The essentially service-driven and customer-focused orientation of financial services enterprises has made them amenable to the forces of positive change and business innovation. However, the recent string of corporate collapses, structural changes wrought by mergers and acquisitions, and stringent regulatory and compliance demands, has forced many financial services institutions to realign their business models and fine-tune them to face such challenges.
The endeavour, as always, is to extend greater reach spanning geographies, platforms and delivery channels, and broaden the portfolio of offerings. It is a matter of attaining superior efficiency in transaction processing so as to retain ‘unique’ competencies and strengths. Through intelligent automation, a global connectivity matrix and relevant communication technologies, the necessary infrastructure and scale of operations need to be elevated to a benchmarked level.
Organisations will seek consistency in managing strategic and regular business-critical operations, streamline the slew of integrated delivery channels in order to maximise efficiency, aim for near workflow standardisation on all fronts, and monitor risks.
Flexibility and adaptability
Hitherto, financial services organisations had fragmented and near-inflexible IT infrastructure. The rising demand for specialised and highly automated services propelled the need for flexible, efficient and cost-effective architecture. Banks kept adding new software while expanding the overall IT landscape with industry-leading technology from the prevalent ‘eras’.
All these needs were inextricably linked to the rising demands for application integration and the continuous process of redevelopment in the banking sector as a whole. When the intent to continuously offer new and integrated financial products and extend delivery channels increased, the challenges to integrate a range of disparate business and IT processes (that vary because of different software languages, hardware platforms and operating systems) became quite daunting.
It is the availability of a standards-based approach to managing services, effected by different software packages or customised applications, that has changed the dynamics of business and IT alignment. These services are interchangeable, can be reused and reconfigured, and allow a panoply of business options and competitive advantages because of faster and better availability of core applications.
Interchangeable applications
Service-oriented architecture’s (SOA) premise of delivering a more dynamic architecture built around a collection of reusable and loosely coupled components with well-defined interfaces heralds dramatic implications for IT. An SOA with an infrastructure for web-based services is designed to merge disparate pieces of software and allied components into a seamless, integrated whole.
Accordingly, there will be reconfigurable business processes with the near assurance of service availability, reliability and scalability due to better IT change management processes. The quest would be towards moving to more amenable, dynamic applications from the existing rigid and silo-like applications and architecture.
The integration of enterprise (existing as well as regenerated) applications holds the key to becoming more competitive. IT strategies for financial services organisations could be different but based around the potential to change IT delivery models. A bank could be focused on aligning business and technology environments to match the ability to change and reuse business functionality, or a securities firm could centre its strategic approach on ‘fast- followers/adopters’ of latest practices.
On the other hand, a credit card services provider could revisit the strategic concept of architectural extensibility. The customisation of a generic SOA approach depends on the stage of business evolution of the particular financial enterprise but cannot deviate from the strategy of aligning business and IT ‘elements’ for the desired business agility.
Service orientation
Production costs for financial services are increasingly dependent on the economics of information processing capabilities and systems. Frequent reviews and extensions dealing with integration and interoperability issues, and the development of new applications, have to be entwined with strategic business objectives. Given the legacy nature of infrastructure in most banks and financial enterprises, the underlying IT architecture itself has to be re-calibrated to revitalise business processes and enhance core functions.
The technical promise of IT cost reduction due to faster and easier customisation, integration and deployment of IT capabilities should not be lost sight of. Because, ultimately, the cost- and time-saving elements that can come from the speed of deployment, ease of integration and faster customisation leveraged by the IT organisation (in the context of running IT like a service) in any SOA exercise is what will raise the stakes for a compelling business proposition for innovation and growth.
Computing power has to appear as a consumable resource or a utility so that the information grid so formed coalesces into a business service grid. Financial services enterprises would do well to note that running IT like a service with predictable deliverables requires a complete business-oriented focus, which SOA can help catalyse.
Therefore, developing extensible service-oriented architectures has to be in line with the changed business scenarios or the organisational context of the planned strategic exercises.
Customising SOA
Financial enterprises have to necessarily adopt a service-oriented paradigm or architecture to make it easier to integrate processes, thereby, creating more options to consolidate and excel in their core business. There has to be a fully fledged acceptance of SOA as a strategic blueprint – if not an outright silver bullet – for the IT organisation or division.
The new solution should possess an intrinsic capacity for rapid deployment; integrate with data, information ‘packets’ and logic on legacy systems; be reliable (given the importance of transaction processing in the financial services industry), and include security features (access control, encryption, tamper proofing), causing as little disruption as possible to existing workflows – both offline and online.
The strategic and force-multiplying value of applying SOA to banking institutions and financial service enterprises cannot really be overstated. It is only by focusing on the architectural requirements underpinning SOA’s overarching promise that financial organisations can leverage its strategic value.
A well-defined and well-crafted SOA can lay the groundwork for a better customer experience, also providing a single customer view across an enterprise. The modular characteristics of this framework will help in the structured integration, realignment and management of IT solutions.
The goal will to be to move towards a shared infrastructure and services model based on SOA concepts and web services attuned to shifting demands, and adhere to standardisation norms and industry dynamics.
This will lead to the convergence of applications and technology infrastructure, and make available ‘harnessed’ computing power for risk management calculations, historical database management (for compliance purposes), portfolio management applications, data mining and integrated delivery channel monitoring, among others.
Simplifying IT complexity
While the application areas of the financial services sector keep evolving with changing business drivers, certain core applications and business processes such as core banking, non-traditional delivery channels, transaction mechanisms payment processing structures, information databases (including mainframe-based legacy systems) continue to remain the same. The only difference being that they happen to function like standalone applications without any perceptible integration.
SOA binds such applications into independent, self-contained and common services, spurring more innovation, higher levels of predictability in delivering IT, and sustaining competitive advantage in the long run. More importantly, with the consistent representation of the same set of information ‘blocks’ across various channels, the quality and level of services to customers is not compromised.
Once there is a clear roadmap for the allocation of responsibilities during the start of the SOA programme, the disruptive effects of implementation cycles, and the large-scale deployment challenges because of the agglomeration of multiple applications, need to be considered and taken care of.
Most financial institutions today understand the relevance of adopting SOA and the flexibility it brings about. In short, service orientation serves as a seamless interaction mechanism between business and IT in any financial services organisation looking to create competitive business differentiators.
