The seed that would eventually grow to become Line of Business Migration technology was planted in the minds of Michael and Frank Sanchez over a decade ago after a less-than-successful visit from a CIO of what was then Chase Manhattan Bank.
The CIO had come to the Sanchez Computer Associates office in Malvern, Pa., to sample Sanchez Profile, the company's core processing platform. The CIO immediately saw value in the application for his bank. "He said to me, 'You've showed me the promised land, this new core system can really help my bank,'" said Michael Sanchez, chairman of Sanchez Computer Associates.
But then the other shoe dropped. "Before I could say another word, he added, 'Now, if you can figure out how I can get from where I am today to this new environment, I'll buy it.' At that time, I didn't have an answer," Sanchez said.
"It's a challenge we hear from banks all the time," added Frank Sanchez, company CEO. "You've showed us what could be, but how do we get there? It's incumbent on us to not only build a solution, but to develop a strategy to achieve it."
As Sanchez was to discover, developing such a solution was far from an easy task. Indeed, few bankers would argue against a new core solution for their banking enterprise, a system that would likely save them millions in operating costs, produce new products at a quicker and more efficient rate, and integrate channels to deliver a complete view of the customer at all touchpoints. Before such a system can be installed however, bankers have to extricate themselves from their mainframe core legacy systems. To remove such a system would be expensive in terms of cost and man hours, and likely require some vital systems go down for a length of time.
"It is such a large effort," said Robert Hunt, a senior analyst with Needham, Mass.-based TowerGroup. "There may be as many as 150 system interfaces feeding into some of the older core systems. Trying to switch this system out is analogous to trying to change a car engine while the vehicle is moving down the road." It's a task few banks up to this point have been willing to make. Those that have tried in the past have gotten stung when the technology they used failed to live up to expectations.
"There was a push to move everything over to client/server when client/server technology was in vogue a few years back," said Octavio Marenzi, managing director of New York-based Celent Communications. "I can't think of a single one that did so successfully. So conventional wisdom up until fairly recently was that mainframe replacement could not be done. It was tried, and a complete fiasco resulted in most cases."
What is needed for core system replacement to become widespread reality is a way for banks to efficiently shift operations from old to new systems that is both inexpensive and relatively risk free, according to Hunt. "Someone has to design a low-risk migration path to change out a core system," he said. "It may even involve running both the old and new systems simultaneously until the bank becomes comfortable."
After years of development, Sanchez believes it has come up with just such a solution. The company calls it Line of Business Migration.
A change for the better
Line of Business Migration is actually a unique combination of Sanchez software products and a cost-effective, phased implementation strategy. Its ultimate purpose is to provide a proven end-to-end banking solution and a methodology by which an institution can efficiently replace legacy systems.
"Usually core replacements are viewed as this sort of grand vision that involves all aspects of a financial enterprise-something most institutions don't have the time or budget for," said Richard Phillimore, chief marketing officer for Sanchez Computer Associates. "Instead, we have come up with a process where the replacement is done slice by slice. We have found a way to literally move one line of business to a new architectural platform, that can then be utilized for other migrations."
The workhorse of Line of Business Migration is Sanchez Profile, the company's real-time core processing application. At its heart, Profile is a processing platform that can scale to support millions of accounts and millions of transactions each day from a variety of delivery channels. Indeed, Profile was benchmarked at 1,900 TPS this year.
While Profile provides the foundation for the Line of Business strategy, it is Sanchez Xpress, a one-of-a-kind transaction and business integration middleware layer, which actually makes the replacement of legacy systems possible. Xpress enables users to access data from back-end systems and deliver it to front-end channels and vice-versa. The use of business logic tools and a customer database also allows it to manage transactions and settlements real-time across an entire enterprise. This capability can also be used to manage the migration of accounts from existing legacy silos to Sanchez Profile.
While Xpress and Profile provide the structure needed for Line of Business Migration, it is the implementation strategy developed by Sanchez that allows the process to take place in an affordable, low-risk environment. Essentially, instead of trying to market and price Line of Business as a huge core legacy replacement system, Sanchez offers it as a solution to individual business unit problems. Line of Business Migration will replace a specific problem or outdated system. By doing so, an architecture of channels and interfaces is put in place that gradually allows an institution to migrate other lines of business to a new platform. (See charts starting on page S4.)
"What we have developed is an integration platform with technology in the mid-tier that allows it to become a go-to platform," said Dan Sollis, senior vice president of Global Sales for Sanchez. "So instead of trying to do a whole bank conversion, a bank can now plug-in and pick one business line at a time and move it to a new platform. A core replacement does not need to occur as a big bang."
The replacement of a problematic legacy mortgage system using Line of Business Migration is already taking place at Scotiabank, one of the largest banks in Canada with assets of almost C$300 billion. (See sidebar on page S5.)
Long term solution
Experts agree that going forward, banks will need their core systems to do more. Check truncation, straight-through processing, electronic manufacturing, customer-centric operation and the constant need to save money wherever possible all rely on an infrastructure that is pliant, integrated and scalable. Existing legacy systems rarely meet any of these criteria.
To stay competitive in today's financial marketplace, bankers realize the need to modernize and streamline core systems. Cost, risk, complexity and silo mentality have stood in the way. Line of Business Migration is Sanchez's trail of breadcrumbs through the woods, and an answer to a challenge posed by a CIO so many years ago.
"I think we have stumbled onto something really big here," Michael Sanchez said. "We are going to prove Line of Business Migration works. We want to wake everyone up to the fact there is now some hope."
Sanchez Computer Associates at a glance
Sanchez delivers a set of end-to-end software solutions for banks and financial institutions.
Sanchez Profile is the world's fastest, real-time core processing system for financial services.
Sanchez Xpress is a Java-based, open standard, middleware solution that enables financial institutions to access data on multiple back-end systems and deliver it to front-end channels.
Sanchez CRM is a pervasive, real-time, Java-based CRM software solution that provides personalized customer interactions and profitability management to optimize sales and marketing opportunities.
Sanchez Wealthware is an integrated brokerage and wealth management software solution that helps financial institutions effectively manage and grow customers' assets anywhere, anytime.
Sanchez Webclient is a Web-enabled, integrated banking and brokerage application that provides customers with a single access point to all financial information-creating a personalized, banking portal for all transactions and products.
Sanchez WebCSR is a browser-based, integrated customer-servicing application that can be deployed across multiple retail delivery channels such as branches and call centers.
Sanchez e-PROFILE is an end-to-end, outsourced operations and technology solution that helps institutions quickly introduce fully integrated, multi-channel banking.