The Path to On Demand Business for Financial Services ...€¦ · 1 IBM Haifa Research Labs –...

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IBM Haifa Research Labs – Leadership Seminar – January 2005

© 2005 IBM Corporation

The Path to On Demand Business for Financial Services:Fulfilling the Technology Strategy

Prof. Chris Holloway FIEE CEngChief ArchitectIBM Financial Services Sector



The IBM CEO Study 2004 shows a strategy shift: The return to top line growth driven by responsiveness

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Achieving an On Demand Business will require enterprise-level alignment of business, application and infrastructure models

Increasing flexibility is the key - business models, processes, infrastructure, plus financing and delivery that horizontally spans

the enterprise and reaches out to partners and customers"

Within the Financial Services Sector we have been working with clients across the three industries to understand and

accelerate transformation

towards becoming an on demand business

across the critical boundary between

Business Transformation and

the On Demand Operating

Environment



The Financial Services Architecture for On Demand Businessunifies the Enterprise Fabric at all three levels

Business ArchitectureComponent Business Model

Application ArchitectureIFW and IAA Models

Technical ArchitectureControl Point Model

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On Demand Business requires a de-constructed architecture

Old: A lose federation of autonomous lines of business operating as a common legal entity

New: A lose federation of internal and external service providers each with strategic focus and differentiation collaborating to pool their core competencies for competitive advantage

Coordinated by the Business Strategy of the principal enterpriseEmpowered by Operational Efficiency and Market Opportunity



This will create a new leadership opportunity within the enterprise to govern such a transformed business

Financial Services business model

CentralisedFlexibleCustomer-focused

Enterprise Leadership

Enterprise performanceEnterprise integrationCost efficient through sharingCompetitive differentiation

LOB Leadership

Component performanceFunctional integrationCost efficient through focusCompetitive differentiation

Corporate Leadership

ValuesGovernanceCultureStriking the Balance

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Firms are reorganizing around six functional competencies that are shared across every financial services firm

Customer Segments

Distribution

Manufacturing

Processing

Insi

ght

Risk &

FinancialM

anagement

Business & Technology Infrastructure



A “business component” is a group of cohesive business activities supported by appropriate information systems, processes, organisation

structure and performance measures.

The IBM Component Business Model is a powerful tool for understanding how to transform the business operation

BusinessPlanning

ProductPlanning

CampaignExecution

FinancialControl

ALCO

Treasury

Ledger GL

Financial Reporting

SystemsOperationsTraining Help

DeskSystems

Development

OperationsOperations

CustomerAccounts Statements

Audit & Compliance

MarketResearch

Insi

ght

Insi

ght

DistributionDistribution

OperationalCRM

Advisory Services

TellerFacilities

CaseHandling

CustomerServices

PortfolioTrading

In forceProcessing

RewardsProcessing

Credit DecisioningManufacturingManufacturing

DocumentManagement

Wireroom/Payments

FacilitiesManagement

Risk &

Financial R

isk & Financial

Managem

entM

anagement

BusinessPlanning

ProductPlanning

CampaignExecution

FinancialControl

ALCO

Treasury

Ledger GL

Financial Reporting

SystemsOperationsTraining Help

DeskSystems

Development

OperationsCustomerAccounts Statements

Audit & Compliance

MarketResearch

Distribution

Insi

ght

OperationalCRM

Advisory Services

TellerFacilities

CaseHandling

CustomerServices

PortfolioTrading

In forceProcessing

RewardsProcessing

Credit DecisioningManufacturing

DocumentManagement

Wireroom/Payments

FacilitiesManagement

Risk &

Financial Managem

ent

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An example CBM finding: duplication and cost by business process

Cost Breakdown

Accountopening

Other loan processingSecurities

processing & management

Card issuing processing

Decisioning & Authorisation

Statements

Card acquiring processing

Clearing

Mortgage processing

Fraud

PaymentsSystems

Product Portfolio Management

Paper storage/ Mgt

Mail processing

Invoice discounting processing

Payments (Order entry – SO/DD)

Debt collection & recovery

Data mining & customer analytics

Cash replenishment

Product Design & Development Account

maintenance

Account maintenance

Account Opening

Core/ non-core framework

Low Medium High

Low

Med

ium

Hig

h

CoreNon-core

Strategic FitC

ompe

titiv

e A

dvan

tage



Customer InterviewCustomer Interview

Laid out sequentially the account opening process hits eight internal components and one external one

Account Opening

Business Components

ProductDirectory Sales Customer

ProfileApplic-ations

CreditBureau

Credit Admin

RetailAccounts

ContactHistory

Data InputData Input

Background Check Background Check

Account Approval Account Approval

FundingFunding

- Review products w/ customer

- Decide on product

- Collect data / Copy documents

- Enter data / Scan documents

- Create customer profile

- Pull record from credit bureau

- Verify information through phone call

- Collate information

- Analyze data and determine limit

- Approve application

- Open account

- Process deposit check

- Mail welcome kit

CustCorresp

Internal External

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On demand Applications require a de-constructed architecture

Old: Allow the users (employees) to exercise the functions of the applicationthrough the institutions terminals

New: Enable the users (customers) to achieve their business purpose by delivering the integrated capabilities of the business and its partnersacross the user’s chosen channel

Coordinated by Process Choreography and Event Driven responseEmpowered by Service Oriented Architecture, Open Standards and Semantic Models



Product matching

Contact/Client mgmtAccount opening

Prospect mgmt

Sales reporting

Sales

Sales analytics

Illustrations/quotesNew product application

Research

Search

Rules & alerts

Fin. market data

Product & Service info

News & Publications

Inform & Educate

Online education

Identify products/actionsCalculators / SimulatorsAsset analysis/mgmt

Recomm’d product/actionReporting

Total wealth positionAggregated position

Off-book assetsConsolidated position

Fact find

Needs & Goals

Fin Position & Advice

Life events plan

Correspondence mgmt

Cust. registration / mgmt.

Satisfaction / feedback

Self help/Helpdesk

Customer Service

Contact mgmtEnquiry/fulfilment mgmt

Identify active offersOffer status

Offer action/stepTrigger offer content

Offer historyReal time cust. profiling

Campaigns & Offers

DelegationEncryption & privacy

Access policy driven

Auth & AccessChannel driven

Privacy policy driven

Data regulation driven

Locator/direct’ry servicesWebcasts / eventsSession sharing

Chat rooms

Idea box / suggestions

CollaborationEvents diary

Secure e-mail

Discussion forum

Alert driven

Channel / Device driven

Campaign / Offer driven

Search driven

Personalisation driven

Content Delivery

Dialogue driven

Navigation driven

Access Integration Services Channel Interaction Processing Enterprise Integration Services Core Business Processing

Customer update/queryInsurance order/query

Fin Markets order/queryBanking order/query

Transaction Integration

Loyalty scheme providersRegulatory postings

Customer data

Information GatewaysFinancial Data

Content

Loyalty Scheme ProvidersTransaction Authority

ATM/EPOSCredit Card Providers

PaymentsClearing & Settlement

Business Service Providers

Partner GatewaysB2B PaymentsCounter-parties

Ad-hoc reportingCustomer reporting

Mi reporting

MI & ReportingBus perf Analytics

Regulatory reporting

Campaign mgmt

Campaign optimisationMarketing analytics

Campaign Mgmt

Marketing workflow

Reg/Legal complianceOperational risk

CollateralMarket risk

Credit riskRisk Mgmt

Acc’ts payable/receivable

HR/ERPRegulatory Accounting

Financial control & mgmt

General LedgerG/L & ERP

Predictive cust. profiling

Cust. segmentationCust. profiling models

Customer Analytics

Historical cust. profiling

Debt collection mgmt

Payments duePenalty calculations

Debt Mgmt

Password mgmt

User / Role drivenWorkplace services

Personalisation driven

Product holding driven

Channel / Device driven

Dialogue mgmtUser / Role driven

Campaign / Offer driven

Routing rules driven

Channel/Contact data

Role access informationFinancial data

Content Management

Information IntegrationCustomer informationProduct information

New application mgmt

Product mgmtCustomer mgmtException mgmt

Order mgmtEnquiry mgmt

Process Integration Product configuration

Loyalty processingSpecial processing

Product sourcingSpecial pricing

Product Mgmt

Arrangements mgmtConsumables mgmt

Funds transfersAccount mgmt

Reporting

Banking

Payments mgmt

Signature verification

Passbook updatesWithdrawals & deposits

Open/Close positionVault transfers

Cash & Counter

Teller reporting

Reporting

Debt, Equity, IPOTax servicesSecuritisation

Bal. sheet structuring

Employee servicesInsurance services

Corp BankingCommercial loansMerchant servicesInternational trade

ReportingTransaction inquiries

B2B PaymentsCustomer registration

Regulatory reporting

GuaranteesCommercial Loans

Customers & AccountsTrade Finance

Corporate Banking

Cash mgmt

Audit LogTrans Coordinator

TePIPayment Mgr

B2B Payments

Digital Signature Mgmt

Payments processingAccounting

MortgagesConsumer Lending

Credit Cards

Limits & PositionsFees & Charges

Teller

Consumables

Customers & AccountsRetail Banking

Funds Transfer/Msg

The application function model is used to:

Map ISV and Legacy systemsIdentify gaps and overlapsIdentify structural issues

Map the flow of business processes(Account Opening Example)

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Successful functional integration and transformation require comprehensive Industry Models

Business ProcessModels

Customer InformationIntegration

System

Product Models (IAA)

Foundation Models

FlowFunction Information

Component Models

Component

Interface Design

Data Warehouse

Models

Solution Template

Warehouse



An On Demand Operating Environment requires a de-constructed architecture

Old: Fragmented infrastructure dedicated to specific siloed applicationsNew: Common infrastructure shared by the application portfolio

each part of which is optimized for its specific purpose

Coordinated by Autonomic Computing and Virtualisation ServicesEmpowered by Integration technology for people, processes and information

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ProprietaryEnvironments

IsolatedSystems

ManualManagement

DedicatedPlatforms

ComplexInefficient

Costly

OpenEnvironments

IntegratedSystems

AutonomicManagement

VirtualisedResources

SimpleEfficient

Cost Effective

IT Simplification and Optimisation

Business Urgency

Technology Innovation

Infrastructure rationalisation is inhibited by disruptive tension in the Operating Environment



ProprietaryEnvironments

IsolatedSystems

ManualManagement

DedicatedPlatforms

ComplexInefficient

Costly

OpenEnvironments

IntegratedSystems

AutonomicManagement

VirtualisedResources

SimpleEfficient

Cost Effective

IT Simplification and Optimisation

Business Urgency

Technology Innovation

An open and virtualised operating environment, integrated by a common semantic model can address these tensions

Service Oriented ArchitectureCommon Semantic ModelSeparation of user, process & data

Technology independent developmentOpen standards, open sourceVirtualization

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Five infrastructure domains are essential to create a stable enterprise architecture for the rapid rates of change in a componentized business model

People

BusinessActivities

OperatingEnvironment

Processes Processes

Business Component

DataData

DataData

DataData

Automated function

“Manual”functionDataData

• People

• Process

• Information

• Development

• InfrastructureManagement

People, Processes and Information are fundamental real-world assets of the enterprise. The key decisions for the CIO are how to efficiently Develop services and deploy them on an efficiently Managed Infrastructure to ensure they are fully effective and adaptable



Applications

EnterpriseChannel

Applications

EnterpriseBusiness

Applications

New-model applications exploit the services offered by the five Enterprise Domains of the On Demand Operating Environment

Enterprise Development Domain

EnterpriseUser

Domain

EnterpriseInformation

Domain

Enterprise Infrastructure Management Domain

EnterpriseProcessDomain

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Each domain comprises a set of key control points Enterprise User Domain

Hybrid Client

Web Client

PortalServices

CollaborationServices

Pervasive Access

Services

UserAccess

Services

System access to support your current rolewhenever and wherever you need it

CHANNELACCESS POINTS

Voice / IVRVoice / IVR

Self ServiceSelf Service

Fixed clientsFixed clients

InternetInternet--basedbased

MobileMobile

EE--MailMail

Branch / AgentsBranch / Agents

Contact CentreContact Centre

33rdrd PartyParty

Server Managed Client



Enterprise-wide IT initiatives can be justified and prioritized by linking the control points to strategic business goals

Customer Segments

Distribution

Manufacturing

Processing

Insi

ght

Risk &

FinancialM

anagement

Business & Technology Infrastructure

Applications

EnterpriseChannel

Applications

EnterpriseBusiness

Applications

Enterprise Development Domain

EnterpriseUser

Domain

EnterpriseInformation

Domain

Enterprise Infrastructure Management Domain

EnterpriseProcessDomain

Distribution: improve sales capability

1. Appoint some function to be responsible for GUI standards

2. …

Portal Services

Collaboration Services

Manufacturing: speed to market of new products

1. Develop new phase practice (design, code, test, maintain in separate teams or projects?)

2. …

Development Process & Lifecycle Management

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Our customers begin the On Demand journey from different starting points, but require a common model to link business and technology transformation

BusinessStrategy

TechnologyStrategy

TechnologyTransformation

BusinessTransformationSolutions



The FSA for On Demand Business - provides the critical links between business, applications and technical infrastructure

Processes activitiesmap to application functions and components of theApplicationArchitecture

Which are instantiated on the Technical Architecture

Business Componentsdemand qualities of service that map to Non-Functional Requirements

Which determine technology selection

Business View

Technical View

Link by Function

Link by Qualities

Business Information maps toapplication usage

Link by Data

Information storage and management is physicallylocated

Application View

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The Path to On Demand Business for Financial Services:Fulfilling the Technology Strategy

Prof. Chris Holloway FIEE CEngChief ArchitectIBM Financial Services Sector

The Path to On Demand Business for Financial Services ...€¦ · 1 IBM Haifa Research Labs –...

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