Innovation in Financial Services

Brett Ison

Director – Industry Solutions

IBM – Software Group – Asia Pacfic

Realising Value

Innovation Update

Capabilities & Solutions

Expanding the Innovation HorizonIBM Global CEO Study & IBM Global Innovation Outlook

and they want to innovate their...

ProductsServicesMarkets

42%

Business Models

28%

Operations

30%

costreduction

CEOs say they must achieve...

revenue growth

riskmanagement

asset utilization

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

Banks will innovate in four ways in response to the foregoing Business & Technology market forces

Customers redefine the rules of the game

Universal banks and ultra-focused niche players thrive

Changing workforce composition dictates new approaches

Regulatory burdens intensify

Technology improvesto enable breakaway value

BusinessTrends

Mega Banks

Community Banks

Industry Specialists

Non-Bank Banks

Competitive Landscape

Growth via Innovation in…

1. Products/Services

2. Customer Intimacy and Market Penetration

3. New Markets & Channels

4. Diversification Strategies

Technology TrendsCore Technology

Optimized SystemsEvent-Driven World

Services 2.0Software Evolution

Analytics

Megatrends from the Insurance 2020 Study

1

2

3

4

Mainstream insurance products are dynamic and provide more consistent performance

Regulatory coordination and use of affirmed industry standards broaden to global scales

Active and informed consumers reward nontraditional operators

Technology virtualizes the value chain and lowers barriers to entry

Realising Value/Case Study

Innovation Update

Capabilities & Solutions

XML Integration Approach

••Using XML to describe messages Using XML to describe messages and mainstream technology to and mainstream technology to develop solutions (Java, .Net, develop solutions (Java, .Net, Cobol)Cobol)

SOA Journey 1999 –> 2007+

Strategic PartnersStrategic PartnersNL IVRNL IVRInternetInternetIFA DesktopIFA DesktopeMaileMailIFA Portals IFA Portals Employers Employers Internal Internal

••Provide multiple channelsProvide multiple channels

Message TransformationMessage Transformation

LoggingLogging

MessagingMessaging

WorkflowWorkflow SecuritySecurity

Systems ManagementSystems ManagementTransaction ServersTransaction Servers

e:maile:mail

••Integrate with existing Integrate with existing and new infrastructureand new infrastructure

••Create reCreate re--usableusablebusiness servicesbusiness services

Life & Pensions ServicesLife & Pensions ServicesMaintainPolicy

ProvideValuation

Healthcare ServicesHealthcare ServicesAddNewCustomerCalculateRenewal

Banking ServicesBanking ServicesMortgageQuotation

Investment ServicesInvestment ServicesPlaceDealOrder

••Leverage core platformsLeverage core platformsBankingBankingPlatformPlatform

Healthcare Healthcare PlatformPlatform

Life & PensionsLife & PensionsPlatformPlatform

InvestmentInvestmentPlatformPlatform

Evolving IT Capability for Business Flexibility

Image copyright Standard Life 2006

SOA framework bakes in architecture and improves Time To Market

Tim

e to

Mar

ket

Timeline

1998

How

What

1998: Decide on IBM platform stack and standardise (WAS, WBI), Early frameworks

2001

What

How

2001: Revisit framework, Design Patterns approach, new framework and re-launch as SOA. Strong emphasis on business service re-use.

2005

How

What

Early 2005: Adopt Agile dev approach in teams. Continued evolution of SOA framework to improve automation.

How

What

Pre 1998

2003 - largest business area adopts LEAN. Focus on time to value

<1% of project time for SOA projects

How does SOADA help?Automated build and unit test

Full catalogue of services

Fast to integrate into new projects

Easy to move through test environments

Image copyright Standard Life 2006

SOA and Agile (Improving TTM)

“Enterprises experience more success with SOA when they eschew big top down delivery projects and instead get down in the trenches with anevolutionary approach”

“Organizations with an enterprise-level commitment to SOA are twice aslikely to use Agile processes”

Agile Processes Enable SOA Success Forrester Trends Report – February 2006

“Agile” - what's that?We Value…•Individuals and interactions over processes and tools•Working software over comprehensive documentation•Customer collaboration over contract negotiation•Responding to change over following a plan

What’s differentin Dev Teams?Principles rather than processMulti-functional teamsTeam sitting togetherDaily huddlesShort iterationsVisual prompts on progress

XML Integration Approach

SOA Reality 2007

Strategic PartnersStrategic PartnersNL IVRNL IVRInternetInternetIFA DesktopIFA DesktopeMaileMailIFA Portals IFA Portals Employers Employers Internal Internal

Message TransformationMessage Transformation

LoggingLogging

MessagingMessaging

WorkflowWorkflow SecuritySecurity

Systems ManagementSystems ManagementTransaction ServersTransaction Servers

e:maile:mail

Life & Pensions ServicesLife & Pensions ServicesMaintainPolicy

ProvideValuation

Healthcare ServicesHealthcare ServicesAddNewCustomerCalculateRenewal

Banking ServicesBanking ServicesMortgageQuotation

Investment ServicesInvestment ServicesPlaceDealOrder

BankingBankingPlatformPlatform

Healthcare Healthcare PlatformPlatform

Life & PensionsLife & PensionsPlatformPlatform

InvestmentInvestmentPlatformPlatform

Wrap Sheila

Opal

FoldersAdviser Zone

Employer Zone

Nexus

SippBUD

Heal

CIT

OSL CPS IFA Portals

400+ Business services

Established and governed SOA infrastructure in place

+ more

Wachovia – CIB – New Business Introduction

SOA Industry Frameworks are the bridgebetween the IT View and the Business View

IT View

Business View

Process View

SOA Foundation

Composite Business ServicesBusiness Partner Content

Business Blueprint

SOAIndustry

Framework

Business Process Management

SOA Reference Architecture

SOA Foundation

Business BlueprintComponent Business ModelsSOA Industry Thought Leadership

Business Process Management

Introducing SOA Industry Roadmaps: Business Blueprint + SOA Industry Framework

SOAIndustry

Framework

Composite Business ServicesBusiness Partner Content

SOA Reference Architecture

SOA Industry Framework

End-to-end platform for Business ServicesConsists of two feature a "Tools Pack" and a "Foundation Pack"

Industry Content

Packs

Banking Composite

Business Services

WebSphere Business Services

FabricIBM Foundation Pack for WBSF

WSRR

WB

S Fa

bric

Pro

duct …Other

Banking and

Insurance

Packs

Bill Paym

ents

Trade Payments

Payments Status

Fund Transfer

Banking CBS Portfolio

…Other CBS

IBM Banking Payments Pack

Flexible, dynamic, loosely coupled business solutions based on SOA Service Oriented Business Solutions are created through the use of WBS Fabric and content accelerators

Service Oriented Business Solutions

Customer Implementations

(Examples…)Treasury Mgt

Pmt Processing Wealth Mgt Settlement

Collection of Reference Business Services Templates for Banking Payments SOA Solutions

IBM Tools Pack for WBSF

Solu

tion

Acc

eler

ator

s

Uses WSRR & existing or developed back-end assets to enable business-facing solutions

Back-end Assets

Extensible, complete & encapsulated business component building blocksPrebuilt components are available from GBS, GSIs, ISVs and other IBM Business Partners

Prebuilt, industry-specific product to improve time to value, instill industry standards & provide solution build & operation controlsIndustry Packs are optionalextensions to WBS Fabric

Assumed over the lifecycle of the project (5 Years)

Metrics Traditional Application CBS Result

Business Value Delivered 1.5 to 2 years Every 6 Months12-18 Mo Faster

Time to Value

Lifecycle Project Costs $15,000,000-$20,000,000 $10,000,000-$13,000,000 30+% Lower Costs

Lifecycle Project Costs (NPV) $14,000,00-$20,000,000 $8,000,000-$12,000,000 30+% Lower Costs

Lifecycle Revenue Generated $350,000,000 $400,000,000 $50+ Million Top Line

Growth – 14%

Asset Re-use

Minimal due to lack of interoperability standards, semantic level cataloging Between 40-70% Re-use 40-70% Re Use

Project RiskLarge delivery times make the

project inherently riskyReduced due to incremental delivery

of services to small user communities Reduced

Project Flexibility

Hard coded connections require more time and effort to accommodate change

Modular design and policy based assembly reduces time to market and

allows rapid change Agility

Based on Incremental Delivery using Fabric and Legacy Assets –Does not include any Call Center Savings

Rating Package Assessment: Traditional Application vs CBS and Fabric

*Source: Large Insurance Carrier

Realising Value

Innovation Update

Capabilities & Solutions

Questions on LOB and SOA

What does the average business executive know about SOA?–Not very much

What does the average business executive want to know about SOA?

–Not very much

What does the average business executive want from IT?

–Quicker Time To Market –Cost reduction in their business processes (and IT)–Innovation and flexibility in their business models–And linked to the above

–Understand portfolio of processes, applications and services

SOA investment should be made within these terms

Industry Business Value Approach

Understand the Business Problem/ ChallengeWork with your team to understand Current-State problems, drivers for change, goals and benefits of Future-State environment

Identify Challenges and Opportunities for ImprovementModel the Current-State and align to business strategies and goals

Provide A Business VisionBased on your strategic vision, IBM’s industry expertise, and the current environment

Define Technology RequirementsTechnical requirements are identified based on Future-State vision, business initiatives and objectives

Define the Business ValueA thorough understanding of the Future-State recommendation allows for more complex ROI and business value to be calculated

--3. Future-State Design

2. Business Goals andRequirements

Typical Industry Value Consulting Approach

Typical Industry Value Consulting Approach

5. Business ImpactAnalysis and Actions

1. Current-State Analysis

4. Current and Future-State Gap Analysis

Information IntegrationApplication

Implement ESB

Enhanced Information Services

Create to-be architecture + roadmap

Create SOA Center of Excellence Create Project Management Office

Deploy Process Modeling (Enhanced LoB / IT Alignment)

Deploy Business Dashboards

Deploy Service Registry

Improve QoS via HW acceleration

Channel Integration & Enterprise Portal

Business Process Performance Monitoring

Deploy Enterprise Content Mgmt

Business Controls & Reporting

Immediate-Term

BetterFoundation

Short-Term(6mth-1yr)

BetterService

Mid-Term1-2 yrsMore

EfficientOperation

Long-Term2-4 yrs

A Strongerxxxxx

Deploy Portfolio Management

SOA Education

Establish IT governance policies

Build consensus of SOA as principle for next generation system

Implement Centralized Security

Recommended RoadmapProcess R

enovation (Six S

igma)

Real-time Customer Data Integration

Enterprise-wide Data Warehouse

Application ArchitectureR

ationalization

Portfolio

Plan

Application Server Consolidation

Surround & Core System Rationalization

New product & channel

PilotE

nterprise-wide

Deploym

ent

IBM’s SOA ROI Model

Customers

Products

Processes

Employees

Faster

MoreEffective

MoreEfficient

LessRisky

Planning

Acquiring

Developing

Managing& Running

HW

SW & AppsHuman

ResourcesReusable

Assets

ITBenefits

LOBBenefits

Benefits of SOA are divided into line-of-business benefits and IT benefits. Within each, a 3-dimension cube is used to analyze benefits along benefit sources, benefit types, benefit recipient.

Better GovernanceModularity & Componentization

Use of StandardsImproved Accessibility & Integration

Increase of customer satisfaction through customer service personnel effectiveness

Reduction of cost through higher employee productivity

Increase in productivity with access to a reusable asset library

Reduction of Cost and risk by leveraging architectural patterns

Reduction of cost associate with finding, using and managing services with service registry and repository

Reduction of costs in developing reusable assets

Reduction of Downtime Costs and Performance Issues by Utilizing Reusable Pre-Built Assets

Findings – Korean Community Bank

Strategic plan for new core banking and branch system risk must be mitigated

Common belief is that outdated core banking system is the problemthe real pain point is information integration

New applications (internet banking, telebanking, etc.) are being implementedstill no integration or shared platform between channels

Strategic plan is to centralize all IT functionsgovernance needs to be addressed before centralization

Single solution for core banking is favoredThe banks unique business model may need significant customization that

diminishes any value from a single-vendor approacha robust integration infrastructure allows best-of-breed applications

‘Trend’ is to shift from host to distributed environmentmany challenges require significant efforts including skills, management

policies and support for business needs and therefore high risk

Findings – Fast Growing Private Indian Bank

Organization has been agile in responding to changes in the business environment – but will this scale as XXX grows?

• SO-Architecture SO-Management SO-Business ModelCustomers interact via multiple channels – but can multiple channels access the same information about the customer?

• SOA provides platforms for consistent customer experienceIT department is capable and the support for business initiatives is solid – but does it provide a competitive advantage?

• SOA can enable client centric rather than product centric solutions IT is well run and existing systems are managed – but are new capabilities being developed at an industry leading pace?

• SOA improves time to value and lower TCO for new solutions Data Warehouse and Operational Data Store being implemented – but is real-time data from all operational systems available to deliver true customer insight?

• SOA Data Services delivers customer info on demand to XXXIT and Business alignment is provided by the BSG – but what is this group’s mission and how will BSG lead adoption of SOA ?

• SOA Governance will enable BSG to deliver higher value solutions

Key results for Business and IT

Market leading service brand maintained

Market leading self invested personal pension products developed on SOA

Recognised as one of the leading product providers for on-line services to brokers in the UK

New Life and Pensions administration platform created on SOA

– Faster time to market for new products– Allowed Ireland to re-use UK services to

enter new market

Strategic distribution and service partnerships with other leading brands enabled with flexibility SOA brings

– Fidelity, UBS, Barclays

Natural Language Voice response channel launched

– Using same business services as on-line channels

– Scottish Financial Enterprise Innovation award winner

Development budget halved between 2003 and 2006

– We are delivering more projects now– Very good track record on delivery and quality– 90% of projects on time and within budget

Project delivery times are shortening

Contributory Factors– SOA– Agile methods – Consistency of vision

Business Services Catalogue and Directory with over 430 services

Tangibles to a build business case around

What IT efficiencies and cost savings can you introduce through

– Reducing the “how to” phase in a project

– Re-use of business services – Consistency in development – Consistency in deployment

Measuring and understanding your SOA target portfolio

– Target most re-used services first– The top 15-20% of our business

services drive 70% of our volume.– Look to Customer and Product

categories

Organise for SOA direction from the top (or centre) to development teams and operational infrastructure

– Federate development of services – Provide flexibility and good

governance in versioning– Target a consolidated and shared

infrastructure to optimise ongoing running costs

•Use of component business modelling or ROI business case development tools can assist.

What’s new in SOA Governance and Service Lifecycle Management to support Business and IT alignment

SOA Governance and Management Method

SOA Centre of Excellence and Services

SOA Governance Registry and Repository Strategy

Service and Asset Management