Cost out, future inFinancial industries solutions

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The real measurementof operational efficiencyWith the complexities facing IT and business organizationsin the financial industries today, basic cost cutting is onlya start. You also need to squeeze more tangible businessvalue from flat or shrinking budgets to prepare yourinstitution for a strong future.

Taking the cost out while building the future in. Call it theoperational efficiency challenge. If it sounds complex,there’s a good reason. It is.

Getting to operational efficiencyAchieving operational efficiency requires optimal balanceamong IT resources to create a cost out, future in environment.When you achieve this balance, your institution haspeople, processes, and technologies working togetherwith optimal business agility to meet evolving requirements.A financial institution’s capability to adapt with agility isthe real measurement of its operational efficiency.

Unfortunately, technology for business agility isn’tsomething you can buy off the shelf. It requires the bestpeople in your organization working with a technologypartner whose in-depth understanding can ensure yoursuccess. At HP, we understand how business agilityapplies to our customers because we’re also creating it forourselves. If your business goals are to leverage existingautomation while reducing business process failures,streamlining exception management, and providingefficient information to enhance productivity, HP can help.

HP in the financial industries• Powering more than 100 of the world’s largest stock

and commodity exchanges

• Handling two of every three credit card transactionsworldwide

• Supporting 95% of the world’s securities transactions

• Supporting 75% of the world’s electronic funds transfers

Technology in the financial industry Financial institutions rely on technology to build a strongfuture, even as they mandate IT organizations andbusiness managers to eliminate excess cost right now.Technology is the key to:

• Retaining profitable customers

• Preparing for Basel II

• Implementing anti-money-laundering (AML) systems

• Monitoring for fraudulent trading activities

• Expanding STP initiatives

• Reinforcing business continuity plans

• Implementing next-generation payments

“When cost is king,like now, financialinstitutions findthemselves underenormous pressureto lower their bottomline while stilldelivering the bestpossible service.”Wall Street andTechnology, “In Search of Savings”

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An adaptiveinfrastructureFirst-hand business agility from HP Today’s financial institutions are leading examples ofglobal, 24x7 technology-enabled enterprises. When itcomes to selecting technology partners, financialinstitutions look for vendor solutions that integrate wellwith existing resources and that can be centrallymanaged, regardless of location. For institutions today,the era of best-of-breed niche players is giving way tomore centrally integrated enterprise IT solutions.

With operations in more than 160 countries, HP has longbeen an example of a global-reach technology partner,and our market share in financial industries solutions hasgrown substantially over the past year. Our solutions gobeyond technology products. The HP Services organizationhelps financial firms get more value from their infrastructure,and our business alliance with Capco not only extends our financial industries knowledgebase but also provides end-to-end business and technology solutions to complexindustry problems.

Now HP is making another leap forward for our customersby offering next-generation technology for business agility using an adaptive infrastructure. Adaptiveinfrastructure is already helping institutions establish arobust technology foundation that evolves with the business.

An adaptive infrastructureAn adaptive infrastructure provides our customers with thebest return on information technology (RoIT). But it is morethan a vision. It is already available in products andservices you can order today.

• HP OpenView

• HP Partitioning Continuum

• HP VersaStor Storage Virtualization

• HP Utility Data Center (UDC)

• J2EE and .Net

• IT Service Management

• HP Managed Services:

– On demand computing

– Comprehensive outsourcing

– Infrastructure management

– Access and support services

– Applications operations and management

– Business continuity and disaster recovery services

• IT Consolidation Services

An adaptive infrastructure delivers business agility HP’s utility strategy helps IT investments flex with the evolving businessrequirements of a global enterprise

Infrastructure adaptability

Businessagility

Utilityinfrastructure

Adaptive infrastructure• Automated intelligent management• Dynamic resource optimization• Continuous secure operations

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Cost out, future inWe understand what it takesDriving out costCost out, future in initiatives often begin by lowering costof ownership. HP offers you a global array of TCOoptions, including infrastructure efficiencies, On DemandSolutions, and the fine-tuning of your environment by HP Services.

HP On Demand Solutions provide an alternative totraditional IT ownership and support that simplifies thealignment of your IT resources with fluctuating demand. It is a utility approach that delivers enormous efficiency.On Demand Solutions integrate products, services, andfinancing to deliver IT resources as utilities, when youneed them and where you need them—with paymentbased on usage.

HP’s Linux® expertise is another example of TCO efficiency.We are helping financial institutions deliver clear cost-reduction benefits by moving applications to Linux on Intel® platforms from HP. Because of our multi-OS strategy,HP is equally adept at assisting with Linux, UNIX®, orWindows® solutions. Our prime goal is to support yourchoices. HP’s long-term support for industry standardswas one reason why Reuters made its first Linux port forRMDS on the HP platform.

Smart sourcing offers a growing opportunity for financialinstitutions to drive out cost. HP research shows thatoutsourcing is on the rise—and is being used for anincreasing variety of IT projects. But it is no panacea.Knowing what to source is key, and developing anoutsourcing policy is something that HP can help youwith. Our sourcing service results in a custom-built solutionthat incorporates the best offerings from in-house andthird-party sources. In addition, the HP Servicesorganization provides a full portfolio of IT outsourcingoptions, and Information Week ranked HP #1 among all outsourcing firms in customer satisfaction.

Reducing core system downtime also helps institutionsreduce cost by preventing lost income. According toGartner, HP NonStop servers deliver the highest levels ofserver availability: 2.2 lost hours per year, compared withas many as 69.9 hours in other high-availability operatingenvironments. A study by the Standish Group determinedthat the NonStop server family also offers the lowest costof ownership while delivering 99.99% uptime.

“On average, datacenters have assetutilization rates of just35%. In today’s tougheconomic climate,financial institutions aredesperate to find newways to increase theserates closer to 75%and to reduce overalldata center costswithout jeopardizingservice levels.”Vernon TurnerVice President, IDC,Worldwide CommercialSystems and Servers

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Business agilityDriving up regulatory compliance Other business agility initiatives are driven by the need tomeet regulatory requirements. These include operationalrisk models to meet Basel II requirements and, in the U.S.,anti-money-laundering (AML) software required by the

U.S. Patriot Act. HP offers a complete Operational Riskservice to help institutions at all stages develop an end-to-end operational risk program.

Even in areas where legislation has not been passed,financial institutions remain aware of industry bestpractices that may indicate operational efficiency changesin IT. For example, most firms keep a keen watch onevolving recommendations for business continuityplanning. HP’s business continuity solution servicesprovide assessment, planning, and asset protection forfirms that are ready to implement best-in-class businesscontinuity.

The need for shorter trading settlement times alsoinfluences operational decisions. Re-engineered back-office operations that support higher straight-through ratesare the primary enabler of reduced settlement time, andHP can help you identify STP barriers and achieve thehighest level of straight-through rate with our STP andException Management Services. In addition, HP Servicesand technology can help streamline the exceptionmanagement process to reduce costs and improvecustomer service levels.

Driving customer service toward thefutureCost out, future in initiatives would be incomplete withoutattention to supporting a strong, competitively successfulfuture for the institution, one built around solid customerrelations. HP can help institutions identify and improverelations with their most profitable customers.

• Building a zero-latency enterprise (ZLE) for financialservices lays the foundation for a real-time institutionthat can maximize profit and customer servicesimultaneously. ZLE is a revolutionary framework forenterprise application integration using real-timebusiness models. Each ZLE solution is custom-builtaround the HP NonStop server family, configured withsoftware and solutions engineered to remove latencyand provide real-time response rates.

• HP’s retail banking initiative provides a multi-channelintegration approach to address critical financialindustry issues in achieving operational efficiency whileinnovating and responding to changing customer needs.HP helps institutions increase customer retention andprofitability by upgrading core systems and integratingmulti-channel CRM.

• Investment advisor solutions from HP help institutionsexpand their service levels and business processes toprovide a 24x7 services portfolio tailored to a growingbase of financial consumers interested in wealthbuilding and other personalized investment services.

• HP can also provide the infrastructure to support amobile customer base or workforce. As more financialand insurance business is conducted away from thehome or workplace, insurance agents, financial marketsbrokers, and other workforce partners can benefit fromdoing business with your institution using mobilechannels.

• Next-generation payments use technology to improveretail and institutional customer service with featuressuch as e-commerce debit- and credit-card payments,ATMs, point-of-sale terminals, person-to-personpayments, and electronic bill presentment. HP cansupport a fault-tolerant, zero-latency back end for risingpayment volumes while incorporating wireless paymentoptions for superior customer convenience.

90% of the profitability at a major North American bank came from 20% of the bank’s customers, according toMeridien Research

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Delivering world-classsolutionsHP solutions for financial industriesHP focuses on key financial industries areas, offering end-to-end solutions composed of infrastructure and servicescombined with applications from our preferred partners—major financial industry solution providers. Focus areas are:

• Banking

• Payments

• Financial markets

• Insurance

HP and Capco: alliance foroperational excellenceAs changing market and regulatory issues continue toconfront the financial industry, institutions need moreoperationally efficient ways to manage ongoing ITrequirements. Now they can turn to a single source forexpert help. The HP and Capco alliance offers theresources of two thought leaders in financial services IT teaming up to provide a whole that’s more than thesum of its parts.

• Capco—Leading global services and solutions providerexclusively focused on the financial industries

• HP—Leading global provider of IT architecture, hardware,integration, and services to the financial industries; HPand Capco offer four joint solutions designed to deliverincreased operational excellence to financial institutions

• Operational excellence—Helps solve pressingchallenges: STP, commoditization, and disintermediation,as well as threats posed by new entrants and newregulations; based on a modular suite of products and services ideal for customized requirements

• Market infrastructure—Addresses the challenges of userempowerment, globalization, exponential transactiongrowth, regulatory change, and new technologies; also assists in new infrastructure for transactions andglobal trading

• Payments—Helps institutions implement seamlessprocesses for sending, receiving, and managingdomestic as well as cross-border payments

• Outsourcing—Offers a range of services designed toenhance financial institution competitive advantage byoffloading non-core, non-client-facing aspects of thebusiness

“Financial institutions have historically had difficulty coordinating their businessstrategies and their systems development.[HP and Capco]. . . allow a seamlessintegration of business and technologystrategy in a fashion not previouslypossible.”Octavio Morenzi, Celent Communications

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Banking

Payments

HP solutions for financial industries

Driving out cost Driving up regulatory compliance Driving customer service toward the future

• Back office• Corporate systems

• Check processing• Treasury

• Front office• Multi-channel integration• E-banking• Branch of the future• Mobility• CRM

• Back office• SWIFTNet consolidation• ZLE intraday, real-time liquidity and risk

management• STP

• Anti-money-laundering (AML)• Risk/Liquidity management• ZLE

• ZLE• Billing• Cash and treasury• Customer access and information• Next-generation payments retail

• Operational efficiency• NonStop server

• AML• Europay MasterCard and Visa (EMV)• 3D secure• Fraud

• Account-to-account• Person-to-person• Card, cash replacement• Mobile• ZLE• Next-generation payments

• SWIFTNet consolidation• STP with NonStop payments

• AML• Risk management• SWIFTNet migration

• Customer access• Customer information• Billing• NonStop payments• ZLE

• Trading• Clearing• Settlement/Depository• Connectivity/Interoperability• Trade matching

• Business continuity• Trade monitoring/compliance

• Connectivity/interoperability

• Transaction automation• Next-generation trading floor• IT value release• IT optimization• STP and exception management• Connectivity• Treasury• Reference data

• Market, credit, and operational risk management

• Business continuity• E-mail archival compliance• AML

• Investment advisor desktop

• Back office• Claims processing• Data exchange (STP)• Intermediary integration

• Mobile workforce• CRM• e-claims• Distribution• Claim processing

Retail

Wholesale

Consumer

Wholesale

Financial markets

Insurance

Marketinfrastructure

Marketparticipants

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Future of financeBankingFor retail banks focused on cost-effective improvements in customer service, HP delivers a front office solutionframework that includes branch of the future, multi-channelintegration, and Web services across collaborativenetworks. Our open, agile solutions provide lower TCO,faster RoIT, and more rapid deployment to help institutionsreduce complexity in their applications, data, andinfrastructure. In addition, our focus on business agility and real-time architecture can help you implement acontinuously updated, cross-channel view of all retailcustomer transactions and the business intelligence relatedto them. When your institution operates in real time, it can make informed, fast decisions involving all aspects ofbanking, from identification of fraud to best practices CRM.

HP also provides standards-based back-office, branch,and core infrastructure solutions that deliver measurableand fast ROI to banks that want to invest in newtechnologies and benefit from lower TCO. Most banks aremanaging numerous legacy systems running on agingarchitectures, and the restructuring of architectures formaximum efficiency is a requirement that HP is uniquelyqualified to fill.

For wholesale banks, HP’s focus is on helping banksprovide better service to their institutional customers. Weoffer SWIFTNet connectivity products, along with treasuryservices, risk management/AML solutions, global liquidityenhancement, cash management, and payment utilityservices.

The efficient treasuryWorking with Wall Street Systems, HP has re-engineeredits corporate treasury, replacing a legacy environment of nonintegrated systems with three real-time treasurycenters in Palo Alto, the UK, and Singapore. The centers,designed to support the complexities of HP’s multibillion,multi-currency global operations, provide real-timeinformation using standard processes worldwide. The STP-enhanced system supports all of HP’s FX and debtinvestment portfolios and cash management activities,with full back-office integration, including confirmation,settlement, and accounting.

“The total solution architecture design, combined withsoftware and hardware implementation offered by HP,enables us to exceed international best practices and turnDubai Bank into a world-class institution embracingmodernity, excellence, and innovation.”Ahmed Bin Brek, CEO, Dubai Bank

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Payments efficiencyPaymentsPayment efficiency, continuity, and security are key issuesfor both consumer and wholesale payments processingacross financial institutions, particularly as markets shiftbecause of new entrants, increasing reliance on electronicservices, global trading, and the single Euro zonecurrency. HP provides the platforms, services, and partnersolutions that can assist banks in achieving their paymentsystems goals. Our low-TCO, high-availability NonStopplatform delivers the highest levels of uptime and TCOefficiency on the market today.

Consumer payments, which may contribute more than athird of a bank’s income, are currently pressured byincreasing fraud rates, the growth of new paymentservices such as wireless and electronic transactions, andexpanded requirements for meeting regulatory and CardAssociation mandates. HP helps financial institutionsdesign and implement systems that deliver more efficientpayment systems for a lower cost per transaction whilesupporting the ongoing challenges of managing change.

For wholesale payments, moving payments from batch toreal-time is becoming a key enabler for banks that wantto implement CRM initiatives such as cross-selling andproviding better cash management services to customers.

At the same time, globalization has increased the risks ofwholesale payments. SWIFTNet migration, riskmanagement, security, and regulatory compliancecontinue to influence institutions in their payment servicesdecisions. HP solutions address key CRM and riskmanagement issues while helping banks protect theirpayments revenues.

For example, HP NonStop Payments (NSP) fund transfersolution processes payments between the bank and bothdomestic and international funds transfer networks such asFedWire, CHIPS, and SWIFT. It also offers acomprehensive real-time approach that simplifies theintegration of existing and future wholesale bankingapplications to enable STP and the implementation ofintra-day liquidity management to support real-time grosssettlement (RTGS) systems.

“Reliability wasabsolutely paramountwhen choosing thenew system. It soonbecame clear thatHP NonStop andACI Base24 softwareprovided the onlyconceivable systemto guarantee 100percent availabilityof service.”Steve Adams, IT Director,Barclaycard

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Delivering measurableROIFinancial markets Financial markets firms are looking for business agilitythat can improve cost structures while meeting anexpanding list of regulatory requirements and higherlevels of customer expectation. HP solutions deliver on allof these needs. Our cost-effective technologies are themost scalable and reliable in the industry.

Trading departments in brokerages and assetmanagement firms can continue to rely on HP for next-generation trading capabilities that cost-effectivelyintegrate multiple and multimedia real-time data andnews feeds, analytics, order management, and riskmanagement. We provide these solutions on multipleoperating systems including Linux, which is proving to be the price/performance leader for multiple front-office and middle-office needs.

HP helps both buy-side and sell-side market participantsbecome more agile enterprises. Platforms such as the HP Evo Workstation inherently increase the stability oftrading desks while reducing associated IT costs. Wefurther lower TCO with HP’s innovative On DemandSolutions and services.

Assisted by HP expertise and technology, exchanges and clearinghouses can become more global throughtruly integrated regional and international alliances. Theycan increase their competitive advantage by deliveringhigh liquidity, breadth of listing services, increasedtransparency, enhanced data, and improved regulatorycompliance. In addition, HP enables exchanges andclearinghouses to manage growing data volumes byhandling multiple instruments, multi-currency marginrequirements, and counter-party risk, and they alsoaddress complex business continuity requirements and thechallenges of delivering real-time zero-latency services.

Next-generation trading solutionsHP’s Compass Portfolio delivers trading applications fromleading solution providers that have worked with us tooptimize and tune their software for industry-standardarchitectures and easy integration with the trading room.Compass Portfolio applications are delivered on theMicrosoft® Windows 2000 operating system running onHP ProLiant servers using Intel Xeon™ and Itanium®

processors. HP Services are available to help financialinstitutions leverage next-generation trading technologiesto reduce operational costs and improve customer serviceand profitability.

“Exchanges today are effectively strategizingthe future and offering the worldwidefinancial community much more convenienttools for acting on financial markets. We’vebeen selling our technology around theworld, and we’ve been doing it in completepartnership with HP.” François-Guy Hamonic,Executive Committee (General Manager,Technology & Projects), Euronext, Paris

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Technology leadershipInsuranceInsurers today are managing new regulatory requirementsat the same time that they are adding efficiencies todistribution channels and claims processing. HP partnerswith leading insurance solution providers to createsystems that are adaptive to ever-changing regulatoryrequirements. On the distribution side, HP helps leadinginsurers integrate distribution channels for better customerservices and improved producer management. We alsowork with insurance firms to create new operationalefficiencies in claims processes and to add Web servicesto their portfolio of customer services. HP solutions fordata exchange for insurers and their intermediaries candrive both cost efficiency and regulatory compliance.

For more informationFor more information, contact your local HP salesrepresentative or visit our Web site at: myfsi.hp.com

“HP consultants are up to date on securityissues. They know what they are talkingabout, and they know how to communicatetheir expertise to the group at large. Theyhave a lot of experience moderating andorganizing workshops and then following up with documentation and delivery.”Michael Lardschneider, Corporate InformationSecurity Officer, Munich Re

To learn more, visit www.hp.com

© 2003, 2004 Hewlett-Packard Development Company, L.P. The information contained herein is subject tochange without notice. The only warranties for HP products and services are set forth in the express warrantystatements accompanying such products and services. Nothing herein should be construed as constituting anadditional warranty. HP shall not be liable for technical or editorial errors or omissions contained herein.

Intel, Itanium, and Xeon are trademarks or registered trademarks of Intel Corporation or its subsidiaries in the United States and other countries. Linux is a U.S. registered trademark of Linus Torvalds. Microsoft andWindows are U.S. registered trademarks of Microsoft Corporation. UNIX is a U.S. registered trademark of The Open Group.

5982-6122EN, 05/2004