IT Mega Projects in Banking

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IT Mega Projects in Banking

  1. 1. IT Mega Projects in Banking Frank@FrankSchwab.de by Frank Schwab
  2. 2. These slides are the intellectual property of Frank Schwab, imacor, copyrighted © 2013, with all rights reserved. You may use the slides as you would use a book or an article, i.e., in small excerpts (called 'fair use') and only with full and explicit reference to the source. All other uses require written permission by the copyright holders. You may not reproduce or use any part of the slides, including data without permission. © of slides
  3. 3. Source: Wikipedia
  4. 4. Source: Letters of Plinius the Younger Pliny to the Emperor Trajan: “The citizens of Nicomedia, Sir, have spent 3,318,000 sesterces, on an aqueduct, which they abandoned before it was finished and finally demolished.”
  5. 5. Pienza, Italy „You did well, Bernardo, in lying to us about the expense ...“ Pope Pius II to Bernardo (Architect), 1462
  6. 6. Frauenkirche Dresden Planned: 88.000 Taler (1726) Actual: 288.000 Taler (1743) Change of scope Stone instead of wood/copper Consequence: High maintenance costs
  7. 7. Kitzbühel, McKinsey Training Center
  8. 8. 10 Years later than planned 14 x more expensive than planned
  9. 9. Reasons for failure ¨  Optimism ¨  Overestimation of one‘s own capabilities ¨  Underestimation of political power
  10. 10. in time in budget in scope
  11. 11. Frank Gehry‘s Success factors Digital models Realistic cost estimation Tight collaboration with crafts Organisation of the artists On time on budget
  12. 12. IT Systems are not buildings
  13. 13. Projects in comparison
  14. 14. Example: financial project risks Cost increase Rail IT Olympic Games Source: Bent Flyvbjerg and Alexander Budzier 2013, Oxford University 45 % 107 % 219 % Occurance 9 of 10 5 of 10 10 of 10 Benefits -51 % -29 % n/a
  15. 15. Source: Bent Flyvbjerg and Alexander Budzier 2013, Oxford University 6 % 18 % 6% Example: financial project risks Cost increase Rail IT Olympic Games 45 % 107 % 219 % Occurance 9 of 10 5 of 10 10 of 10 Benefits -51 % -29 % n/a
  16. 16. Prof. Bent Flyvbjerg, Oxford “The most project managers are either idiots or liars. " Source: Spiegel Online, 10th January 2013
  17. 17. Learn from past projects
  18. 18. IT Mega Projects in Banking
  19. 19. > 100 Million USD > 3 Years
  20. 20. > 150 Case studies
  21. 21. Do not repeat know mistakes Better understand the fundamentals Identify early warning signs Learn about success factors
  22. 22. Magellan High Performance CBS Platform Deutsche Bank SAP BS 8.0 and Intel GRID 1,3 Billion Euro Program Project start: January 2010 First modules Q2/2012 Planning 2005 to 2010
  23. 23. Lesson 1 „Establish a robust project leadership.“
  24. 24. Common Wealth Bank of Australia – Budget planning 580 2008 830 2009 1,100 2012 Source: CBA Press releases
  25. 25. Lesson 2 „Do only start an IT Mega Project once the bank can stand double the planned budget.“
  26. 26. Feb 2009 Apr 2013 Euro 18.15 Euro 71.45 Source: Yahoo! Finanzen +293 % Common Wealth Bank of Australia
  27. 27. COMMERZBANK Source: manager magazin online, 25th November 2009 Integration of Dresdner Bank + 500 Million Euro
  28. 28. Integration of 1,400 IT Applications within 1.000 Days Target landscape Several releases Migration Tests Governance Migration in 2 steps 1)  Customer data first 2)  Product- and balances by Big Bang ¨  High test efforts ¨  Multiple test environments ¨  End-to-end tests of critical systens ¨  Strong IT/Business Team ¨  Permanent adaptation of project management ¨  Transparent decisions Source: Frank Annuscheit, Group COO Commerzbank, Finance Forum, Wiesbaden, 2011
  29. 29. Quelle: Frank Annuscheit, Group COO Commerzbank, Finance Forum, Wiesbaden, 2011 Success factors Strong senior management involvement High transparency for all employees and project stakeholders Fast and transparent decisions Decoupling & equalization Central management & decentral implementation Inform & listen
  30. 30. 31/8/2008 30/4/2013 Euro 17.49 Euro 1.07 Source: Yahoo! Finanzen -94 %
  31. 31. Surgery successful, patient dead
  32. 32. Lesson 3 „Build a conservative business case.“
  33. 33. High failure rates in core banking system transformations Program abortedTransformation successful 25 %25 % 50 % Transformation delivered, but costs and time doubled
  34. 34. Lesson 4 „Prepare yourself that your program will not deliver on all objectives.“
  35. 35. Why?
  36. 36. Product Price Decision Contract Collateral Account Customer Transaction Output Archive Booking Position Identity Collection Loan system in branches CRM
  37. 37. Security Product Pricing Decision Contract Account Customer Contact Recovery Transaction Output Archiving Booking Position Identity Retail Loan Internet CRM Product Pricing Decision Contract Collaterals Account Customer Recovery Transaction Output Archiving Booking Position Identity Retail Loan Branch CRM Product Pricing Decision Contract Collaterals Account Client Recovery Transaction Output Archiving Booking Position Identity Corporate Loan Branch CRM Security Product Pricing Decision Contract Account Client Contact Recovery Transaction Output Archiving Booking Position Identity Corporate Loan Internet CRM Security Product Pricing Decision Contract Account Customer Dealer Recovery Transaction Output Archiving Booking Position Identity Consumer Loan Extranet CRM Product Pricing Decision Contract Collaterals Account Contact Recovery Transaction Output Archiving Booking Position Identity Customer Retail Mortgage Branch Product Price Decision Contract Collateral Account Customer Transaction Output Archive Booking Position Identity Collection CRM Product and Silo Thinking
  38. 38. Security Product Pricing Decision Contract Account Customer Contact Recovery Transaction Output Archiving Booking Position Identity Retail Loan Internet CRM Product Pricing Decision Contract Collaterals Account Customer Recovery Transaction Output Archiving Booking Position Identity Retail Loan Branch CRM Product Pricing Decision Contract Collaterals Account Client Recovery Transaction Output Archiving Booking Position Identity Corporate Loan Branch CRM Security Product Pricing Decision Contract Account Client Contact Recovery Transaction Output Archiving Booking Position Identity Corporate Loan Internet CRM Security Product Pricing Decision Contract Account Customer Dealer Recovery Transaction Output Archiving Booking Position Identity Consumer Loan Extranet CRM Product Pricing Decision Contract Collaterals Account Contact Recovery Transaction Output Archiving Booking Position Identity Customer Retail Mortgage Branch Products are implemented redundant and inconsistent across product lines and channels
  39. 39. Credit Banking Customer/Sales Investment Risk Shared services Access channels Clearing & Settlement Governance & Control Treasury Corporate IT landscape of a typical retail bank – functional view Cooperation Mobile BranchInternet Call Centre Self service Service Centre Workflow / Order processing Order distribution Product Price Account Contract Transaction Market data Price Order Product Contract Position Insurance Portfolio Brokerage Product Price Decision Contract Collaterals Recovery Position Clearing Booking Payments Booking Settlement Corporate Actions Securities Market Liquidity Credit Counterpart Trading MIS HR Intranet Security Output Documents Archiving Identity General ledger Financial Analysis Financial Reporting AML Legal reporting Compliance MIS Risk Customer Sales Contact Provision Central Products Reporting / MIS Complaints Advisory Service Tax Central Price CRM Rich functionality
  40. 40. IBM Mainframe Sun Server Intel blade Tandem Thin clients Fat clients AIX Server Server Farm Every technology of every decade
  41. 41. C++ 3270 MI Red Dot Cross Beam Struts jsp PHP 18 Windows!
  42. 42. Example Workflow NOS öffnen ► Kunde suchen NOS-Übersicht ► Partner / Adressen ► Anzeigen / Ändern ► Bestätigung ► Änderung der Telefonnummer? ► bestätigen / Ändern ► Ausdruck bestätigen ►zurück zur Übersicht NOS-Übersicht ► Produkt / Ändern ► Einlagen / Termingeldprolongation ► Daten ändern ► bestätigen ► zurück zur Übersicht Einmeldung in KIM ► Starten von KIM ► Anmeldung ► Kunden suchen ► neuen Eintrag wählen ► Daten einpflegen ► Abschluss anlegen ► Daten eingeben ► bestätigen ► zurück zur Übersicht ¨  Customer approaches service desk ¨  Customer informs the bank about address change ¨  Advisor notifies a due “time deposit” in the customer’s portfolio 37 Clicks
  43. 43. Complex
  44. 44. Complicated
  45. 45. Complexity takes a large share Operation & maintenance 70% Regulation 12 % Complexity 10 % Innovation 1 % Business model 7 % Sources: BCG, Datamonitor, McKinsey, imacor
  46. 46. Most banks underestimate complexity They just do not know about
  47. 47. Allied Irish Bank CBS Transformation Started: 2007 Stopped: 2010 AIB sues Oracle : 84 million Euro
  48. 48. Do not repeat past failures STOP Set unrealistic technological objectives STOP Assign inexperienced program management
  49. 49. Overestimation of one‘s own capabilities
  50. 50. “AIB is post-crash bank with pre-crash cost structure. The bailed-out lender's loan losses have shrunk since the crash, but it's operating costs have risen.” 31 March 2013
  51. 51. Merger of three banks in 2002: Dai-ichi Kangyo Bank Fuji Bank Industrial Bank of Japan Technical integration in April Breakdown of money supply Loss of 1.8 Billiion Yen 6 month to recovery Mizuho Bank, Japan
  52. 52. Wrong architecture Programming failures in 2 critical modules Inappropriate time to test 3 CEO did know about, but kept political target date Main reasons
  53. 53. Politics Optimism
  54. 54. STOP Set political objectives. STOP Inappropriate time to test. Do not repeat past failures
  55. 55. ING ¨  Wholesale Banking in 35 countries ¨  Planned: 3 Years ¨  Stopped in 2005 ¨  Start in 2002
  56. 56. Reasons for failure ¨  Underestimation of complexity ¨  Wrong technological decision ¨  Overestimation of one‘s own capabilities
  57. 57. We will make it
  58. 58. 70 % of all car drivers think they are the better car driver
  59. 59. The same: bankers and project managers
  60. 60. Overestimation of one‘s own capabilities Politics Optimism
  61. 61. Why?
  62. 62. Racket and Ball are 11 Euro. The racket is 10 Euro more expensive than the ball. How much is the ball?
  63. 63. Prof. Daniel Kahnemann Emeritus, Princeton University Nobel prize in economics, 2002 “Prospect theory”
  64. 64. The art of war Do only fight if you are well aware of the terrain
  65. 65. Lesson 5 „Make yourself familiar with your IT Landscape of your project.“
  66. 66. 000100 IDENTIFICATION DIVISION. 000200 PROGRAM-ID. HELLOWORLD. 000300 000400* 000500 ENVIRONMENT DIVISION. 000600 CONFIGURATION SECTION. 000700 SOURCE-COMPUTER. RM-COBOL. 000800 OBJECT-COMPUTER. RM-COBOL. 000900 001000 DATA DIVISION. 001100 FILE SECTION. 001200 100000 PROCEDURE DIVISION. 100100 100200 MAIN-LOGIC SECTION. 100300 BEGIN. 100400 DISPLAY " " LINE 1 POSITION 1 ERASE EOS. 100500 DISPLAY "Hello world!" LINE 15 POSITION 10. 100600 STOP RUN. 100700 MAIN-LOGIC-EXIT. 100800 EXIT. "Hello world!" #include <iostream> int main() { std::cout << "Hello, world!n"; }
  67. 67. Source: Code City, Dr. Richard Wettel, 2010
  68. 68. What problems are solved?
  69. 69. Regulation Basel II Basel III Basel I MiFID II WpHG BörsG MiFID I Dodd Frank SolvV SOX AML Abgeltungssteuer
  70. 70. Need to forfill regulatory requirements
  71. 71. Digital Natives
  72. 72. 2011 20162012 2013 2014 2015 662 Million > 4 Billion Source: Cisco, 2012 Number of Internet enabled mobile devices
  73. 73. New customer behaviour
  74. 74. Number of German banks Source: Deutsche Bundesbank 1990 20112000 0 2,000 4,500
  75. 75. IT costs per user per year in USD 200 Bank Google 3,4 Facebook 3,8 eBay 7,4
  76. 76. Banks need to be prepared for further consolidation
  77. 77. Long term competitiveness
  78. 78. Retirement
  79. 79. R I P
  80. 80. Keep the bank running
  81. 81. Lesson 6 „Understand what problems do you want to solve with your mega project.“
  82. 82. Example Bank plans IT-Transformation across 8 countries Product management IT Head quarterCountry heads Management Project members Provider Bank
  83. 83. Corporate Strategy All leaders involved
  84. 84. Assumed solution Selection of standard software as strategic platform for the future
  85. 85. Complications
  86. 86. Example: CBS replacement
  87. 87. ?
  88. 88. Credit Banking Customer/Sales Investment Risk Shared services Access channels Clearing & Settlement Governance & Control Treasury Corporate IT landscape of a typical retail bank – functional view Cooperation Mobile BranchInternet Call Centre Self service Service Centre Workflow / Order processing Order distribution Product Price Account Contract Transaction Market data Price Order Product Contract Position Insurance Portfolio Brokerage Product Price Decision Contract Collaterals Recovery Position Payments Clearing Booking Booking Settlement Corporate Actions Securities Market Liquidity Credit Counterpart Trading MIS HR Intranet Security Output Documents Archiving Identity General ledger Financial Analysis Financial Reporting AML Legal reporting Compliance MIS Risk Customer Sales Contact Provision Central Products Reporting / MIS Complaints Advisory Service Tax Central Price CRM Functionality GAPs
  89. 89. CBS share of Total IT Landscape CBS Minimum = 10 % Maximum = 100% Average = 61 % Standard deviation = 23 CRM Mobile Call Center Branch Securities Finance Reporting Settlement Internet
  90. 90. Chinatrust Commercial Bank Taiwan Oracle Retail- and Corporate Banking 210 branch, thereof 70 abroad
  91. 91. Adopt, not adapt
  92. 92. Complications ¨  Low knowledge of standard software ¨  In standard software implemented processes ¨  New implementation approach ¨  Adopt ¨  Parametrisation ¨  New partner
  93. 93. Problem
  94. 94. Vergleich Mount Everest Everest
  95. 95. „Take your time – not PPT, but make use of a test environment of your target IT Landscape.“ Lesson 7
  96. 96. Survey: Chief architects of banks Question: „What would you different if you would do it again?“
  97. 97. New Standard- software Integration environment Migration programs New Front End
  98. 98. „First build some prototypes to learn about your core challenges.“ Lesson 8
  99. 99. „If you think it's expensive to hire a professional to do the job, wait until you hire an amateur.“
  100. 100. Check list
  101. 101. Quality people strong communication skills broad banking knowledge solution- oriented deep IT knowledge convincing project experience
  102. 102. „Make yourself fit for the target landscape“ Lesson 9
  103. 103. Increasing regulatory requirements Chaning customer behaviour Need for change Consolidation Legacy IT Landscapes IT Mega Projects
  104. 104. Faster changing environment
  105. 105. 0 -50 +50 +100 +200 Increase of costs in % Month36 Example: Project portfolio 12 24
  106. 106. „Deconstruct your IT Mega Project in several smaller delivery units, that each create value, build on each other and help to achieve the common objectives. “ Lesson 10
  107. 107. Apollo 11
  108. 108. Uniqueness
  109. 109. Scope ¨  Private Banking ¨  Roll out in 3 countries ¨  18 months implementation time ¨  Accounts, Deposits, Payments, Securities Challenges ¨  Data migration concerning existing silos of redundant and inconsistent data ¨  Ensure employees continued cooperation within the program ¨  Ensure a smooth and complete knowledge transfer ¨  Different tax issues and client reporting requirements of migrated countries Description Objectives ¨  Increase operational efficiency and maximize synergies within the group ¨  Migrate all countries to the same common system ¨  Improvement of CRM, risk management, and compliance ¨  Reduction of complex interfaces and decrease the number of technical and platform skills required Best Practice Patterns Background ¨  Private & Corporate Banking ¨  34 branches in 26 countries ¨  CHF 110 billion assets Temenos T24 at Schroders, Switzerland Big Bang Approach Established Change Management Prepared Business Processes Shared Strategy Open Communication concerning Job Cuts Real Partnership Be the Reference Bank
  110. 110. Shared Strategy New Operating Model Executive buy-in Measurable Benefits Phased Implementation Established Change Management Real Partnership Strong Governance Be On-SiteQuality People Minimum Customization Prepared Business Processes EXAMPLE – Bank specific best practice framework Pre-Design Design Implementation
  111. 111. Summary
  112. 112. Learn from past projects
  113. 113. 10 Lessons 1. „Establish a robust project leadership.“ 2. „Do only start an IT Mega Project once the bank can stand double the planned budget.“ 3. „Build a conservative business case.“ 4. „Prepare yourself that your program will not deliver on all objectives.“ 5. „Make yourself familiar with your IT Landscape of your project.“
  114. 114. 10 Lessons 6. „Understand what problems do you want to solve with your mega project.“ 7. „Take your time – not PPT, but make use of a test environment of your target IT Landscape.“ 8. „First build some prototypes to learn about your core challenges.“ 9. „Make yourself fit for the target landscape“ 10. „Deconstruct your IT Mega Project in several smaller delivery units, that each create value, build on each other and help to achieve the common objectives. “
  115. 115. Do not repeat know failures Set unrealistic objectivesSTOP Set political objectivesSTOP Provide not appropriate time for testingSTOP STOP Assign inexperience program management
  116. 116. Overestimation of one‘s own capabilities Politics Uniqueness Optimism
  117. 117. Shared Strategy New Operating Model Executive buy-in Measurable Benefits Phased Implementation Established Change Management Real Partnership Strong Governance Be On-SiteQuality People Minimum Customization Prepared Business Processes EXAMPLE – Bank specific best practice framework Pre-Design Design Implementation
  118. 118. Success= 1% Inspiration + 99% Perspiration
  119. 119. Do you want to know more? Frank@FrankSchwab.de http://www.FrankSchwab.de
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