Replacing core systems is not an option for every bank, depending on the cost or risk involved. ‘Better the devil you know’ has resonance in this area as bringing a new system into a bank can create unforeseen problems.
Anita Bradshaw, senior industry expert at CSC, notes that regulatory requirements are increasing the need to improve standard processes and even purchasing a new core banking product does not guarantee compliance. She says: “You may not find out about performance issues until you have a system installed. For example, nobody wants to run the risk of working with a bank that can only do its anti-money laundering checks after the fact. If you have a system that is slow-batch, then you are done for.”
The key to managing core systems is to constantly match the IT processes to those of the business, according to Ms Bradshaw. “You have to work with your system all the time. It is living, growing and you should understand the process that it supports,” she says.
Keeping the core flexible enough to roll out new products at a speed that at least matches the market is vital, as is the ability to easily use data from numerous disparate sources. Achieving that level of intercommunication can prove problematic and, in fact, costly.
Architecture remodelling
The real trick here is to increase speed and functionality while reducing complexity. To achieve this requires a remodelling of the architecture and if the underlying system is not designed with integral modularity, this can now be realised through the use of XML and web services.
It is possible to extend the capabilities of existing systems, at a lower cost than increasing the mainframe’s MIPS (millions of instructions per second) capacity. “If core legacy systems haven’t been modernised, their time to change can just be too great, so I think service-oriented architecture is a way of breaking down those legacy systems into component parts that can be reused,” says Mike Gilbert, director of product strategy at Microfocus. “The key that web services and service-oriented architecture offer is that they are technology-neutral and they are platform-neutral.”
In top-tier banks flexibility is often less of an issue than cost reduction. With mainframes typically running from 20,000-50,000 MIPS at major retail banks, migration to a new system is not an option.
What can be achieved is a reduction in the application workloads that are being run on the mainframe, limiting the need for increased capacity and the associated expense. Some batch applications and overnight reconciliations may lend themselves to this, but it is important to assess the individual applications if the overall system is to be optimised.
Portfolio assessment
Says Mr Gilbert: “This is where integrators like EDS and Accenture will go in and look at the portfolio, look at the pieces and say ‘Well, for that piece, a replacement makes sense. For that piece, you better make sure you are optimising your operation on the mainframe, both in terms of development and deployment. For that piece over there, you may be better off moving it to a UNIX, LINUX or Windows platform because you can save operating costs and avoid an upgrade of your mainframe.”
Shifting the workload piecemeal minimises the risk and allows the bank to focus on large cost items. Mr Gilbert continues: “Look at the applications that you use and assess value to business versus cost per transaction or cost to business. You can then start to make decisions about balancing the high value and high cost of an application and try to reduce the cost.”
