Common architecture needed to reduce bank system integration costs

Banks need to adopt common architectures order to untangle the complex IT systems which are hindering innovation, according to industry standards group BIAN.


Banks need to adopt common architectures order to untangle the complex IT systems which are hindering innovation, according to industry standards group BIAN.

The use of legacy systems is causing a number of problems for banks, with highly complex environments built up over years blamed for the numerous high profile IT failures, such as the major Natwest outage last year.

In addition, the lack of interoperability between systems means that the cost of integrating new software into legacy infrastructure can devour large chunks of IT budgets, the majority of which is being spent on keeping the lights on rather than innovative projects.

The Banking Industry Architecture Network (BIAN) was set up in 2008 to address some of the problems faced in markets such as the UK, where there is a strong reliance on legacy systems.

The aim of the group is to establish a standard service oriented architecture for banks such as UBS, Credit Suisse and Deutsche Bank. Systems integrators and software vendors are also among the 38 members currently part of BIAN, including SAP, IBM and Temenos.

According to Hans Tesselaar, executive director of BIAN, banks will benefit from adopting a common architecture to integrate off the peg software from vendors, with the cost of implementing new software often dwarfing the outlay on the system itself.

“Hardly anyone is going to build their own software today, everyone wants to buy off the shelf,” he said. “If you want to integrate an off the shelf product into your existing IT landscape, and it could be a multi vendor environment including legacy systems, it costs you on average four to five times the price that you paid originally for the package.”

Tesselar adds that the prohibitive cost of integration can effectively stop new projects in their tracks.

“A lot of business cases to replace, renew or add functionality are killed due to integration costs.  If you can get the integration cost down, then the business case is much more solid from day one. This gives the agility to the bank that they don’t have today.”

BIAN aims to make software integration easier by developing a common architectural framework to enable interoperability within banking systems, involving the production of consistent service domain definitions.  BIAN has already defined 263 service domains as part of its reference model, and is continuously developing the definitions of each in its Service Landscape releases.

The reference models are aimed at allowing banks to gain a better oversight and reorganise their existing landscape, using the framework to help decide what functionalities are doing well and what needs to be replaced for example.

BIAN also offers a network for communication between IT staff at those at other member banks, as well as with the vendors.

On the vendor side, software provider SunGard is already using the BIAN service definitions in the building and implementing of its Ambit Core Banking solution.

Tesselar said that the aim is to add 10 to 12 new members each year, and has his sights on bringing UK players into the fold. Although there has been no uptake in the UK so far, he notes that the group is now in talks with organisations, including a major UK retail bank, to discuss the use of the standards.

He said that many of the challenges facing UK banks are the same as in Europe and other Western regions.

“I don’t think that there is any difference between a UK bank and a European bank, because they are all more or less of the same age, and they all started roughly the same time with their IT infrastructure,” he said, adding that the picture is markedly different from the infrastructure in emerging markets which lends itself to greater agility.

“In North America, Europe and UK they are all at the same stage with ageing of systems, and are all facing the problems with an ageing workforce which has the knowledge of systems ageing systems.”

He acknowledged that there is a valid concern among the major banks with replacing systems ’mid-flight’, with the fear of disruption to critical core banking systems.

However he claims that with the introduction of common architecture will simplify the process, moving away from spaghetti-like infrastructure where all systems are connected, towards enabling a more ‘layered’ approach to systems.

“The major concern for each bank in their core banking environment is that, if I touch it, you don’t know what happens, and before you know it I am on the headlines in the newspapers,” he said. 

“Everybody has to reconsider what is the best next move, and nobody wants to have an open heart surgery while the shop is still open. So you also have to find a way where you gradually can replace parts of the system.”

He added: “Our landscape can help in defining which areas have the highest need, which can wait a little bit. It gives a very neutral view of how a bank looks like, and gives the opportunity to decide what areas you want to move into first.”

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