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A business need for web enabled internet computing architecture


Today''s banking landscape is changing at breakneck speed. To survive, banks must understand their customers including why customers elect to conduct business with a particular institution and accordingly deliver products and services to them through multiple delivery channels. They must become value-based intermediaries between customers, employees, and their business partners if they are to avoid becoming prey to the many non- traditional competitors using technology as an empowering tool to attack their markets. To win, banks must offer delivery mechanisms in the form of web- enabled transactions and information whether this entails providing consumers with bill presentment and payment capability or a corporate treasurer with web- based cash management and Letter of Credit functionality. The digital economy demands that to remain competitive banks must implement a Web-enabled Internet Computing Architecture as a market enabler to conduct business.

Banks must also consider offering new products such as, wholesale and corporate banking services that have traditionally been left to the large money centre banks. Some banks have already expanded their product lines and seized upon the evolutionary transaction opportunities e-commerce has presented. Others are still trying to figure out just what those opportunities are. Confirming the rapid growth of e-commerce in the banking sector, Ernst & Young predicts that by the year 2001 banks will be spending as much money on e-commerce initiatives as they spent in 1998 for branch initiatives.

With financial industry consolidation and the ever expanding number of new competitors pushing into the financial sector, bankers must look toward expanding their lines of business beyond those traditional services such as checking, savings and loan accounts to areas such as insurance, mutual funds, brokerage, trade finance and treasury. To compete more effectively and establish multi-faceted, long-term relationships with customers, banks must provide a broad-based array of competitive products today. Further, they must be prepared, from a technology perspective, to offer those products and service channels that are yet unknown or undefined. Web enabled delivery capabilities position banks to compete on a global basis, providing a market equaliser regardless of size or location. Banks today also must know their customers better than ever before. This means more than just understanding a household relationship. The bank that retains customers, sells multiple services to them to enhance returns, and effectively manages risks is the bank that has an in-depth understanding of each customerÕs relationship with the institution. Such relationship understanding can only be achieved, on a reasonable cost basis, by networking all of the customer and account information on a logical single database. The cost of maintaining multiple information and control databases, on an application by application basis, as well as the redundant staff requirements and the inefficient infrastructure needed to support such integration will cause operating costs to continue to head north on the expense curve.

In the very near future, it will also be necessary for banks to tailor products to all segments of the profitable customer sector on the fly, as individuals demand the ability to design their own financial relationship with their bank. In short, banks will need to be able to offer any product to any customer, anywhere at any time at an acceptable price while maintaining both risk and profitability objectives. While banks are working to extend their delivery channels and services, they must be able to control the costs of achieving such a market posture.

The Advantages of a Web-enabled Internet Computing Architecture
Taken together, these trends are causing an unprecedented reliance upon technology. At the same time, the pressures of today's financial services marketplace are outstripping the capabilities of traditional mainframe computers and client/server systems. The only practical way banks can seamlessly deliver services through multiple channels and offer e-commerce and customer resource management (CRM) capabilities, while reducing costs, is to transition to an entirely new technology infrastructure that is web-enabled, over the Intranet and corporate Intranets employing a networked logical single database. The transition to Web-enabled computing is by no means a new idea, but its importance is increasing exponentially with the accelerated pace of change in the financial services industry.

Browser-based computing offers great efficiencies, including increased control over data and the ability to deploy or update applications easily from a single location. This allows banks to be faster and more agile in entering new markets and expanding their lines of business. New Web-based services and product lines can be implemented on a central server and literally deployed overnight across the institution, at a very low cost.

Computing using a networked, logical relational database also provides the advantage of offering a single information repository. This repository is seamlessly accessed and used by anyone in the institution, from customer service representatives in the call centre to financial analysts at headquarters. Because all information is stored on the network, and acts as a single point of reference, information such as customer accounts or interest rates do not have to be loaded onto several disparate systems. A complete picture of each client is available at all times, including commercial and retail relationships. This is essential to managing each customer's total risk profile. Without a fully integrated view of all of the customerÕs relationship with the bank, it may be impossible to know, for example, that a highly profitable customer from a retail standpoint works for a corporation that has just filed for bankruptcy.

A Web-based infrastructure also provides banks with universal connectivity to all existing and future delivery platforms. With browser software becoming more adaptable all the time, it will be configured to work on many different types of channel devices from personal digital assistants (PDAs, like the Palm Pilot) to devices that have yet to be invented. Moreover, regardless of what device a customer uses to interact with the bank, an open, web-based infrastructure ensures that the transaction is processed seamlessly from the device on the front-end through to the back-end systems of the bank. This allows banks to extend their delivery channels without having to change their technology infrastructure, write an interface to a proprietary delivery system, or change the way they do their processing.

The use of large, scalable server solutions is also beneficial because, by design, they are capable of handling everything from front to back-end processing. Using this design schema, data does not need to be integrated from one system to another to ensure that all systems are synchronised. In the past, relational databases did not have the necessary speed to process millions of accounts and their transactions in a timely fashion. However today, some relational databases available are up to the task. In spite of the obvious benefits to banks of browser-based computing architecture, most institutions have large amounts of time and money invested in their existing technology infrastructure. For this reason, banks today continue to run disparate applications on legacy mainframe technology for core processing and client/server systems for branch, marketing, finance, and other functions. These applications are at best linked together via complicated back-office integration programs that are one-off solutions, maintained almost exclusively by the in-house staff. While this infrastructure is not destined to disappear tomorrow, its lifetime is inevitably limited.

Client/server systems, with their dispersed computing resources and applications, are becoming increasingly expensive to update and maintain both from a hardware and software as well as a staffing perspective. Client/server systems also impede rapid change and slow time-to-market. The time required to roll out new products and services is often solely dependent upon an institution's ability to load new or updated applications onto thousands of remote client and server computers. In addition to being slow, the process of maintaining and updating client/server systems is enormously expensive and resource-intensive.. Legacy mainframe technology has also become increasingly expensive and cumbersome. COBOL programmers are literally a dying breed, and it has become exceedingly difficult and costly to hire and retain professionals capable of maintaining older legacy mainframe applications. Mainframe applications based on COBOL or other older programming languages are not easily or quickly adapted, in contrast to applications designed using CASE tools and written in high-level, fourth-generation programming languages. Moreover, training in the colleges and universities today is almost exclusively directed toward fourth-generation programming languages and tools. Try hiring new computer science graduates and ask them to work on older generation computing architectures. They balk at the direction fearing that they will quickly fall behind on the learning and thus the job markets curve. For banks wanting to become more fleet of foot and enter new markets quickly, legacy mainframe systems can be a significant ball and chain to progress.

The Move to the Web
To overcome the limitations of today's hybrid legacy mainframe-client/server systems, banks have basically two choices: deploy point solutions that use separate databases, or transition to a Web-enabled Internet Computing Architecture that seamlessly integrates all of the bankÕs functional units.

Implementing point solutions can be a highly complex and expensive process, because a bank's applications are interdependent and rely on a common set of information. Consequently, point solutions must normally be interfaced to the bankÕs many other systems. This can become a complicated exercise involving multiple interfaces, multiple data feeds, tables to normalise the data and ultimately a solution so complex that no one is eager to maintain the software code.

Ultimately, the best alternative to meet the demands of today's changing financial services market is to migrate step by step to a Web-enabled infrastructure based on a network database and integrated applications for all of the bank's functions. The move to such an environment is not easy or quick to implement and does require prolonging interfaces and legacy application systems during the transition. The strategy is to move the most costly and critical systems first. Most often, CRM should be implemented first. It will serve as the core for all-current and future application processing, and will immediately return benefits and savings to the organisation. The next migration steps are highly dependent on market and internal time pressures. Some older systems are on the verge of breaking. When this happens, banks have little hope or staff to maintain and fix them. These then could be looked at, as an immediate need for centralised consolidation. Use this exercise as learning and planning experience and accelerate the implementation as the organisation is refocussed to the centralisation task.

Implementing a seamlessly integrated, Web-enabled Internet Architecture is not only a highly efficient alternative, but also a cost-effective one. Banks that implement a Web-based infrastructure will thrive into the next century. They will be nimble in delivering e-commerce capabilities and new products across a wide array of channels. They will know every facet of each customerÕs relationship and they will be able to manage risks and profits more effectively. They will also be able to control costs and ultimately increase margins. With the immense pressures in today's marketplace, banks that continue to wrap solutions around their legacy monoliths may not survive.

Thomas F McAllister
Chief Operating Officer,
System Access (Americas), Inc.


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