An Immature Maturity – Integration Trumps Everything in Core Banking

 

“Immature Maturity”; the term popped into my head and came out of my mouth as if the concept had been sitting there, unspoken for years. A client was wondering why a project, which by all indications should have been a slam-dunk, had virtually nothing to show for the millions already spent and current estimates showed the cost more than doubling prior to delivery. The client, acting as their own solution integrator, only had the solution vendors to blame. Right? Wrong!

On closer look it became clear to me that the actual bulk of the work, and the reason for all the uncertainty and increasing estimates, is related to foundational elements required to support newer technology, like that of the solution vendor.

In other words the problem is the lack of maturity within the existing legacy systems and landscape and a lack of maturity in the implementation and integration of some newer foundational systems. Although all of the legacy systems are mature age wise, they lack the ability/maturity to integrate easily with newer technology. Although the client has selected and implemented some newer systems and concepts their architects, supporting methodologies, operational and development groups are not mature enough to leverage these investments and integrate them easily with newer solutions and concepts.

The systems and the team have an immature maturity. An immature mature core system landscape coupled with a number of poorly made architectural decisions has painted them in a corner and things that should be of relatively low effort and associated costs have exploded as projects and solutions that should be consuming foundational elements now have to spend time, money, and an enormous amount of effort proving new technical integration concepts, building additional foundational capabilities, to solve a relatively simple business problem.

So the complexities of their landscape are causing problems. Maybe you’re asking what else is new? This is the common problem across the all of the banks I have ever worked with. You’d be right in asking this. The thing that is really bothering me lately in core banking is the lack of maturity at all levels of the organization. The inability of a bank to look at a situation and logically see the path forward and understand how all of the blocks fit together.

Patching together an immature mature core banking landscape may allow the business to pick some low hanging fruit but it will not sustain the organization over the longer term. Eventually the business will have requirements that, due to the immature mature nature of the landscape, will end up costing way more than it’s worth as its scope includes laying foundations that should have been there in the first place.

Integration trumps everything. The easier integration between systems is the better of you will be. Patchwork needs to be solved logically by methodically migrating your core objects onto one integrated platform. The big problem with this is that there normally isn’t a great initial business case for this concept, and the migration can create throwaway work. “Because it’s a great idea and will help us down the road” is not acceptable in the quarter-by-quarter growth driven culture of financial services. It took most large banks 40+ years to develop their immature mature landscape and it takes vision and a few years to transform it. The ability to move fast in financial services requires a mature integrated landscape as well as a mature team. Both take time to mature.

4 Responses to An Immature Maturity – Integration Trumps Everything in Core Banking

  1. System integration, planning and risk management are three key components to success of critical projects such as core banking. Whenever we mean core banking it is just not alone core banking but ecosystem which works in tandem with it. The key is the right architecture and proper integration.

    Either the software vendor or the customer attempting to be System integrator have often failed to deliver. The reason according to me is that an SI has to be impartial to either the software problems or Bank’s internal challenges, which these two entities cannot. Similar will be the risk assessment as well.

  2. Sada, you are absolutely correct! “The key is the right architecture.” And the “appropriate integration” becomes superfluous because integration will be embedded in the “right architecture”. And from what I know, until now, no firm is offering the “right architecture”.

  3. Hi Sada & Joao

    While I agree with you on the right architecture, core banking implementations seriosuly fail when trying to achieve technology nirvana only. The “right architecture” is a relative term and keeps changing with fast changing technologies and products.

    I would supplement your comments above with the need of balance between risks, future proofing of org appl landscape and core delivery in hand.

    We implemented core with fresh implementation of online middleware and standardization of ETL tool for a multi-country rollout which proved success. However, we compromised certain architecture deviations which we left to be fixed in future with roadmap and accomplished go live as planned.

  4. Yo are right, banks with legacy solutions, are in serious risks and will not be able to fulfill the coming compliance requirements, for sample BASEL 3.
    But for me, that I have doing projects in Spain, Europe and Brazil last 15 years, the landscape of banks as immature you describe, is very incredible because the whole banks I worked in these years had Enterprise Architectures connected to a multichannel network of users and terminals, and a BPM middleware, supported by a legacy mature backend but able to connect by SOA and XML messages to the middleware.
    The banks you explain have a problem but it could be resolved by someone as myself, an Enterprise Architect and consultant, expert on banking legacy integration, can help them in time and costs.

    I did this job from 2003 to 2006 for a big brazilian bank, designing the “new architecture of systems” and the “common architecture services” that you can see on the green box left right at slide 18 on:

    http://www.bmfbovespa.com.br/empresas/consbov/ArquivosExibe.asp?site=B&protocolo=228179

    Currently, this bank is doing more than 15000 transactions / second on top of the architecture.

    Alex G

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