Implementing a core banking system (CBS) is complex and tricky, involving numerous stakeholders; bringing on a systems integrator (SI) can greatly facilitate the process. We offer a set of criteria for choosing a well-suited SI.
Selecting a Systems Integrator to Implement a Core Banking System
• Cognizant 20-20 InsightsSelecting a Systems Integrator toImplement a Core Banking SystemGiven the risk and multiple stakeholders involved, banks need SI partnersthat can collaborate and communicate with internal constituents andwith other third parties, and have demonstrated domain and technicalexpertise aligning software solutions with business objectives. Executive Summary tives around CBS implementation requires the attention of many parties, each of whom brings Historically, systems integration was largely in a different dimension on the decision-making a technical and an operational task. It was process. considered as part of the wider area of systems engineering. However, in the last decade or so The role of an SI in a CBS project can be catego- systems integration is considered to be a strategic rized as follows: enabler across different levels of the business such as systems engineering and operations, and • Provide business and product expertise: is seen as critical in assisting senior management decision making. >> Business expertise: An SI is expected to exhibit a sound understanding of the vari- Implementing a core banking system (CBS) is ous lines of business (LOBs) of the bank a prime example of this change in the thought and the business and technology impact of process. It often leads to a large, complex project, a CBS implementation on each LOB. with multiple stakeholders across multiple groups >> Product expertise: An SI should provide within the bank. The outcome of a core banking an integrated solution across multiple prod- implementation can lead to a higher level of differ- ucts and services that are involved in a CBS entiation in the market or an enriched customer implementation. value proposition. Moreover, if the transition is not managed properly it can pose serious risks >> Program management: Since the SI owns the program, it should have a consolidated for the bank. view of all activities, interdependencies Considering the high level of risk involved, and impacts of changes across the entire coupled with the involvement of multiple stake- program. holders, the importance of the role of a systems • Collaboration across vendor organizations: integrator (SI) cannot be overstated. The cost, scope, quality and importance of strategic initia- >> Vendor collaboration: An SI is the single cognizant 20-20 insights | december 2012
point of contact for the bank. It is respon- • Segregate criteria into ”mandatory” and sible for the integration of efforts across “important”: At this stage, the criteria are multiple vendors, all of whom may be con- segregated into mandatory (i.e., those that are tracted by the bank. absolutely essential, and the failure to meet any of which will have an adverse impact on >> Communication management: One of the the project) and important — criteria that, while key responsibilities of an SI is to manage important, are such that even if they are not communication across vendor organiza- met, risks arising from them can be mitigated tions and different groups within the bank. adequately. This is discussed later in this white The SI is expected to be aware of all chang- paper. es that occur as a result of a CBS implemen- tation and is in a position to understand • Perform initial screening of SIs: As part of the impact of these changes on the overall the initial screening, only those vendors that program. meet all mandatory criteria are considered. >> Business process management: An SI is • SI finalization: After the initial screening, responsible for the integration of interde- the important criteria are assigned risk-based pendent functions and business processes weights. The shortlisted SIs are evaluated of the bank and brings in substantial domain using an analytical hierarchical process (AHP) and process expertise that are essential to or other combinatorial optimization algorithms understanding the functioning of a bank. such as UKP.This white paper explores the process of SI • Risk assessment and management: Asselection for CBS implementations by explaining part of this step, additional business risks arebest practices and procedures as well as criteria identified. These risks may be related to the SIrequired. selected (based on the important criteria that the selected SI doesn’t meet) and risks withinSI Selection Process the computational framework. A mitigation plan is then created; these risks are then monitoredBanks find it increasingly difficult to differenti- throughout the CBS implementation.ate among SI vendors. Hence, it is recommendedthat a bank use a structured decision model to SI Selection Criteriadecide on the most suitable SI. We recommendthe following steps to choose the SI for a CBS Every bank will have a predefined set of criteriaimplementation. for vendor selection based on its vendor management principles. The criteria for selecting• Business case creation: In this stage, the an SI to implement a CBS will be based on the SI is expected to create a business case for same principles. The following list can be used implementing a CBS. This could be a new as a guide where vendor management processes implementation or an upgrade. In either case, have yet to mature. the business case is expected to cover the We have connected various criteria used by banks following areas: into four broad categories. >> Business benefits: Such benefits could in- clude reduced time to market for products, • Program management capabilities: Banks improved customer satisfaction, etc. look at SI vendors as strategic partners that can assist them in transforming project/ >> Financial benefits: Financial benefits are program management practices. As part of typically associated with cost reductions. the SI selection exercise, banks expect that Key financial benefits anticipated through the SI vendor can deliver most, if not all, of the the implementation of a CBS are reduction following services: in ongoing costs, reduction in hardware costs and an overall reduction in total cost >> Leading-edge program management of ownership (TCO). methodologies: Banks expect SI vendors to bring proven methodologies, processes and• Develop criteria for evaluation of SIs: In this tools on large program governance, project stage, the bank develops a list of criteria for planning and governance, change manage- evaluating SIs. These criteria are based on the ment and control, vendor/contract manage- bank’s financial stability, proven track record of ment, frameworks for quality management, executing similar engagements, global reach, etc. product knowledge, etc. cognizant 20-20 insights 2
>> Program management office (PMO) sup- skilling of people. The TCO is quite significant port: Banks expect SI vendors to provide in most cases. Hence, it is imperative that the support for functions by defining new pro- SI exhibit long-term viability. cesses or refining existing processes as ap- plicable. • Cost-effectiveness: Investment in technology and improved processes is seen by banks as >> Work stream management: In addition to a way to attain competitive advantage. Banks the above, banks may also expect the ven- expect SI vendors to deliver streamlined dor to manage additional work streams. Ex- processes reducing overheads and providing amples of these include: cost-effective services over a period of time. »» Integration management: Drive overall Conclusion solution integration ensuring integrity of the solution design, interdependencies The responsibilities of an SI are viewed differently and delivery of the end-to-end solution. across regions. In Asia, banks look at an SI as a partner that can bring in banking expertise. Banks »» Deployment management: Handle the are keen to understand industry-specific offerings overall deployment planning and execu- and service/product innovations that can benefit tion including solution delivery for dif- the bank. They also look at an SI as an entity ferent phases of testing and rollout. An that can help them transform SI vendor is expected to work with the their program management Banks typically deployment managers and project man- practices, bringing added effi- agers from other work streams in the ciencies in scale and execution. gauge the program to achieve the desired results. vendor’s focus and In Europe, banks look at an SI to• SI focus on the bank’s business segment: provide expertise in two main commitment to Another key parameter that banks must consider is the focus of the vendor on the areas: product expertise, and continuously enrich bank’s business area. Banks typically gauge the as a change agent to help them and improvise improve internal program/ vendor’s focus and commitment to continuous- project management processes. on available ly enrich and improvise on available solutions to meet evolving banking requirements. Banks solutions to meet typically assess this by various criteria such as The dimensions used by bank evolving banking IT organizations to evaluate contribution of their clients to overall revenue, core banking systems integra- requirements. investments in the core banking space, tors are not always the same customer sites across the globe and the profile as the areas that core banking SIs focus on. A of its key clients. large number of SIs emphasize more horizontal• Financial stability: Financial strength and skills across multiple core banking products. On business continuity are important attributes the other hand, banks look for SIs that exhibit for evaluating an SI. This is not surprising, con- commitment to innovation and investment in sidering that the payback for a core banking solutions in the banks’ areas of business, and that system is approximately four to five years. have more focused models dealing with one or Transforming core banking systems brings two CBS products – usually supported by a strong about changes in operating processes, systems alliance with the product vendor. and interfaces, and tends to involve the re-References• The Business of Systems Integration, Andrew Precipe et al., Oxford University Press.• The Forrester Wave: Global Banking Platform, Q1 2009, Jost Hoppermann, Forrester.• Trend 2005: European Banking Architecture, Jost Hoppermann, Forrester.• Corebanking Platform Replacement, Adpar Solutions.• Celent’s ABCD Analysis on Corebanking Products, Stephen Greer and Bart Narter, Celent. cognizant 20-20 insights 3