The introduction of a shared service centre can lead to a more efficient, flexible infrastructure but requires significant management commitment. By Andreas Andreades, CEO, Temenos
In many parts of the financial industry and among large corporates, the term “shared service centre” has emerged to describe the process of rationalising common core functions and then sharing this specialist capability across the organisation. But many models are possible, covering a variety of solutions to an equally varied set of problems.
At one extreme, some Tier 1 organisations are moving towards an IT architecture based on consolidated centres of excellence in specific areas. Examples of this would be payment or settlement factories that deal with specific business functions required by various front-office applications in multiple business streams. These islands of processing are integrated into a wider IT framework through middleware and messaging solutions. This is best of breed on a massive scale.
At the opposite end of the shared service centre spectrum is the convergence of back offices through the deployment of a single integrated solution across multiple business lines and regions. This enables the centralisation of common business functions while catering for regional or local variations.
Horses for courses
Clearly both of these approaches have merit and are suited to different organisations. The service centre with a specific or very narrow business function is best suited to domestic retail solutions where sheer volumes and project risk limit the extent to which entire core systems can be replaced. The second approach is ideally suited to international branch networks offering wholesale, private banking and even mass affluent retail solutions.
The direct and indirect benefits of a shared service centre approach based around an integrated core banking solution are numerous. The direct benefits are the result of the elimination of redundant systems and processes, which leads to a simplified, efficient and flexible operational and IT infrastructure. This enables the bank to achieve economies of scale. The indirect benefits are harder to quantify, but are no less significant as they lead to improved customer satisfaction, business growth and potential to expand into new markets and territories.
Why wait?
Given the obvious cost benefits of the shared service centre concept one might ask why this model has not been more widely adopted. Part of the reason could be customer demand. Until fairly recently the market for global wholesale and private banking services was not developed. But today there is growing demand for global processing solutions, and banks have an opportunity to improve their competitiveness by offering such capabilities.
Until today, technology availability has been a major barrier to running an international network of branches on a single system. Besides multi-currency and multi-lingual capabilities, one of the main requirements is the capability to run multiple legal entities independently while still providing an integrated real-time environment using a single central database. A single solution, rolled out internationally, also needs to provide online processing in all the required time zones, so one branch can be accepting online input while another is running the close of business processes. Similarly, online data back ups must be possible so systems can run continuously.
Building strength
A successful implementation of this operational model is reliant on the availability of a high-speed global communications network linking all regions and branches to a central location. And both the network and the core banking system must be fully resilient with redundancy at all levels, because the effects of a systems failure in this model will be significantly greater – resulting in a global disruption rather than a local one.
In order to achieve the goals of a single international operations environment, a great deal of political will and management commitment is required within the organisation attempting to change. Implementing such a change will require a significant restructuring of the business, which in turn will require vision and commitment at the highest levels in order to succeed. But with the latest core banking systems on the market, technology is no longer an obstacle to achieving the benefits that such an environment can bring.
