• Home

• Services
• Insights
• Clients
• About
•
Top of Form

Search

Bottom of Form

transform your world

Strategy.People.Process.Technology.
Feeds:
Posts
Comments
Emerging Markets Banking
December 29, 2009 by emetrix
We provide a study of core banking systems and the business and technology challenges facing
banks in Europe and specifically the emerging markets.
These findings are based on a combination of client based consultancy engagements and a
review of core banking system vendors.
Our in depth knowledge of technology best practise for System Integration and Business
Strategy Innovation enables us to to offer an independent advisory service to CEO’s and CIO’s
to implement a technology strategy that will position their organisation for the next wave of
growth.
We can assist you to efficiently and fundamentally narrow down the search for the right
technology solutions and architectures to simplify your investment decision making based on a
well-informed pool of knowledge and expertise.
We can provide your organisation with considerable benefits in the area of system selection and
implementation, including:
■ a broad spectrum of services and in depth experience of every phase of the system selection
process;
■ an exceptional track record based on the successful implementation of many different types of
package solutions;
■ different application maintenance options on vendor solutions;
■ leading-edge capabilities closely attuned to current and future industry changes;
Should you require any further information or assistance in this area or any major technology
change programme, please contact us for an informal discussion.
Contents
1 Background. 4
1.1 Emerging Markets Strategy
1.2 Core Banking Technology
1.3 Technology Trend
1.4 Retail Banking
1.5 Corporate Banking
1.6 Emerging Markets
2 Core Banking Domains
2.1 Payments
2.2 Savings
2.3 Loans
3 Core Banking Solutions
3.1 Package Vendors
3.2 Recent Developments
3.3 Commercial Factors
3.4 Outsourcing
3.5 Future Direction
4 Methodology
4.1 Business Case
4.2 Benefits Tracking
4.3 Governance
4.4 Portfolio Management
4.5 Change Management
4.6 Work Plan
4.7 Resourcing
4.8 Architecture
4.9 Partnership
5 Summary
1 Background

“Continued growth through product innovation and acquisition will be

constrained by a malaise of systems that are difficult to integrate and too
costly to scale.”

The top retail banks in the European emerging markets are

expanding into foreign markets and face challenges to integrate
their acquisitions
1.1 Emerging Markets Strategy
The dominant banks in the European emerging markets are enjoying significant success and
growth. The market leaders are consolidating their dominant positions and seeking to increase
their assets, revenues and net incomes by triple digit amounts.
In developed markets facing product saturation, banks are fighting a battle to retain clients. In
emerging markets where there are large segments of underbanked and unbanked customers,
banks are competing to acquire customers through extensive reach, innovative products, and
superior service.
The bank CEO is faced with offering a full range of retail banking products to match the
competition and differentiate through excellent service. Innovative products must cover the
spectrum of savings and deposits to loans and credit cards.
Having enjoyed the knock on effects of the boom years and achieved stellar performance
milestones, many banks are pursuing acquisitions of new market segments in their existing
territories and a new business footprint in regional neighbouring territories.
The rapid expansion has focused on establishing a broader branch network for retail banking
products and the steady growth of the corporate banking sector.
Many CEOs now realise that expansion and growth highlights new challenges for their
management as the existing operating model does not scale and weaknesses in infrastructure and
processes start to hamper their limited resource pool.
Whilst many emerging markets acquire and increase their branch network, they will very quickly
realise that the branch is the most expensive of all customer delivery channels. This cost is seen
as a burden and many banks quickly focus on the integration of bank data and reconciliation
amongst disparate and geographically distributed branches.
The management of credit and operational risk across the domestic and regional cross border
locations is critical in maintaining transparency and visibility of the banks positions, volumes,
trends and profitability.
Dominant country retail banks enjoy a near monopoly on the number of accounts held. Many
recognise that they must continue to innovate and generate new and profitable business in order
to stay ahead of the new entrants.
The major players are shifting their focus from a large pool of unprofitable accounts to a
business model that is driving to generate greater value and profits from their core customers.
The new entrants are entirely focused on selling an integrated mix of profitable products to
maximise their return on investment. The near monopolies are acutely aware that they will lose
business through a process of attrition and be saddled with carrying a large population of
dormant or unprofitable accounts. The effect of this baggage will be increased overhead costs
and / or a lathargic pace of change.
New entrants are positioned to operate in a nimble and selective manner to attract profitable fee
income and new sources of client deposits.
The opportunities for expansion and growth in home and regional markets must be tempered
with the deepening credit crisis and the prospect of increased inflation which will have a knock
on effect on regional economic growth and employment.
1.2 Core Banking Technology
The technology architecture of the bank will play a pivotal role in simplifying and standardising
the way the bank competes for new business and revenue growth.
A capability of the bank is the core banking systems responsible for processing and posting
transactions in the domains of payments, current and saving accounts, loans and securities (such
as performing current and deposit accounting, maintaining loan accounts, holding securities
positions, clearing payments).
Many emerging banks have a core banking systems that have evolved from a relatively small
client base. As mergers and acquisitions of rivals have increased the asset base of the bank, this
has also introduced a mix of core banking solutions into the overall technology portfolio.
The integration and scalability of the end to end core banking systems will prove to be
increasingly complex and expensive to manage as the number of accounts and product types
increase.
The competitive pressures will demand tighter integration across multiple delivery channels. The
core banking applications are a mission critical component that impacts every aspect of the
business of banking.
Replacing a core banking system is often an unthinkable option for risk averse senior managers
who can only see the prospect of a time consuming, disruptive and expensive system integration
project. The core banking system is the backbone infrastructure that handles all customer
transactions and any glitch can grind the bank to a halt and tarnish it’s reputation in the process.
Technology innovation is an essential driver for business change as it offers to streamline the
speed and flexibility of banking services through automation and reliable real-time handling of
core banking processes. The integration of technology components and an information security
architecture can be used to provide a single view of the customer and product catalogue to give
the business the flexibility to cross-sell and gather business performance enhancing intelligence.
As financial institutions quickly realise that their current core systems are an unacceptable
inhibitor to expansion and growth, they will seek to for alternative solutions that will offer better
return on investment and invest in technologies that can be supported with from a greater pool of
people.
Decisions on this scale must be justified by supporting evidence of inefficiencies, escalating cost
of change and increasing cycle times to deliver new capabilities.
Strategic renewal initiatives will be expensive and complex. The bank will need to take a ten
year view on financing and reaping the rewards from such an initiative.
1.3 Technology Trend
Major tier 1-3 banks in Europe are racing to renew their core banking platforms and many have
already started to rationalise and renew their application portfolio.
The driver for this transformational change is based on a strategy to globalise IT based on a
common architecture and modular application portfolio which is ready-to-go for new change the
bank initiatives.
The major drivers in the sector for core banking replacements are:
■ the severity of regulatory requirements and penalties;
■ the appeal of a component approach (SaaS – Service as a Service – and BPM – Business
Process Management);
■ a strong focus on architecture for the industrialisation of banking, infrastructure and multi-
channel enablement;
■ availability of resources to tackle back-office systems;
■ industrialisation and the shift to transaction banking for core banking back-office systems;
■ new cross-border mergers and acquisitions wave in the emerging markets financial services
industry.
Beneath that there is also the prospect for efficiencies through business process outsourcing and
selective application outsourcing.
The challenge for emerging markets is the rapid expansion of clients and branch networks
through acquisition of regional rivals results in a complex mix of technologies that must be
rationalised and consolidated to a common standard.
1.4 Retail Banking
The complexity for many banks in the retail or consumer domain are volume handling and mass
products. As the number of clients increases and a diverse set of channels are offered with the
innovation of new products, the once stable core banking platforms start to buckle under the
strain and the cost of running the service starts to soar.
Being able to manage large volumes of data and the end of day processing loads is the main
challenge for core banking systems. Emerging markets banks that once had the luxury of running
many diverse applications off of a single production core banking platform are now scampering
to offload non-core bank related applications off platform.
Retail banking represents the most significant source of income and the top performers must
embrace the fact that a cost-effective and scalable core banking platform will become a key
differentiator between market leaders and poor performers.
Based on the tremendous consolidation that we have seen in the European banking market over
the past 15 years, we expect that the Emerging Markets will see a similar evolutionary pattern as
regulatory and competitive pressures drive tremendous consolidation in the sector.
Those players that invest in the flexibility and capabilities of their core systems will be better
positioned to absorb the change and accelerate the pace of sustainable growth. Unfortunately,
many emerging banks lack the maturity or vision to invest strategically to overcome:
■ the lack of flexibility which is a source of pain for many CEO’s who are keen to drive growth
and product innovation;
■ the technology influencers where the cost of supporting the banks growth strategy is
compromised by the ever increasing total cost of ownership of an ad-hoc technical architecture;
■ the lack of resources and increased complexity of project implementation is a severe challenge.
1.5 Corporate Banking
The business processes for managing corporate banking clients is fundamentally different to the
high volume processing of retail banking. However, there is some trend towards a single core
banking system for both retail and corporate operations. Many banks are seeking to simplify and
standardise the way they manage clients by removing duplicate applications and infrastructure
towards centralised systems with central data.
Strategically, the corporate and retail banking operations want an integrated global view of the
customer with the possibility for all departments to have transparent online and daily insight to
all accounts globally. Specifically, in emerging markets, the small to medium size corporate
segment and the opportunity for micro-loans represents a growth area that must be managed
efficiently and quickly by the branch network.
1.6 Emerging Markets
The emerging markets have some very unique opportunities that are dependent on the flexibility
and adaptability of the core banking solutions:
■ start-up banking activities in new regions will focus on buying small operators with an existing
license to get a rapid entry and exposure to a new market. The internet offers an excellent and
low risk delivery channel for banking services where a standardised and robust core banking
system service is already available in their dominant market;
■ secondary markets in insurance, wealth management, brokerage and car loans will also rely on
core banking solutions to support their finance activities;
■ partnerships with retailers to offer their consumers retail banking products to improve
customer retention will increase demands on white label core banking services;
■ monopoly banks in their dominant countries are rapidly reaching saturation level in their home
markets and must diversify to new geographies to sustain their growth and address the attrition
of their customer base by new competition from neighbouring countries.

2 Core Banking Domains

There are business and technical drivers for renewing systems. The characteristics of legacy
systems is that are complex to change and administer as they have evolved over time to meet the
demands of specific products, geographies and customers. Often the legacy technology portfolio
will require complex integration and batch interfacing to overcome the limitations of a
fragmented and distributed architecture.
The business drivers for change will primarily focus on the limitations to growth and
competition. Inevitably, many banks will reach a point of diminishing returns where the cost of
change to the legacy outstrips the business benefits.
The emerging markets have a business model that relies on very basic products to fulfil huge
growth targets. As a result, these markets are dependent on basic improvements to deliver
automated processes with adequate reliability.
2.1 Payments
The efficient and cost-effective processing of payments is a major driver for renewal. In
particular, end of day processing and book balancing is a major burden for emerging markets as
successful growth is now exposing weaknesses in infrastructures and application architectures.
Mergers and acquisitions are forcing banks to create a unified and integrated payments
architecture that can handle cash, debit, credit, internet and mobile phone payments in a fast,
transparent and secure manner to limit risk and the opportunity for fraud.
The most critical issues for banks is to deal with the complex compliance and regulatory
requirements across their entire operations. The ability to inter-connect and collaborate with
wider range of business partners requires conformance to an ever-increasing set of standards and
protocols.
Investment in a flexible architecture that can accommodate emerging standards for transport,
messaging and security is critical.
2.2 Savings
The savings market is highly competitive with the preference for internet savings accounts
steadily increasing as clients are able to seek out the best products and easily move their funds
between accounts.
The pervasiveness of internet banking as broken down the barriers to entry and specialised niche
players, that are subsidiaries of foreign banks, are cherry picking the most lucrative savers to
attract low cost cash deposits.
Banks are being forced to increase their range of savings products and place greater emphasis on
product development in order to contend with the competition.
In an increasingly risk-averse market, the need for savings products is forcing banks to cope with
higher volumes over a wider product range and requires a greater focus on product, process and
system development and adaptation.
2.3 Loans
As with the maturity and increased competition that is all too apparent with the purchase of car
or house insurance, competitive pressures have forced many lenders have been forced to provide
a core product with a range of optional features for the customer to select. In return for fewer
features (and less flexibility), the customer can get a cheaper loan and the bank can differentiate
it’s product pricing against the all-inclusive implicit product from the competition.
A further trend in the lending market is the role of intermediary broker channel and the
additional burden this presents to the banking systems.
With improved market intelligence and information modelling, the personal risk profile of a
customer becomes an important factor product pricing.
The implications on the banking systems of these competing demands are for:
■ more transparent and easy to manage product catalogue;
■ break-up of the lending product into optional elements and supporting business rules that can
be included or excluded;
■ straight-through processing to meet the demands of the concentrated buying power of
intermediary organisations;
■ the introduction of the personal loan as the availability of flexible credit lines are considered
too risky;
■ introduction of risk-based pricing in line with the personal risk profile of the customer;
■ new products such as tax-friendly bank savings, which enable banks to compete with insurance
companies in tax-friendly products.

3 Core Banking Solutions

The larger retail banks in developed countries are workflow and transaction-focused to deal with
the ability to handle large volumes. Many banks that were supported by in-house developed
systems, shifted away to package based commercial systems that were customised to their needs.
With the maturity of the IT market and the demand for scalable technology architectures in the
domains of customer relationship management, human resources, payroll and many other areas
of the business supply chain, many vendors emerged to offer package solutions.
Software and hardware innovation has created major market opportunities for companies such as
Sap, Oracle and IBM. The core banking market has also benefited from this wave of investment
and the ensuing mergers and acquisitions between the various technology vendors.
3.1 Package Vendors
The dominant vendors from the 1970-80s and available products include:
■ Fidelity: Corebank is a customer-centric, real time, relational database solution delivered as a
set of integrated components that are then tailored to fit each bank. Corebank can be delivered in
COBOL on the mainframe zSeries platform as well as in a J2EE environment on either UNIX
pSeries or mainframe zSeries;
■ Misys: Equation, Midas Plus and BankFusion. BankFusion is a pure Java SOA-enabled
universal banking which is an integration with SAP NetWeaver platform;
■ Fiserv: ICBS supports all retail financial products and processes including savings, current
accounts, loans, mortgages, transfer orders, collections and document management. Available on
IBM iSeries and pSeries server technologies;
■ TCS (TATA): BaNCS Core Banking is an integrated solution that automates all aspects of
core banking operations across entities, languages and currencies. BaNCS solution is an open
standards based platform, using multi-tier architecture with international messaging standards
which can be implemented on HP-UX and Oracle database.;
New vendors that appeared in the 1980-90s included:
■ Sunguard System: SunGard’s Ambit serves the retail banking, commercial banking, treasury,
and trade requirements of banks worldwide. These banks rely on SunGard for straight-through
transaction processing across front-to-back office operations, with online, real-time processing
capabilities.;
■ Accenture: Alnova is Accenture’s custom banking solution that covers all aspects of universal
banking; it handles traditional business products as well as products designed for wholesale
banking and wealth management, all in an integrated, browser-based environment that crosses
multiple delivery channels.
A three-tier technological banking platform, running on Mainframe, Unix and Microsoft .NET
platforms using the most widely known databases (DB2, Oracle, SQL Server);
■ TietoEnator: The Core Banking Suite manages deposit and loan products and credit and debit
cards. The system is independent of target technology platform and can be run on IBM S370,
UNIX, Microsoft NT and also different transaction and database systems. In addition, the system
does not depend on any system development tools;
More recently since 2000 includes:
■ Temenos: T24 and TCB. TCB is a core banking processing engine for large, complex retail
banking businesses and is well suited to a phased rollout of core banking lines of business. TCB
is based on the IBM Financial Services Data Model;
■ Delta Informatique: Delta Bank is a Unix-based core banking application with retail,
corporate, trade finance and treasury modules integrated in a centrally deployed multi-tier, thin-
client architecture with browser-based access. Delta Bank can utilise either an Oracle or Informix
RDBMS;
■ Callatay & Wouters: Thaler has been designed as an integrated solution, but can be
implemented on a modular basis which can be run on SAP’s business-process platform;
■ SAP: Transactional Banking is built upon it’s ERP foundation and NetWeaver integration
technology. SAP partner with many other core banking solution vendors;
■ Oracle i-flex: Flexcube core banking is an integrated modular solution backed by Oracle and
J2EE architectures.
■ Infosys: Finacle core banking solution has an integrated CRM module.
3.2 Recent Developments
Increased competition in the core banking systems packaged solution market has lead to the
availability of functionally rich turnkey solutions that was only available to banks with an in-
house bespoke system development capability.
The maturity of packaged solutions has improved significantly as the products have been rolled
out across a large customer base. The vendor technologies and organisation have matured to
satisfy business expectations in terms of agility, time to market and operational support.
The functional capabilities of package solutions have reached an equilibrium and are consistently
available across the major system vendors. The non-functional capabilities of the package
vendors have improved considerably to handle larger volumes across all functional areas as a
result of the technology architecture improvements that have been made possible through the
advances in hardware and software infrastructure.
Many vendor solutions are based on multi-tier architectures and can be supported by a
heterogeneous infrastructure that can be sourced from a range of hardware vendors, operating
systems and database technologies. The banks have a choice of operational platforms and
infrastructure for deploying core banking systems to suit their budget and scalability needs.
The advances in middleware technologies presents a unique opportunity for a flexible integration
layer to decouple application logic from mainstream shared services to introduce fine tuned
business rules and service oriented solution architectures. The role of middleware to offer greater
freedom, flexibility and improved time to market will become an important differentiator for
those banks that are willing to embrace the benefits of these technologies.
3.3 Commercial Factors
For many banks in the emerging markets who lack the experience of managing package vendors
and the complexities of embedding and configuring a package solution, there are many
commercial challenges that must be understood.
Whilst a package solution is feature rich and can be operated as a turnkey solution, the reality of
configuration versus customisation can turn a dream solution into a nightmare.
All package solutions have a fixed cost element which can be priced as a perpetual license fee or
a variable license fee based on the number of accounts. License costs can be complex and can be
imposed on specific functions, number of accounts, number of CPUs and based on geographic
factors. These costs can be significant and specific expertise should be sought to model the cost
implications of the licensing based on a 10 year lifetime of projected business scenarios.
Software license costs will not take into account the cost of infrastructure in the development,
support and production architectures that will need to be managed throughout the lifetime of the
system. The non-functional capabilities of each vendor solution will play a pivotal role in the
final total cost of ownership of any selected solution. These areas must be investigated rigorously
during the selection process to get an accurate understanding of the cost of change.
All package solutions will require an element of system integration, configuration, customisation
and consultancy. These costs will generally be quoted as a variable time and materials cost which
can run for a period of 3 months to 18 months. Once again, these costs can be significant and
will require strong technical and commercial leadership to get the best results from the chosen
package vendor and minimise the costs and disruption to the business.
The role of a bank’s IT department should focus on all areas of the project lifecycle to ensure
that the design integrity of the package solution is consistent with an established methodology
and supporting governance. Specific areas that will take on heightened imprtance will be vendor
management, business analysis, architecture, design and testing. Weaknesses in any of these
areas will result in increased costs and project over-runs.
Some solutions can be described as open systems where the underlying data model and source
code is shared with the client. Other package vendors do not offer this flexibility and will require
all changes to be undertaken by their own staff according to their schedule.
3.4 Outsourcing
Some package vendor solutions offer outsourcing and hosting as an alternative to in-house
management of core banking systems. Many banks have decided to focus on their core
competencies and outsource their non-core – but nevertheless mission-critical – operations to
best-in-class service providers. The joint offering of infrastructure and software, whether in a
business process outsourcing (BPO) mode or a ‘Software-as-a-Service’ (SaaS) approach, is a
potential route to market for some organisations.
This may be an option for smaller banks who are willing to sacrifice flexibility in return for a
rapid start-up and reduced TCO.
3.5 Future Direction
We would expect that over time the market will consolidate and the dominant players will align
with the architectures and frame works of the big players such as SAP and Oracle. Indeed, many
providers have dependencies and collaborations with SAP and Oracle.
There are many benefits for closer integration with these technology pioneers who own a
significant portion of the technical architecture of the package solutions. The long term benefits
of any alignment is a consistent product roadmap which will result in a positive evolution of
integrated business intelligence, CRM, financial accounting, reporting, risk management and so
forth.
4 Methodology
The scope of this section is based on our experience of the most frequent pitfalls for clients who
have embarked upon a package system implementation.
The specific areas of focus include project portfolio management and governance, resourcing,
supplier management, architecture and change governance, capability bundling and rollout,
business benefits realisation and operational readiness.
At a very high level, the most immediate concerns facing Banks will be around the execution of
strategy and the shortage of in-house resource to shape and deliver the business change.
These challenges will be magnified where a major technology investment and change is initiated
with an external partner. The operational exposure and risk of disruption to the business will be
that much greater as staff must continue to perform Business As Usual and manage an external
partner to deliver the new capabilities.
Historically, most organisations will struggle to deliver due to a lack of appropriate preparation,
planning and resourcing.
Other areas for concern include:
■ Insufficient effort being made in prioritising, aligning and committing the Business and IT to
deliver the desired transformation in capability.
■ The silo approach to projects will mean that too many activities are in the plan with key
resources being spread too thinly.
■ Lack of contingency planning around the phasing and rollout of business capability and the
interim architectures that must be supported during the implementation.
The timing of the change must be carefully managed to minimise the risk of delivering during a
busy period and so placing the organisation in an unfavourable position. Late or weakened
delivery of benefits from an implementation would leave the organisation entirely unprepared
and unable to deliver a service during the busy period.
Any planning and phasing of requirements and capability must take these risks into consideration
and prepare appropriate contingencies to manage the “what-if” worst-case scenarios.

4.1 Business Case

Many strategic projects are often founded on a must-do basis and lack a formal business case.
This is very often the major cause for IT project failures, as it becomes impossible to prioritise
effort and measure success.
Organisations that implement a major project based on gut feel rather than any underlying
business or IT related business case will face huge challenges.
The business case is a critical deliverable that underpins the strategic business and technical
direction of the bank. The lack of a business case is a red flag item for the bank that must be
addressed immediately.
Entering into a package selection without a supporting business case is very high risk and
inadvisable. The business case must justify all project costs on the basis of perceived business
benefits and creating a clear plan to realise those benefits.
The vision and desired business outcomes must be known up front, rather than defined piecemeal
during project implementation.
A business case provides a solid foundation for success and delivering the best value possible for
the investment. Most organisations consider the business case to be obvious and an
administrative overhead. Our experience shows that a business case is one of the most important
deliverables of any major project and will significantly aid the downstream implementation
phases to prioritise and deliver the project to maximise return on investment and minimise total
cost of ownership.
Recommendation
■ The business case must be treated as a critical document that provides the linkage
between business strategy and delivery capability.
■ The business case should provide the basis for making sound investment decisions and
provide guidance on the relative merits and priorities of the proposed change.
■ The business case approval should be a pre-requisite step before committing to a final
solution, technology or integration partner.
■ A good business case can only be created through strong internal sponsorship and
participation from key business units.

“EMETRIX has the insight to facilitate and accelerate the process of producing a
business case by bringing in proven methodologies and experience to identify the
relative priorities, costs and benefits.”

4.2 Benefits Tracking

The difference between success and failure is often very difficult to measure in most
organisations due to the complexity of requirements, business processes and lack of clarity on
ownership and strategy.
What is clear is that making best use of limited resources to focus on activities that produce
benefits to (i) people or (ii) performance is a simple paradigm that will steer most towards near-
optimal solutions.
The key to achieving this objective requires the capability to consistently MEASURE
improvements and use this as a driver for change.
The process of targeting, measuring and analysing performance improvements accelerates the
pace of change by:
■ Increasing accountability and transparency
■ Creating a traceable basis for action
■ Improving the understanding of cause and effect relationships
■ Builds continuous improvement into change program
Without adequate regard to benefits and the associated benefits tracking process, the project will:
■ lack direction
■ be unable to assess the impact of changes
■ create a sense of dissatisfaction or frustration
It is imperative that the team fully understands, supports and drives the release of benefits.
Benefits tracking is a continuous process that will allow the implementation team to manage
progress in delivering benefits and intervene effectively where they are off track.
Recommendation
■ Establish a baseline for accurate benefits tracking to support and mitigate against the
risks.
■ Any decision to invest in the replacement of a core banking system should provide early
visibility of the KPIs and gaps that will be the key driver for managing the budgets for
time, cost and resource.

4.3 Governance
Many organisations understand the importance of Programme Management and often have an
adapted methodology for tracking the completion of deliverables.
Our experience shows that very frequently project deliverables lack in the required level of
quality and often become shelfware that serves no purpose in the downstream project lifecycle.
Often, the silo based organisational structures result in poorly defined roles, responsibilities and
accountabilities for the ownership and production of project deliverables.
The lack of formal governance and enforcement of standards regarding the detailed structure,
content and peer review of project artifacts results in an inconsistent mish mash of project
documentation which is often seen as an unnecessary diversion by most project teams.
The introduction of a formal governance approach to managing projects is a critical part of
successful delivery and this is especially so if external partners are contracted to deliver major
projects.
Discipline and structure in the day-to-day management and accountabilities of the technical
delivery teams and suppliers must be established and formalised at the outset.
This is a non-trivial activity and requires considerable detail around actual processes and
approach. Critical to this is to source experienced leaders to engage with the business and IT
teams to measure progress, monitor risks and assess the impact of issues, operating at a level
above that of the individual work streams.
Quality management is fundamental to achieving integration of the organisation and its
deliverables, through adoption of consistent terminology, standards, procedures, techniques and
methods.
Recommendation
■ Establish a Programme Office and define a robust and pragmatic delivery framework
that is focused on adding value and one that sends a clear message to all partners that this
organisation is mature and able.
■ Enforce a formal and disciplined structure to reduce the temptation to cut corners and
ensure that decisions are made pro-actively, with leadership team buy-in and authorisation
and ensure that people are operating within the recognised framework.
■ Formalise the role of the Programme Office as a hub for decision making, escalation
management, risk management and all matters relating to prioritisation, budgets and
resourcing.
■ Establish the Programme Office as the natural owner and manager of the business case
by delivering to the principles of the business case with the available budgets and
resources.

4.4 Portfolio Management

The delivery of this change programme will result in several solution work streams to deliver
and manage the release of benefits. An integrated delivery strategy is crucial to the success of
any programme where resource and budget are scarce. In addition, there is likely to be a high
degree of interdependency between work streams. This is ultimately a positive as the creation of
a new and standardised technical architecture will result in many shared components and
common processes which when integrated and deployed into the organisation will be the major
source of benefits. However, during the design and implementation stages and also during the
interim stages of phased deployment, this will introduce significant tensions and challenges to
the smooth running of Business as Usual.
It should be accepted that during the implementation of a complex cross functional programme
of work the strategy may have to be adapted or changed. This is a key area that is often over-
looked during an ITT process where the competitive responses are seeking to minimise scope
and inter-dependencies in order to deliver on-budget and on-time.
Managing the internal portfolio of projects against this backdrop and making investment
decisions in new infrastructure, applications or partnerships requires a detailed risk assessment
and appropriate strategies defined to provide guidance to the governance body.
In addition, many projects will resist change and seek to work-around any inter-dependencies
with a strategic solution that does not fit within the current scope, timescales or budget. It is
absolutely critical to get a firm grip on these projects and there business sponsors to see the
bigger picture and agree that in some cases sacrifices and compromises will be required for the
greater benefit of the vision, strategy and desired outcomes.
Recommendation
■ We would recommend a detailed review of your ongoing tactical and strategic projects to
assess the likely impacts and inter-dependencies on the proposed programme that is
currently out to tender.
■ When major programmes are seen on the horizon, most projects will make assumptions
and design decisions that certain key features of their project requirements will now be
provided by the new technology.
■ Project architects who are often silo resources will not have the necessary facts or
leadership qualities to navigate the projects and business towards more informed solutions
during this period of uncertainty on the final supplier or technology selection.
■ The outputs from this activity would identify opportunities for cost savings and
efficiencies that may otherwise be missed. It would also serve as a valuable input into the
baselining process and identify strategies for dealing with any potential hotspots.
4.5 Change Management
The scale and reach of this project is significant and will require a change management approach
to ensure there is alignment of people, culture and behaviours and to sustain the change. A
change management methodology will focus on:
■ Creating high performance teams who can measure and deliver success.
■ Instigate necessary culture change by aligning aspirations and values to that of the new
organisation.
■ Install a continuous improvement culture and mechanism using effective knowledge capture
and ongoing learning.
Many organisations achieve some success at the communications aspect of the change but they
very rarely follow through on the detail that is required to realise any sustainable benefits.
Usually the risks and symptoms that surface at the programme level will include the following:
■ Any new business processes or amendments will not be sustainable and staff and business
units will be tempted to return to the old ways of working thereby eroding the benefits of the new
solutions.
■ Teams and projects will resort to a silo and will struggle to deliver in a culture that aspires to
be joined-up.
■ Leadership is not properly aligned and there is no process in place for ongoing re-alignment on
strategy and behaviours.
■ Tracking of benefits is vague due to an ill defined baseline. The risk is that insufficient
evidence of benefit release leads to continued inefficiencies going unaddressed.
■ Without empirical evidence, there is no belief and therefore buy into the perceived benefit.
Recommendation
■ We would recommend identifying a dedicated change management leader and
appropriate support to perform the change manager’s tasks of process and cultural
change, leadership alignment, benefits management and the creation of high performance
teams.
■ Perform regular temperature checks to assess the organisations understanding and
acceptance of the forthcoming changes.

4.6 Work Plan

This phase of the ITT process is not focused on reviewing or agreeing detailed work plans. As a
result, any vendor pricing at this stage will be unrealistic as it will not relate to the specific
requirements of Banks. A detailed project plan listing the major work streams, tasks, deliverables
and milestones will provide valuable insights into where the hot-spots are likely to occur, areas
of overlap and contention for key resources.
Aligning the plan with internal Business As Usual activities and the availability of key business
and IT support staff must all be factored into the decision making process. The deployment and
management of project resources requires careful planning to avoid delays and smooth progress
to a detailed work plan.
Recommendation
■ Create a detailed project plan with clearly identified work streams and resources. At this
stage, the resources should simply define role and skills. The plan can be used as a sound
baseline for prioritising project activities and resources.
■ A detailed schedule should be refined as the ITT process matures and also used as basis
for comparing the various vendors and their specific resourcing profiles. This will also
serve to identify any major gaps or omissions from each vendor.

4.7 Resourcing
The overall success or failure of any project will depend on the quality of the deployed
resources. The importance of detailed planning was discussed above.
The next level of detail in the planning must focus on the mix of internal versus external
resources and specific skills that will be required throughout the key stages of the project.
Any gaps or lack of commitment in the area of resourcing will have an adverse effect on the
project and the overall morale of the delivery teams. From past experience the usual pitfalls are:
■ Poor team selections made on the basis of availability rather than any formal skills or
capability for the targeted roles.
■ Where external contract or consultancy resource is deployed, there is no formal succession
planning or knowledge transfer.
■ Key members of teams are already heavily involved in business as usual and are unable to
contribute fully to the programme.
■ Key resources are expected to contribute to the programme stream and in one case leading a
large part of a stream without due consideration of business as usual constraints.
■ Resource recommendations by the selected partner have not been addressed adequately.

Recommendation
■ Clearly define the project team structure, roles and responsibilities.
■ Select team members based on skills and capability.
■ Where resource gaps exist identify cost-effective alternatives and put in place a
contingency plan to address the gap and plan for succession and knowledge transfer.

4.8 Architecture
A critical part of any IT organisation is it’s Architecture function. This role is traditionally
misunderstood and misrepresented. The role of a technical architect is to bridge the gap between
business strategy and IT strategy. The architecture function typically falls into one of three areas:
■ a enterprise-wide role
■ a business or functional role
■ a project-based role
Most organisations are reactive to the business and generally find appropriate resources to
support the project architect function. The enterprise and business architect roles are often spread
out amongst key business or IT staff, but rarely the responsibility of an enterprise architecture
function or a business architecture function. As a result, it is very difficult to enforce any
governance or standardisation based on sound architecture principles such as a unified security
architecture, or a common portal or content management system. Often each and every project
will have specific views on this and will follow the path of least resistance to satisfy the
requirements of the project.
The role of architecture is very far-reaching and defines the fabric of the information and
security model of an organisation and the critical infrastructure components that support the
business. In addition, the role of architecture shapes the way in which solutions are prototyped,
designed, developed, tested and deployed. Getting this right can pay huge dividends and be a
significant enabler of business benefits realisation.
Banks approach is radical and admirable in many respects as it aims to deliver a step change in
IT architecture. Potentially this project could redefine the IT landscape in one swoop. As a result,
I believe it also introduces some fairly significant challenges and due diligence activities to
validate that the final solution will satisfy the current and future business needs.
Recommendation
■ Invest in an architectural framework to manage the transition from the as-is to the to-be
architecture in a controlled and robust manner.
■ Select technology products based on capability and fitness for purpose to support your
business requirements.
■ Select technologies and architectures that can be easily and cost-effectively resourced.
■ Identify architectures that eliminate duplication and redundancy.
■ Select technologies based on a clear total cost of ownership model.
■ Ensure that technologies are validated and proven before final selection. Ideally create
competitive tension to identify the strengths and weaknesses of key architecture
components.
■ Invest in an architecture function that can sustain and manage future changes and
extensions to the chosen architecture.

4.9 Partnership
It is absolutely critical to select an overall Systems Integration partner who can then act as the
single point of contact with overall responsibility and accountability for delivering the final
solution. A partnership and collaborative approach where the roles and responsibilities of both
parties contribute equally to the end solution is essential to the success of this programme of
work.
It is also needed to ensure that the right balance of expertise and practical knowledge is used to
build the solution. Too much external influence and the solution may not be the most appropriate
to that environment, too much internal influence and there might not be enough innovation to
make widespread change.
Based on previous experience, it is normally far better to engage with a technology and product
agnostic Systems Integration partner to deliver the overall project rather than engage with the
product vendor directly. This may seem bizarre, but the reality is that product vendors tend to
understand their products better than they understand their customers. An integration partner
tends to focus on the customer requirements and manage the delivery and client expectations
accordingly.
From past experience, a product vendor lead implementation of a licensed turnkey solution that
requires a complex and costly integration based on a time and material contract is a high risk
strategy. The Bank must be clear that the end to end accountability of a working and production
ready solution must be the responsibility of the chosen technology partner. Wherever possible
the commercial terms should seek a fixed price delivery model to minimise risk and assign
accountability.

Recommendation
■ Focus on an SI lead implementation partner as this should offer better value for money
and lead to better knowledge transfer. Product vendors tend to focus on revenues through
training, education and support. As a result they have far greater flexibility to cross-
subsidise pricing so that the up front cost during competitive tender appears cheap, but
often turns out to be far more expensive over the solution lifespan.
■ Adopt a partnership approach based on fixed price contract and some element of
risk/reward for delivering key milestones and performance criteria. This is often an
excellent incentive to identify a partner that is willing to engage on the basis of benefits
realisation rather than delivering a solution that almost works!
■ Where possible invite the partner to identify tasks or areas where a time and materials
based consultancy may be more appropriate. This will identify weaknesses or uncertainties
in requirements and capabilities early on rather than during the implementation phase.

5 Summary
We believe there is sufficient information in this report to highlight where we see the greatest
risks for Banks. These recommendations represent a best practice approach to containing these
risks.
Banks should undertake a detailed diagnostic to investigate the areas identified in this report.
This should provide a stronger foundation for success and state of readiness to:
■ Deliver and execute on the business case;
■ Provide project leadership and accountability;
■ Align culture and business processes;
■ Gain stakeholder commitment and participation;
■ Achieve clear and timely communications;
■ Prepare and work to an integrated plan;
■ Create the headroom and capacity to absorb the change;
■ Identify a partnership to build a new and robust enterprise architecture.
Without the right level of expertise, resource, alignment and commitment to this project, Banks
runs the risk of not delivering in time or not delivering at all. Without the release of benefits
from the project, Banks runs the risk of disrupting it’s business and alienating key stakeholders.
All of these areas are very tightly inter-related and getting the wrong balance will cause delays to
the execution of the strategies and the unknown nature of the likely benefits to be released.
We recommend that the current resource and skills capabilities be assessed immediately with a
view to putting in place the necessary contingencies to provide greater clarity around some of
these areas. We believe that this approach will pave the way for making the correct choices and
ultimately delivering the right solution on time and to budget.

3 Votes

Posted in Architecture, Business Case, Change Management, Consulting, Core Banking,

Governance, Methodology, Outsourcing, Package, Portfolio, Procurement, Requirements, Scope,
Strategy | 1 Comment
One Response
1. on January 6, 2010 at 8:24 am Emerging-Markets-Banking : Sysmaya
[...] http://emetrixconsulting.wordpress.com/2009/12/29/emerging-markets-banking/ [...]

Comments are closed.

• Heatmap

Agile Architecture Build Business Case Change

Management Channel Consulting Core Banking

Customer Design Distribution EAI Freeware Governance
Infrastructure Integration Knowledge Management
Lifecycle Messaging Methodology Oracle Outsourcing Package
Patterns Portfolio Process Procurement Product Recruitment
 Requirements Resourcing Risk SaaS Scope Search SOA
StP Strategy Test Tool Traceability Transaction V-Model
Virtualisation
• See Also
○ eMetrix Twitter
○ Sal Kabay, Managing Director
•
Top of Form

Search

Search for:
Bottom of Form

• Archives
○ March 2010 (3)
○ February 2010 (2)
○ January 2010 (2)
○ December 2009 (10)
Blog at WordPress.com.
Theme: Mistylook by Sadish.
Retail Strategy Planning
Why Strategy?
To define the business idea and validate the same through:
• Market entry strategy
• Market positioning strategy
• New concept development
• Business feasibility analysis

For Whom?
Strategy Planning service caters to the needs of:
• Entrepreneurial retail venture
• Organizations planning to foray into the retail arena
• Manufacturing companies with retail business ideas
• Existing traditional retail businesses trying to reinvent themselves
How?
A series of activities are required to frame a strategy. These include:
• Management interviews
• Organization assessment
• Segment analysis
• Competitive performance analysis
• Customer research
• Capturing target segments ‘Share of Mind’
• Analysis of different format options
• Analysis of merchandise mix
• Analysis of various price points
• Rollout plan
• Business feasibility plan

Why Integrated Retail?

Integrated Retail carries out Strategy Planning based on the following strengths:
• Large team with over 200 man-years of retail operations and business experience
• Successful implementation track record of similar projects
• Constantly updated repository of best business practices in retail from across the world
• Data bank of benchmark retail performance data
• Access to macro-economic data impacting overall retail and consumer businesses