The most important decisions in a core banking systems replacement or renewal often are those that are made before the project even begins. In what could be a bank's most risky and expensive technology initiative, the partnership between IT and business leaders, and the choices they make before implementation begins, ultimately can determine whether a core banking project succeeds or fails.
Given the massive scope of a core systems transformation, though, it can be easy to overlook the small steps that a bank can take to prepare for core renewal. But without this up-front planning, a bank is likely to fall short in assuring that a strong business case and objective goals take priority over simply installing new technology.
An individual bank, however, might not have the broad perspective of what other institutions are doing in terms of core transformation. To help you benefit from the successes (and failures) of the banks that have traveled the core systems road before you, Bank Systems & Technology turned to the experts -- the technology providers themselves. Several key vendors in the space reveal what they're seeing from banks that are beginning core banking renewal projects and offer tips that will increase the likelihood that such an initiative will accomplish its goals.
As with each vendor Bank Systems & Technology spoke with, Paul Leadbetter, global CTO of banking and credit services for Falls Church, Va.-based CSC, says there has been a recent increase in core banking renewal and replacement projects among banks. "There's a lot of interest at this juncture around core system renewal of some form or another," he says. "The indicator or the supporting evidence for that is definitely within our own customer base, which has been predominately top-tier banks globally."
Start at the Beginning
John Macaluso, CTO of bank solutions for Brookfield, Wis.-based Fiserv, says all banks should start a core systems initiative with a strong business case. "When I talk to clients about this, what I really begin with is that they need to have an understanding of why they're migrating. What are the reasons they're doing this?" he relates. "Frankly, it has to be an organizational imperative."
Across the board, the vendors we spoke with agree that the first step to ensuring a successful core banking renewal project, as with most technology projects, is to ensure that the IT and business departments have their goals aligned. Of all the technology-driven initiatives a bank can undertake, a core systems initiative is the last thing that should be done just for the sake of new technology -- a lesson many banks are learning from past experience.
"In the late '90s it was this technology lovefest," Macaluso says. "They fell in love with the technology, and at the end of the day it resulted in huge expenditures in the technology. But the end results for the banks weren't what they expected them to be."
R. Ravisankar, SVP of Redwood Shores, Calif.-based Oracle's Financial Services Global Business Unit, stresses that if a bank is going to embark on a core systems renewal project, a strong business case must lead the way. "It's regarded as a business-driven project with IT support rather than an IT project of technological renewal," he says. "It's a business case because it changes the way business is done."
Baby Steps to Success
Beyond building a business case, there are other small steps banks can take even before selecting technology. "When I talk about those precursor steps, some of the things can be as easy as upgrading to the latest release of software," CSC's Leadbetter says. "That's a tangible first step."
Oracle's Ravisankar stresses that a bank needs to understand how a modern core banking solution can impact its business. "The first thing they need to do is look at what are the limitations of the existing system that they need to address," he says. "Sometimes they just look to replicate the existing system in the new architecture and really miss the ability of the new platform. But they must ask, what are the functions their business units have, the limitations that they are frustrated with, and all the future requirements the business units anticipate coming down the line?"
Rather than trying to replicate the old system's abilities with new technology, instead look ahead at future capabilities that the bank would like, and improve business processes along the way, Ravisankar adds. "It's important to have a functional viewpoint about what capabilities you are looking for," he says. "The homework needs to be done before you go out looking for a solution -- you need to understand the problem that you are trying to solve."
Stick to the Plan
Once banks understand their goals, they have a number of core renewal solutions from which to choose -- ranging from upgrading a legacy system with newer software provided by the existing vendor to finding a new vendor altogether. But regardless of which path a bank takes, once it selects its technology, the first thing it should do is adopt a structure in which to guide the large-scale project, says Jim Sizemore, CIO of bank solutions for Fiserv.
"You need a standard project management orchestration, a PMO -- a project management office approach that has very defined milestones with reporting and escalation built into it, both on the bank side and the vendor side. In order to make a project successful, you need to have something to measure success by," Sizemore emphasizes, noting that without a tangible vision of the project's scope and benchmarks with which to identify iterative projects, a core renewal project could be lost from the start.
"Try to deliver quick wins," notes Fiaz Sindhu, an executive and core banking expert in Dublin, Ireland-based Accenture's North America banking practice. "It comes down to trying to deliver components of the solution that are going to provide tangible value to your organization -- in six to 12 months time you want to say you've delivered something that creates value in your environment." He adds, "People can get jaded very quickly in a long-term program that doesn't deliver tangible value in a short period of time. In order to sustain the value over the long term, it's a matter of being able to obtain those achievements early."
Further, "In terms of business case management, an IT department needs to be able to say they have a business case that's been developed and a governance process to manage the business case," Sindhu continues. "They need to continually update the business case within the context of the environment. That's why producing quick wins is important."