gap between ERP packages and The gap between ERP packages and organization needs is usually organization needs is usually smaller. smaller.

• ERP vendors (e.g. SAP) are ERP vendors (e.g. SAP) are beginning to build vertical ERP beginning to build vertical ERP solutions for banking.solutions for banking.

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Buy vs. Build: Buy vs. Build: BuildBuild

• A major development project is A major development project is required.required.

• Platform decision is needed:Platform decision is needed:

J2EE vs./and Dot Net, COBOL, J2EE vs./and Dot Net, COBOL, 4GL4GL

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Programmer Market ShareProgrammer Market Share

Developers

From an estimated worldwide market size of 7 million “professional” developers

M = million

1M

2M

3M

2000 2001 2002 2003 2004 2005

COBOL

Visual Basic

C++

Java C#

Source Gartner Group

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Technological decision Technological decision processprocess

Selecting Java could implySelecting Java could imply• Paradigm ShiftParadigm Shift• Cultural ChangeCultural Change• External people in the External people in the

development teamdevelopment team• Internal ResistanceInternal Resistance• Leading Edge: More risks and Leading Edge: More risks and

more potential business valuemore potential business value

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Technological decision Technological decision processprocess

Selecting COBOL could implySelecting COBOL could imply

• Proven TechnologyProven Technology

• Internal Development TeamInternal Development Team

• No fundamental change: Less No fundamental change: Less Business valueBusiness value

• Less Internal Resistance Less Internal Resistance

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Buy vs. Build: Buy vs. Build: Buy & Buy & BuildBuild

• Buy Build and Buy Build and IntegrateIntegrate

• What to buy? What to build and What to buy? What to build and what to keep?what to keep?

• Enabling Technologies: Enabling Technologies: Integration. The Challenge: Integration. The Challenge: Combining existing, bought and Combining existing, bought and developed as an integrated developed as an integrated system.system.

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ArchitectureArchitecture

• A Banking package defines an A Banking package defines an architecture.architecture.

• Components based vs. SilosComponents based vs. Silos

• The trend: towards Service The trend: towards Service Oriented Architecture (SOA) Oriented Architecture (SOA)

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Architectural exampleArchitectural example

New European Banking Specialization New European Banking Specialization

• Big Banks continue their multi-lines Big Banks continue their multi-lines business, in multi-countriesbusiness, in multi-countries

• Big Banks infrastructure:Big Banks infrastructure: Back-End systems and ChannelsBack-End systems and Channels

• Products Banks: Build banking products Products Banks: Build banking products and sales them to other banks. No need for and sales them to other banks. No need for Back-End production systems.Back-End production systems.

• Sales Banks: Sales the products build by Sales Banks: Sales the products build by Products Banks and executed by Big Banks Products Banks and executed by Big Banks Back-End systemsBack-End systems

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New InfrastructureNew Infrastructure

Transaction Bank

Back End

TB-CH2

TB-CH3

PRB1-CH1

PRB1-CH2

PRB1-CH3

PRB2-CH1

PRB2-CH1

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Presentation AgendaPresentation Agenda

• IntroductionIntroduction

• Business ChallengesBusiness Challenges

• Solutions and decisions Solutions and decisions

• Technological perspectiveTechnological perspective

• Business perspectiveBusiness perspective

• SummarySummary

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Techno-Business Techno-Business perspectiveperspective

• Integration instead of Integration instead of

re-development applications re-development applications using new technologiesusing new technologies

• ERP and ERP like packagesERP and ERP like packages

• Architecture: SOA, MDAArchitecture: SOA, MDA

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Techno-Business Techno-Business perspectiveperspective

• Outsourcing:Outsourcing:

reuse of outsourcer reuse of outsourcer methodology, technology, best methodology, technology, best practices practices

• Cooperation between banksCooperation between banks

• The rational for both is : saving The rational for both is : saving costs.costs.

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Presentation AgendaPresentation Agenda

• IntroductionIntroduction

• Business ChallengesBusiness Challenges

• Solutions and decisions Solutions and decisions

• Technological perspectiveTechnological perspective

• Business perspective Business perspective

• SummarySummary

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Keys for successKeys for success

• Business and Business and Technology AlignmentTechnology Alignment

• Business PartnershipBusiness Partnership• CustomerCustomer• Multi ChannelMulti Channel• Reuse: Elements, Reuse: Elements,

knowledge etc.knowledge etc.• ArchitectureArchitecture

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Q & A?