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Copyright: Avi Rosenthal, 2003. alCopyright: Avi Rosenthal, 2003. all rights reservedl rights reserved
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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
Copyright: Avi Rosenthal, 2003. alCopyright: Avi Rosenthal, 2003. all rights reservedl rights reserved
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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.
Copyright: Avi Rosenthal, 2003. alCopyright: Avi Rosenthal, 2003. all rights reservedl rights reserved
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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.
Copyright: Avi Rosenthal, 2003. alCopyright: Avi Rosenthal, 2003. all rights reservedl rights reserved
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Presentation AgendaPresentation Agenda
• IntroductionIntroduction• Business ChallengesBusiness Challenges • Decisions and SolutionsDecisions and Solutions• Technological perspectiveTechnological perspective• Business perspective Business perspective • SummarySummary
Copyright: Avi Rosenthal, 2003. alCopyright: Avi Rosenthal, 2003. all rights reservedl rights reserved
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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
Copyright: Avi Rosenthal, 2003. alCopyright: Avi Rosenthal, 2003. all rights reservedl rights reserved
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Traditional BankTraditional Bank
-
Branch
Branch
Branch
ATM
ATM
ATM
Copyright: Avi Rosenthal, 2003. alCopyright: Avi Rosenthal, 2003. all rights reservedl rights reserved
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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
Copyright: Avi Rosenthal, 2003. alCopyright: Avi Rosenthal, 2003. all rights reservedl rights reserved
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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
Copyright: Avi Rosenthal, 2003. alCopyright: Avi Rosenthal, 2003. all rights reservedl rights reserved
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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
Copyright: Avi Rosenthal, 2003. alCopyright: Avi Rosenthal, 2003. all rights reservedl rights reserved
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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
Copyright: Avi Rosenthal, 2003. alCopyright: Avi Rosenthal, 2003. all rights reservedl rights reserved
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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
Copyright: Avi Rosenthal, 2003. alCopyright: Avi Rosenthal, 2003. all rights reservedl rights reserved
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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
Copyright: Avi Rosenthal, 2003. alCopyright: Avi Rosenthal, 2003. all rights reservedl rights reserved
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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)
Copyright: Avi Rosenthal, 2003. alCopyright: Avi Rosenthal, 2003. all rights reservedl rights reserved
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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
Copyright: Avi Rosenthal, 2003. alCopyright: Avi Rosenthal, 2003. all rights reservedl rights reserved
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Globalization Globalization DependenciesDependencies• 24X724X7
• Customer CentricCustomer Centric
• ProductsProducts
• IntegrationIntegration
• RegulationsRegulations
• MergesMerges
Copyright: Avi Rosenthal, 2003. alCopyright: Avi Rosenthal, 2003. all rights reservedl rights reserved
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Multi - ChannelMulti - Channel Branch
ATM
Copyright: Avi Rosenthal, 2003. alCopyright: Avi Rosenthal, 2003. all rights reservedl rights reserved
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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
Copyright: Avi Rosenthal, 2003. alCopyright: Avi Rosenthal, 2003. all rights reservedl rights reserved
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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
Copyright: Avi Rosenthal, 2003. alCopyright: Avi Rosenthal, 2003. all rights reservedl rights reserved
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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)
Copyright: Avi Rosenthal, 2003. alCopyright: Avi Rosenthal, 2003. all rights reservedl rights reserved
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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
Copyright: Avi Rosenthal, 2003. alCopyright: Avi Rosenthal, 2003. all rights reservedl rights reserved
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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
Copyright: Avi Rosenthal, 2003. alCopyright: Avi Rosenthal, 2003. all rights reservedl rights reserved
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Business issues Business issues perspectiveperspective
Copyright: Avi Rosenthal, 2003. alCopyright: Avi Rosenthal, 2003. all rights reservedl rights reserved
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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
Copyright: Avi Rosenthal, 2003. alCopyright: Avi Rosenthal, 2003. all rights reservedl rights reserved
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Priorities 2003-2004Priorities 2003-2004
• Costs SavingsCosts Savings
• ProcessesProcesses
• Understanding the CustomerUnderstanding the Customer
• Customer Identity verificationCustomer Identity verification
Copyright: Avi Rosenthal, 2003. alCopyright: Avi Rosenthal, 2003. all rights reservedl rights reserved
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Complexity and Complexity and FunctionalityFunctionality
Functionality
Com
plexity
Copyright: Avi Rosenthal, 2003. alCopyright: Avi Rosenthal, 2003. all rights reservedl rights reserved
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Presentation AgendaPresentation Agenda
• IntroductionIntroduction
• Business ChallengesBusiness Challenges
• Solutions and decisionsSolutions and decisions
• Technological perspectiveTechnological perspective
• Business perspective Business perspective
• SummarySummary
Copyright: Avi Rosenthal, 2003. alCopyright: Avi Rosenthal, 2003. all rights reservedl rights reserved
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Solutions and decisionsSolutions and decisions
Guiding Principles Guiding Principles
• Use of Assets and knowledgeUse of Assets and knowledge
• ArchitectureArchitecture
• KISSKISS
Copyright: Avi Rosenthal, 2003. alCopyright: Avi Rosenthal, 2003. all rights reservedl rights reserved
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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.
Copyright: Avi Rosenthal, 2003. alCopyright: Avi Rosenthal, 2003. all rights reservedl rights reserved
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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
Copyright: Avi Rosenthal, 2003. alCopyright: Avi Rosenthal, 2003. all rights reservedl rights reserved
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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
Copyright: Avi Rosenthal, 2003. alCopyright: Avi Rosenthal, 2003. all rights reservedl rights reserved
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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
Copyright: Avi Rosenthal, 2003. alCopyright: Avi Rosenthal, 2003. all rights reservedl rights reserved
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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
Copyright: Avi Rosenthal, 2003. alCopyright: Avi Rosenthal, 2003. all rights reservedl rights reserved
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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.
Copyright: Avi Rosenthal, 2003. alCopyright: Avi Rosenthal, 2003. all rights reservedl rights reserved
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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)
Copyright: Avi Rosenthal, 2003. alCopyright: Avi Rosenthal, 2003. all rights reservedl rights reserved
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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
Copyright: Avi Rosenthal, 2003. alCopyright: Avi Rosenthal, 2003. all rights reservedl rights reserved
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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
Copyright: Avi Rosenthal, 2003. alCopyright: Avi Rosenthal, 2003. all rights reservedl rights reserved
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Presentation AgendaPresentation Agenda
• IntroductionIntroduction
• Business ChallengesBusiness Challenges
• Solutions and decisions Solutions and decisions
• Technological perspectiveTechnological perspective
• Business perspectiveBusiness perspective
• SummarySummary
Copyright: Avi Rosenthal, 2003. alCopyright: Avi Rosenthal, 2003. all rights reservedl rights reserved
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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
Copyright: Avi Rosenthal, 2003. alCopyright: Avi Rosenthal, 2003. all rights reservedl rights reserved
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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.
Copyright: Avi Rosenthal, 2003. alCopyright: Avi Rosenthal, 2003. all rights reservedl rights reserved
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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
Copyright: Avi Rosenthal, 2003. alCopyright: Avi Rosenthal, 2003. all rights reservedl rights reserved
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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
Copyright: Avi Rosenthal, 2003. alCopyright: Avi Rosenthal, 2003. all rights reservedl rights reserved
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Q & A?