Table of Contentsconf.mbri.ac.ir/ebps4/userfiles/file/اسلایدها/روز ۲... · Core Banking Evolution 1980 –2015 5 –7 ComplexIT Project Implementation: Lessons Learned

Table of Contents

2Iran Core Banking Conference

# Topic Slides

Objectives of this Presentation 3 – 4

Core Banking Evolution 1980 – 2015 5 – 7

Complex IT Project Implementation: Lessons Learned 1990 – 2015 8 – 14

International Core Banking Projects: Lessons Learned 2005 – 2015 15 - 22

Thailand Core Banking – A Roadmap for Iran Not to Follow 2015 – 2xxx 23 – 30

Questions, Comments, & Answers 31

Appendix – Anatomy of A Failure 32 – 41

Objectives of this Presentation

1

3

Goal of this Presentation

CBS …We’ve come a long way in 25 years

…A CBS is Just Another Complex Piece of Software

…Banks have learned much since 2000

…Iran can learn from Thailand

…and apply the key to transformation

Iran Core Banking Conference 4

The Evolution of Core Banking

25

CBS Solutions – 40 years of evolution

Technology 1975 – 1995 1995 – 2010 2010 – 20xx

PlatformIBM Mainframe orIBM System 32 / 38

Unix Agnostic

Architecture Centralized Client – server Agnostic – SOA

Operating System DOS / VSE, AS/400 HP/UX, AIX Agnostic

Mode of operation Batch Real-time, batch accruals Real-time, true 24x7

File StructureVSAM flat filesISAM flat files

Relational database Relational database

LanguageCOBOLRPGII

C, C# Java

Modules Silos Integrated modules Components

Client ‘Dumb’ terminal ‘Fat’ Client – Windows xx ‘Thin client’ – browser

Integration Point-to-point Messaging EAI/ESB

Industry trends Leading edge 5 years behind the trends Back to early adoption


Banking Solution Panorama as at 2015

Technology US Europe Asia

Small banks

Core iSeries / Unix Unix Unix

Channels Omni-channel Omni-channel Multi-channel

Operating Model Outsourced In-house In-house

Mid-size banks

Core Unix Unix Unix


Operating Model Outsource & in-house In-house In-house

Large Banks

Core zSeries mainframes Mixed Unix / zSeries Mixed Unix / zSeries


Operating Model In-house In-house In-house


Risk Factors in Complex IT Project Implementation

3

8

Risk Factors in Complex IT Projects

9

In 1994, the Standish Group conducted a survey of organizations who had complex IT projects

The participants included:

• IT executive managers (CIO’s)

• Large, medium and small companies

• All sectors

- Banking

- Securities

- Manufacturing

- Retail

- Wholesale

- Healthcare

- Insurance

- Services

- Government

The survey sample included:

• 365 organizations

• 8,380 IT application projects

The Study is updated every year – the latest is 2013

Iran Core Banking Conference


16% 53% Challenged 31% CancelledSuccess

The 1994 Standish Scorecard for IT Complex Project Success

Risk Factors in Complex IT Implementations

Cost / Time OverrunWrite-off

16%

31% 30%

10% 9%

4%

14%18%

20%

36%

11%

1%0%

5%

10%

15%

20%

25%

30%

35%

40%

11

Cost overruns

Time overruns

0%

5%

10%

15%

20%

25%

30%

35%

40%

Feature & Function Fulfillment

Complex IT Project Implementation Challenges


Success Factors – IT Project Implementations

7%

8%

10%

17%

17%

18%

24%

0% 5% 10% 15% 20% 25%

Sufficient Resources

Competent Staff

Realistic Expectations

Proper Planning

User Involvement

Executive Support

Clear Requirements

Success Factors


Progress in IT Project Implementation – 1994 – 2013

16%

53%

31%

39%43%

18%

0%

10%

20%

30%

40%

50%

60%

Success Challenged Cancelled

١٩٩۴

٢٠١٣


Progress in IT Project Implementation – 2004 – 2012


40%

50%

60%

70%

80%

90%

٢٠٠۴ ٢٠٠۶ ٢٠٠٨ ٢٠١٠ ٢٠١٢

Time

Cost

Features

Time Cost Features2004 84% 56% 64%2006 72% 47% 68%2008 79% 54% 67%2010 71% 46% 74%2012 74% 59% 69%

International CBS Implementations- Trends in the last decade

415

50%

55%

55%

60%

65%

70%

70%

80%

0% 20% 40% 60% 80% 100%

Increase cross-selling

Increase penetration

Provide unified customer experience

Improve customer satisfaction

Improve time to market

Launch innovative payments products

Speed up loan approval

Improve operational efficiency

General themes and trends globally

Sources: Ovum study of European banks; IDC study of Asian banks.

International Trends in Core Banking Replacement


Global drivers for changing core banking system, from IBS study

5%5%5%

7%7%

9%11%

16%16%

23%25%

27%

0% 5% 10% 15% 20% 25% 30%

Bank merger/acquisition

Improved risk management

Manual processes

Obsolete technology

Legacy system not supported

Start-up bank

High costs of legacy system

Scalability

Support for new products

Support future strategy

Centralization/standardization

Broader functionality

Sources: International Banking Systems Intelligence. “Core Banking Systems Case Studies Online”. IBS: 22 August 2011. Updated July 2013.



80% 75%65%

45%

20%28%

0%

20%

40%

60%

80%

100%

Europe North America Asia/Pacific

ReplacementNecessary

ReplacementPlanned

Sources: North America: Oracle, The Impact of the Financial Crisis on Core Systems Replacement, July 2010, page 3Europe: Ovum, “The Business Case for Core System Transformation”, February 2012Asia: IDC, Financial Insights, “Core Banking Renewal Strategies of top 150 Asia/Pacific Banks, 2011-2014”, 2011.

Many banks view core banking replacement as necessary, but a smaller percentage have definite plans to replace



Why is there such a gap between necessity and actual core banking replacement?

• Three factors account for reluctance to changing of core banking systems

1. High cost – minimum of $30 million for a medium-sized bank

2. Long timeframe – minimum of 3 years, average 4 years for a replacement project

3. High risk – core banking replacements have a high failure rate

• Three common core banking replacement trends around the world

1. Banks are being driven to undertake core replacements by market pressure

2. Cost and customer demands for agility are key drivers of replacement

3. Vendor core banking products have matured enough to overcome fear of change

Sources: Forbes. Groenfeldt, Tom. “Why Core Banking Replacement Remains Locked in the Future”. Forbes Report 10 September 2013.Celent. Greer, Stephen and Daniel Latimore. “Global Core Banking: Steady but Unspectacular Growth”. 23 July 2013.



Bank transformation follows a path from (1) product innovation, to (2) sales innovation, to (3) market share innovation, and finally to (4) customer service innovation

ChinaBangladesh

Sri Lanka

Vietnam

Indonesia

India

Malaysia / Philippines

Korea

Hong Kong

Singapore

Australia

Taiwan

Private Banks



21

Lesson learnt from 63 case studies of CBS transformationRetail Banks

Universal Banks

Vendor selection time 10 months 13.5 months

Implementation time 19 months 22.3 months

Total transformation time 29 months 35.8 months

Level of satisfaction for completed transformation projects High High

Select a solution that is already successful in the country 85% 80%

Banks are split between ‘big bang’ and ‘phased’ implementation 45% ‘big bang’ 45% ‘big bang’

Sources: International Banking Systems Intelligence. “Core Banking Systems Case Studies Online”. IBS: 22 August 2011. Updated July 2013.

Lessons Learned in 63 case studies of core banking transformation, from IBS



Sources: The Asian Banker. “Retail Banking Innovation Report”. AB: Sept. 2010, page 56

Risk Factor Risk Mitigation

1. Managing the interface between business and IT 1. Establish a joint IT-business implementation team, with KPIs based on successful collaboration.

2. Employees’ behavior 2. Establish employee KPIs based on project success

3. Technology bottlenecks 3. Select the most scalable technology

4. Managerial attitudes 4. Establish managerial KPs based on project success

5. HR if training and management is insufficient 5. Provide intensive training for project team

6. Flexibility of IT systems 6. Select the most flexible IT system

7. Huge level of hierarchy 7. Establish horizontal project team structure

8. Lack of adequate technical expertise 8. Provide in-depth technical training to project team

9. Lack of support from IT vendors 9. Structure the project contract to guarantee support

10. Regulations and compliance 10. Streamline internal bank regulations

The most common risk factor is the interface between business and IT



Case Studies of 6 Banks in Thailand

5

23

Snapshot of Three Thailand Banks that Succeeded


Bank CIMB KTB SCB

Transformation Year 2012 - 2013 2008 2009

Legacy IT System SAFE II SAFE II SAFE II

Transformed System SIBS 10 Profile Systematics

Total Assets $114.9 bn. $80.7 bn. $81.7 bn.

Loans $62.7 bn. $53.3 bn. $54.0 bn.

Deposits $82.2 bn. $60.7 bn. $58.8 bn.

Branches 1,041 1,146 1,173

Customers 13 million 17 million 15 million

Lessons Learned in Thailand Bank Success Cases


# Success Factors SCB KTB CIMB

A Clear vision and mission Yes Yes

B Strong management support Yes Yes

C Effective communication channels Yes

D Reward and recognition Yes

E Project implementation consultant BCG None

F Bank-wide support Yes

G Project governance Yes

H Proejct organization Yes


# Facts and Figures SCB KTB CIMB

A CBS Replacement Time 15 months 24 months 18 months

B Dedicated staff 155 250 20 IT, 60 Biz

C Testing and go-live staff 800 900 1,600

D Platform zSeries mainframe HP Superdome iSeries

E Operating System zOS HP/UX AS-400

F Database dB2 Oracle dB2

G Branch Channel Thick client, Winxx Thin client, browser Thick client, Winxx

H CBS Software FIS Systematics FIS Profile Silverlake v. 10




# Benefit from Transformation SCB KTB CIMB

A Faster time to market Yes Yes Yes, by 50%

B Increased customer retention Yes

C Increased customer acquisition Yes

D Increased fees from retail services Yes

E Product profitability increased Yes

F Efficiency of internal processes increased Yes, by 30%

G Open architecture Yes

H Reduced IT cost Yes

I Product Bundling Yes

J Retail banking income increase 40 – 60% N / A NYA

Lessons Learned in Thailand Bank Failures


Three Banks Selected TCB – a mainframe software solution from Spain

• BAAC – 900 branches, 12 million customers, 15 million accounts

• kBank – 850 branches, 11 million customers, 12 million accounts

• Bank Thai – 100 branches, 2 million customers, 2.5 million accounts

IT Project Timelines at Each Bank

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

BAAC

BankThai

kBank

Critical Success Factors Assessment – Bank’s Failures


Critical Success Factors Assessment – Vendor’s Failures

30

Success Factor Chennai Software Development Issue for Three Banks

Management Support Ineffective support from TCB mgmt. No control or input in strategic plan

Clear requirements Good quality in recent kBank work No issues

Proper planning Plan changed 3 times Corporate and project plan mismatch

Competent staff

Competent in TCB functional specs Competent, but insufficient for 3 projects

Competent in technical specs Competent, but insufficient for 3 projects

Competent in coding No issue

No competency in proper function testing Testing is manual and ad hoc

No performance testing of customization Absolutely no focus on performance

Low competency in mainframe Difficult to find and recruit experienced mainframe staff in India

Available resources

Insufficient staff to manage 3 banks, test release 7, and do other projects

Will Temenos management provide sufficient staff?

No mainframe technology competency to ‘shrink-wrap’ the product

Technology support group in Hemel must create a ‘shrink-wrapped’ product that is documented for delivery

Clear vision Chennai has clear vision re release 6 and 7 impact Chennai does not have resources for both tasks

• Top mgmt. does not understand impact of release 7 on delivery of functionality to Thai banks

• Does not understand that it will divert resources with no benefit for Thai banks


Questions, Comments & Answers

731

Appendix – Case Study of a Failure

832

General Description of the Project

1. The project was to deliver a working Islamic core banking system in a 10 month period. The project budget was US$ 25 million.

2. This project was part of a larger programme. The programme included

a. EAI – application integration for all the bank systems, to be done by a third party vendor in parallel with CBS;

b. EDW – an enterprise data warehouse with CBS, cards, treasury and trade finance system data

c. Internet Banking – an internet banking system from a 3rd party

d. RMS – a risk management system from a 3rd party

3. Roadmap was designed by one of the ‘Big 4’ consulting firms

4. Programme PMO was managed by the same ‘Big 4’ consulting firms

5. Programme governance structure agreed by all parties – Bank, vendor, consultant


Case Study of CBS Project Failure


Programme Governance Structure

Board of Directors (BOD)Board of Directors (BOD)

EAI ….EDWEAI ….EDWCBS ImplementationCBS Implementation …..

Programme Sponsor / Deputy SponsorProgramme Sponsor / Deputy Sponsor

Board IT Oversight CommitteeBoard IT Oversight Committee

Project Structure

Programme Management Office

Programme DirectorProgramme Director

Project Steering Committee

Project Director

Project Manager

Project Team


Project Director

Project Manager

Project Team

RMS…Internet BankingRMS…Internet Banking


Project Director

Project Manager

Project Team

Management IT CommitteeManagement IT Committee


PMO Steering CommitteeProject Team Leads

Prepare Weekly Status Report for PMC

Project Manager


Review and Submit Weekly Status Report to Project Director and PMO

Weekly Project Team Status Meeting –Chaired by either PD or PM

Prepare Weekly Project Status Report

Review and Submit Weekly Project Status to PMO

Project Steering Committee Meeting

Steering Committee

Board Status Update

Receive and Compile Status Reports

Board of Directors

Project Director

Weekly Status Report

PSC Status Report

Weekly PMO Status Meeting

Board Paper

Programme LevelProject Level

Meeting Frequency -Suggested

PMC MeetingWeekly - Monday

PSC MeetingMonthly

PMO Programme Status MeetingWeekly - Wednesday

MeetingMonthly

Prepare Status Reports for PMO and Programme SC

Programme Communication and Reporting Structure


# Bank SOW Issues

1. Company Y failed to deliver, implement and go-live with Islamic Model Bank in 10 months

2. Company Y failed to install a pre-configured and pre-parameterized CBS Islamic solution to enable rapid implementation –minimize customization and lower project risk

3. Company Y failed to install a CBS solution in accordance with the SOW and the Service Agreement.

4. Company Y failed to install and implement a system capable of providing all regulatory reports

5. Company Y failed to provide a comprehensive training, including induction training, OJT, and ‘train the trainer’ for end user training

6. Company Y failed to deliver ‘To-Be’ business process flow

7. Company Y failed to deliver a set of interfaces to internal and external systems

8. Company Y failed to provide complete documentation for the software system

9. Company Y failed to deliver and/or test 198 gaps identified by the Gap analysis

10. Company Y failed to deliver a model bank that produced a bank-wide single customer limit

11. Company Y misrepresented that its solution would target up to 80% functional fit ‘out-of-the-box’



# Bank SOW Issue Supplier Response to the SOW Issue

1 No go-live in 10 months Failed to go-live in 10 months because Bank failed to adhere to 6 of 11 project assumptions

2 No ‘pre-configured’ delivery Pre-configured Islamic Model bank was delivered and accepted by the bank

3 Did not follow SOWThe company delivered 95% of the items in the statement of work; the balance of 5% were to be completed in an additional 3-month period

4 No regulatory reportsThe company delivered STB reporter, a 3rd party solution with all regulatory reports; Bank failed to deliver the necessary EDW system as per programme.

5 No comprehensive trainingCompany Y delivered training plan in first month; delivered technical training; delivered induction training. Could not deliver ‘train the trainer’ because of project cancellation.

6 No ‘To-Be’ business processCompany Y delivered 32 major business process flows and 50 minor business flows. Also delivered 219 manual with business process ‘to-be’ documentation.

7 No interfaces / integrationOriginal SOW was for integration to be 3rd party EAI. Modified SOW for Company Y to deliver 12 online and 16 batch integrations.

8 No complete documentation Company Y delivered 128 user guides and manuals, with full technical and user documentation.

9 No delivery of 198 gaps150 of the 198 gaps were agreed for delivery before go-live. All 150 gaps were tested and delivered. The remaining 48 were to be delivered after go-live, but project was cancelled.

10 No bank-wide limitsThe RFP requirement is for customer limits ‘…across modules.’ This is not ‘bank-side’; the card and Treasury systems are excluded because they are not CBS ‘modules’.

11 No 80% ‘out-of-the-box’ fitThe RFP had 1,678 specific requirements; the company provided 1,459 as standard ‘out-of-the-box’ requirements. This is 86.9%, which exceeds the 80% requirement.



# Bank SOW Issue Supplier Response to the SOW Issue

1 No go-live in 10 months Failed because did not support 6 of 11 project assumptions

2 No ‘pre-configured’ delivery

Pre-configured Islamic Model bank was delivered and accepted by the bank

3 Did not follow SOW The company delivered 95% of the items in the statement of work – rest in 2 months

4 No regulatory reports The company delivered STB reporter, full solution; Bank failed to deliver EDW

5 No comprehensive training Company Y delivered technical and induction. Could not deliver ‘train the trainer’ because of project cancellation.

6 No ‘To-Be’ business process Company Y delivered 32 major and 50 minor business process flows; also 220 BP manuals.

7 No interfaces / integration Original SOW was for integration to be 3rd party EAI. Modified SOW for Company Y to deliver 12 online and 16 batch integrations.

8 No complete documentation

Company Y delivered 128 user guides and manuals, with full technical and user documentation.

9 No delivery of 198 gaps 150 of the 198 gaps were agreed for delivery before go-live. All 150 gaps were tested and delivered. 48 after…

10 No bank-wide limits The RFP requirement is for customer limits ‘…across modules.’ This is not ‘bank-wide’; excludes Cards and Treasury

11 No 80% ‘out-of-the-box’ fit The RFP had 1,678 specific requirements; the company provided 1,459 as standard ‘out-of-the-box’ requirements. This is 86.9%,



# Bank Governance Issues Supplier Response to Governance Issues

1 Company Y failed to deliver reasonable project management and governance.

• The project management and governance were a bank responsibility;• The SOW assigned to Company Y the management responsibility for (1) data

conversion, (2) advice on infrastructure configuration; and (3) advice on network upgrade.

2 Company Y failed to carry out services with reasonable care, diligence and skill

• Company Y delivered all contractually committed deliverables;• A 10 month delivery would necessarily require reasonable care, diligence

and skill.

3 Company Y failed in their role as stakeholders in the project and failed to show commitmentto the project.

• The Bank did not include Company as a stakeholder:• The company was not a member of the PMO• The company was only an observer in the project steering committee.

• Company Y showed its commitment by continuing to work from Month 4 to Month 10 even though the Bank had failed to make milestone payments as contractually required.


Why was the project cancelled?

1. The Project and Programme structure were set up as per expectations.

2. The supplier delivered according to the contract

The underlying reason for cancellation

1. The Bank CIO during the design and selection process was Mr. X.

2. In Month 3 of the Project, the CIO was forced out of the bank.

3. The new CIO, Mr. Y came in with a different agenda:

- In month 5 of the project, the CIO asked the Contracts division to advise the steering committee on how to cancel the project;

- Contracts advised that cancellation in Month 5 would contractually require that the Bank pay the entire amount of the contract

4. Decision was made wait until Month 10 + 1 day, and then cancelled for cause

The final outcome of the dispute was:

1. The international court of arbitration ruled in favor of the supplier

2. The bank paid the entire $25 million value of the contract to the supplier



What is the principal lesson learned?

1. Without full and effective support from top management, an IT project will not be likely to succeed.

2. Even when other factors are present – the right programme structure, the right communication process, the right solution – even then, if top management support is not in place, project failure is likely.



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Table of Contentsconf.mbri.ac.ir/ebps4/userfiles/file/اسلایدها/روز ۲... · Core Banking Evolution 1980 –2015 5 –7 ComplexIT Project Implementation: Lessons Learned