The Eight Stages of Core Banking Transformations

Commonalities in core banking transformations are what I look for. The common issues, mistakes, and roadblocks that I have seen across a number of large banking transformations are the things I like to solve for.  Recently while speaking with a client they asked me if they were any different then other banks going through the same type of transformation? Sadly I had to say no. In fact I had to tell them that they were going through almost an identical process as other banks. What are the stages that most banks undertaking a core banking transformation will go through? For simplicity sake I have distilled my view on the common processes down to a list of eight stages of core banking transformations:

Stage One – The Excitement of Something New

Most banks go through an extremely detailed, time consuming, and costly RFP process when assessing core banking solutions, integrators, and other peripherals required for their transformation project. The elation at the end of the RFP process with the selection of a solution (Vendor), integration partner (Integrator), and the other required hardware components normally generates an amazing amount of excitement. The bank is over optimistic at this point and the new project kicks off, all parties land on the ground… it’s the excitement of taking on the new!

Stage Two – Why is this so hard? It’s the integrator!

The excitement only last so long until the bank realizes that this is harder then they assumed. Gaining traction and momentum on the implementation takes longer than expected. All of the parties don’t seem to play well together. The bank assumes that the problem has to be the integrator they hired to help them implement the system. They rethink the strategy, they look back at the contract the bank and the Integrator descend into a renegotiation, the Bank looks for alternatives, time and money are wasted sorting out the blame game. In the end there is normally a replacement of the integrators senior management on the project some sort of concessions made and the project continues.

Stage Three- The Vendor’s product is defective and full of gaps!

Ill-defined processes start to come out of the woodwork. The capabilities and standards of the purchased solution start to be understood by the bank. Enhancements, extensions, and configurations start to be identified, effort and duration start to increase. “The solution was oversold, “ says the Bank! “You have asked for non-standard processes or functionality that was identified to you in the RFP” responds the vendor.  This creates noise and uncertainty within the project as suddenly scope is in question, the Bank and Vendor relationship is in question. Again the Bank looks for alternatives, time and money are wasted sorting out the blame game. In the end there is normally a replacement of the Vendors senior management on the project some sort of concessions made and the project continues.

Stage Four – Maybe we should cancel the project and sue!

The Bank is still upset! They feel cheated and betrayed. Pride takes over and leads a Bank right to the edge of canceling the project and letting the lawyers sort it out. Thankfully extreme actions normally also lead to extreme introspection. The healthy self inspection normally takes the bank back to the strategic decisions made related to the selection of the solution, the understanding that the need to transform is still in front of them. This normally pulls them back from the edge and the project continues.

Stage Five – Maybe we don’t know our processes?

Stage four’s introspection normally leads the Bank to question their own understanding of their processes. The understanding that a complete view of processes is missing within the organization allows them to question their status quo and opens their process up to true transformation

Stage Six – Maybe it’s our organization?

The natural progression to question the status quo of the processes normally leads to an epiphany related to the banks overall organization structure and questioning their management by silo mentality. Internally a power struggle over the definition and ownership of the business processes starts as the business realizes this isn’t an IT project it is a dramatic transformation of the business with the core banking transformation acting as a catalyst.

Stage Seven – All Hands on Deck!

The organization wakes up. The executive sponsor realizes that they actually need to do something other than sitting in status meetings. An all hands on deck mentality manifests as the Bank realizes internal infighting will not solve their problems. Normally there are some drastic changes in the Bank’s senior management structure at this point.

Stage Eight – Successful go live all is forgiven

Two or three years have passed, with multiple releases, and the final transformation is ready to go live. There will always be issues to resolve but for the most part the go-lives are successful. The core-banking platform has been replaced, processes redesigned, and the organization transformed for the better. The Bank has forgotten the trials and tribulations and normally becomes a supporter of the Vendor and their solution, and considers the Integrator a trusted business partner going forward.

Banks concerned with saving time and money in transformations will do the work required early on to address their own processes and organization issues (moving steps five and six ahead of step number one). They will also diligently work to remove steps two through four from their transformational journey. I would be interested to hear from others that have seen this pattern.

36 Responses to The Eight Stages of Core Banking Transformations

  1. Great post, George. Awareness of these stages in advance can really help new programs anticipate the level of change and introspection required for true transformation.

  2. Hi, this is a very nice article of the core banking transformation stages.
    I am, Eko Priyanto, Marketing Manager of an IT system integrator company in Jakarta, Indonesia, named Anabatic Technologies. We are also doing Core Banking Implementation with our clients in Indonesia, and I found this article will be useful for our Blog.
    Our blog will tell all the stories shared by all of our employees to share the knowledge of all our solution (not product related) to everyone.

    My purpose on writing this comment is can I ask your permission on using some of the content of this article on our Blog? Because I found it very useful for knowledge sharing to all customers and banks in Indonesia.

    Hope I can have good news from you :)

    Thanks a lot.


    Regards,
    Eko Priyanto

  3. Stage 5/6/7 rarely happens , even with successful Core Banking Transformation (“CBT”).

    I believe if you do a Stage 5/6 before 1 you’ll never do a CBT

  4. If a bank does not mature during their Core Banking Transformation and address their processes, organization, and provide sufficient support to transform their bank then it normally is not transformative. In these cases where steps 5 through 7 do not occur it has been my experience that the bank reverts back to their existing processes and replicates their existing legacy system functionality and processes in their new system, it becomes a core banking replacement. Or the bank takes a cookie cutter out of the box solution, for the sake of speed and simplicity, that does not differentiate them from their competitor down the street with the same black box. These fail to be a core banking transformation.
    Sadly I have not seen a bank mature enough to complete stage 5 and 6 prior to a core banking initiative this type of maturity is taking 3 plus years and costing multiple millions of dollars for the banks that struggle through a true transformation. Maybe you are correct and they would never get to the transformation due to all the navel gazing. But maybe you are wrong and a change in the status quo of core banking transformations could turn what is trending to be half billion dollar projects into less costly initiatives that finish faster. My hope is that a bank thinking about a transformation can learn the lessons of other banks who have already paid the price.

  5. Great observation, George.
    I experienced all stages except first in my previous project. Exectly as you described. Just some stages overlapped in my project. Fortunately we made it to the stage 8. Hope my next Core Banking transformation project will be less pain, lower cost and finish faster

  6. Great Article !!!

    There are banks which had gone through 5 & 6 first, also there are banks which dont bother anything other than reaching 7, then going through 5 & 6, some banks struck up at 4 and wondering which way to proceed.

    Thanks !!! Looking for more

  7. Hi, the above mention 8 steps defiantly meet the ground reality while system transformation. I am also working in core banking implementation compang & have faced same in different implementations.

    Yasir

  8. George, I agree with your analysis and I would suggest this is true of any high profile project where software is a key element of the solution. It’s interesting that you seem to depict both the integration partner and software vendor as fairly passive in terms of defining scope and business change. In fact these two players, especially the integrator, are both key to bringing an undertanding to the client that the solution is only partially IT based and that changes to processes and organisation are always the critical factors in any operational solution enhancement.

  9. Hi George,

    Great post. The same pattern also applies for other complex organisations and their transformation journeys. I believe that initially the expectation (hope?) on exec-level is that new tools/technology together with mostly external consultancy will solve key problems (just read the typical responses to RFI/RFP’s) and that might be a reason that the fundamental organisational changes that are required only are tackeld heads on later in the stages you describe. Only when that pill has been painfully swallowed all OU’s will pull in the same direction.

    kind regards,
    Ronald

  10. Hi George,
    You are bang on. The stages 4 / 5 and 6 do occur but the bank never acts the stages are always discussed but the impact for Integrator is he losses on other projects which are coming-up in near future. Now the funniest part is Bank again goes thru the same stages and almost same dialogues with the other integrator. In all these processes the bank misses one thing is that the 1st integrator who assured the CBS go live was matured as partner and he would have been able to complete the same in proper time frame because of his experience of CBS.

    Thanks and Regards
    Sanjay Shintre

  11. What about the stage when the business ends up insisting on sticking to arbitrary legacy processes and spending an endless amount of money customizing the core banking software package instead of using the industry best practice out of the box solution.

    – Ben Winegarden

  12. Hi George,

    Your observations are very accurate. I have been part of a core banking transformation, which has taken nearly three years to reach stage 8.

    We have went through all the stages you listed here, including the uncomfortable stage 4.

    – Prasad Mavuri

  13. George,

    Lived it, seem it in operation, but sadly not quite seem stage 8. You have hit the nail n the head – more biting the bullet early and real understanding of internal process will definitely help.

  14. How to eliminate roadblocks during execution? Of course, everybody agree to start the transformation but at some point member of the top team themselves start to put big rock on the road.

  15. Sorry to join the party late. George, this is an excellent article, as always!
    So, what do you propose as solutions to minimize the most troublesome of the stages [Stage 2 – where the Integrator is targetted, Stage 3 – where the RICEFWs begin their spiral into what often seems like minimal control (and, it should be added as it is an element of conflict of interest, into additional revenue for the Integrator), and Stage 4 – what a waste of time, effort and money these thoughts are]? These stages are the bottom of the pit emotionally for most project resources and we see the vast majority of sacrifical lambs here… unneededly so.
    Interestingly, in reviewing your stages of 5, 6, and 7, my thoughts turned to “it would be nice for the consultants on the ground to know these stages are being experienced by the client. The PMO will surely know it, but it is rarely heard of within the Integrators team. Knowing this is happening would surely help the Integrator Team members modify their actions as often they are still running the gauntlet thinking they are being targetted by the client / on the edge of the project being shut down. The result: continued allowance of unneeded RICEW’s.
    As for Stage 8, the term “All’s well that ends well” is pervasive. Unfortunately, this does not really present an environment facilitating everyone’s introspection on what could have truly been handled better. Admitting one’s actions were wrong and should have been handled a different way, especially in front of a client, is tantamount to public suicide in today’s consulting world. Thus, is the implementation project learning process (isn’t that exactly what you have documented here?) doomed to repeat itself with every Phase 1 software implementation?
    So, what do we do to offset stages 2, 3, and 4, and the elements found within, and best encourage stages 7, and 8? Your article is an immense start, but to leave it there is to leave the discussion unfinished. Great articles containing such knowledge should not be read and casually remembered… they should really be the starting point for further analysis and ideas!
    For example, to start with, I might print off this article and ask my key client resources to read it on Day 1 (and Day 2, Day 3, Day 180, Day 365, Day …). It might not be perfect (as there are always variations), but starting from a fixed point is far better than discovering the process from scratch at each stage encountered.

    Cheers George! Hope all is well back “home”. I hear it’s as warm as NZ is at the moment.

    Russ Willis

  16. Great Article. Going through the implementation of our core banking solution at many banks, we find the above so true. Unfortunately, some banks do cancel the project and change vendors, without introspecting their internal process.

  17. Hi

    The above article is good and I do agree to first 2-3 stages mentioned in the article but I also agree the remaining stages are very subjective and may not happen in all the projects. There are some other stages that happen during the project and sometimes some of the stages may be skipped and management wakes up and takes charge and make project happen.

  18. Super stuff… Almost predicting future of all large programs…

    Probaility that stage 7 and 8 will not get achieved is linked to:
    – Programs size (anything above 100 million can spiral into a Titanic)
    – Legacy systems age (you cannot replace what you dont know. Its like car user tries to make a car)
    – Outsourcing of current systems / processes (if you dont know the systems and dont use it, how would you replace it)

  19. Great summary, thank you for the read. This should be a document shared to the group as soon as the contract is signed. It’s all about setting expectations and guiding the client throughout.

  20. I must say your article remains valid even today after more than an year. I have been working on banking projects for last 5 years and seen this cycle repeating, sometimes at the same bank and with same people.

    Integration is not only about systems but people as well. And when people are involved these stages are inevitable. What I have learned is to accept the fact that the stages would come and be prepared to face it and resolve at the earliest.

    As the complexity increases, the conflicts are bound to be there and hence your article will remain valid for a long time to come.

  21. Hi,

    Great Informative Article….

    I totally agree with all the stages mentioned …

    I feel stages 1,2,3 are common stages which every integrator , vendor and bank faces… other stages slowly crept as enthusiasm gets lower and frustration starts creeping in… lack of proper syncronization , group meetings, project monitoring and reviews leads to more panic situation… blaming war starts and everything seems messy….

    Many times Bank cancel the projects and change the integrator after stage 3 & 4 ….

    Thanks for sharing such valuable information… it teaches us to be patient & to stick to our primary goal.. ups and downs do come in huge project implementation.. …..

    Learn from other banks implementation… not necessary to learn at own risk and expense….

    Sir, I will like to share this ….

  22. Spot on George – my key question would be – does anyone manage to make it through and experience all the stages in one engagement? Personally I have experienced 1, 2, 3 and 4 on one engagement and 5, 6, 7 and 8 on a separate engagement. I do know the 2nd engagement also went through 1 to 4 before I arrived :-)

  23. Your observations are perfect George. I have been working with various banks in last seven years and seen all the stages in almost every project irrespective of region. Its India, Thailand, Sinapore, South Africa and Middle East

  24. V. Good observations and I have seen all these factors exhibiting in all big projects, except the suing or cancelling. Our leadership proactively addressed the factors 5-7 well-ahead and ensured project would be a success…

  25. Very nice post George. It was really an informative article and thank you for sharing your observation. It would really help core banking service provider for servicing their clients.

  26. George THis is a vey helping Post. Thanks

    Here I want to put my thoughts ( bit hesitant about it … But lets start talking about this )
    We Know we all now at least know of all the issues
    Their Speed and nature.

    Let’s Put Alice in Wonderland in action …

    I want to be like a Mad Hatter and have the speed twice of all the issues to finish the transformation in less than 4 months.

    ( I know this sounds like MAD hatter but the approach may really help … Let’s do it we can and believe in I’m Possible)

    Manoj J Patil

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