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TAKING
A SERVICE-ORIENTED APPROACH
TO ACHIEVING BUSINESS FLEXIBILITY
By Sandy Carter, IBM vice president of WebSphere strategy, channels,
and marketing
The
business terrain for today's banking, insurance and financial markets
organizations is fraught with challenges from competitors, complexity,
regulations, consolidation and demanding customers. To navigate
successfully, firms must be able to make changes to their business
models quickly and precisely. They must also be flexible and thus
require flexibility in their IT infrastructures. Many firms are
pursuing an approach that addresses these needs by integrating systems
based on a service-oriented architecture (SOA).
As an IBM vice president in charge of WebSphere strategy, channels
and marketing, I see first hand how integration and SOA strategies
are changing the way IT operates in today's financial services industries.
Essentially, SOA is a methodology that helps organizations transform
applications into component business processes called services.
Combine them or add new ones - companies can change the processes
to address dynamic business needs and leverage the services across
horizontal boundaries. The business process is no longer bound to
a specific platform or application. It can be treated as a component
and be reused or changed.
By creating these services organizations can define in business
terms, not IT terms, the underlying architecture to allow for business
flexibility. In this way, SOA is the blueprint or DNA that drives
business integration. Analyst firm Yankee Group recently surveyed
473 enterprise decision-makers and found that 75 percent of them
plan to invest in SOA technology this year. In addition, Gartner
analysts predict that by 2009, SOA will play a dominant role in
new application projects. This adoption is not being driven by IT
needs, but by the business needs. The Cutter Benchmark Survey found
that 60 percent of its respondents believe SOA is being driven by
business requirements in their companies, and that it must be based
on a comprehensive business model to be successful.
Financial services organizations must be flexible and move quickly
to respond to current industry conditions. In banking, for example,
since 1985, 47 major banks have consolidated to five. This merger
and acquisition activity requires massive integration efforts to
make sure all processes are aligned across the bank. And they also
face additional challenges, such as new and stringent federal regulations.
Banks are driven to integrate their channels so that customers have
a seamless and positive experience across all of their interactions.
Plus, they have to quickly introduce new services to attract customers
and still contain costs. All of these factors make flexibility and
responsiveness imperative.
It's clear that the SOA model is especially helpful to businesses
with a complex portfolio of applications. Banks certainly fall into
this category. They have multiple channels - branches, ATMs, online
resources - and therefore have a complex set of processes and applications
to support. We also know these businesses are being driven to create
efficiencies across their processes, both internally and externally,
which is another key driver for SOA and business flexibility.
Specifically in the financial services industry, SOA is helping
organizations both large and small. CIOs from both have two basic
goals: Make the business more efficient while reducing costs, and
at the same time increase growth opportunities through business
agility and responsiveness. According to Gartner, most chief executives
see IT as a barrier rather than an enabler for meeting goals. So
these companies don't have the integration and flexibility on the
IT side to support what the business needs. SOA and integration
capabilities can help remove that barrier.
Charles Schwab, for example, has been a leader in adopting a standards-based,
service-oriented architecture. By taking an SOA approach, the company
has removed the IT barrier so that processes are no longer tied
to specific elements of underlying technology. They can change customer-facing
processes without having to change the underlying technology. At
the same time, they can make back-end technology improvements without
disturbing the front end. This provides tremendous business agility
by getting new products and services to market faster, which in
turn drives greater revenue growth.
SOA and business integration also delivers enormous cost-savings
to IT departments. Bank of America was able to identify $40 million
in simplification and cost-savings projects over two years by developing
a component-based business model to identify opportunities and eliminate
redundancies. In addition, insurance company Standard Life is looking
at saving more than two million English pounds over three years
in development efforts thanks to business service re-use, which
enables the ability to create, adapt and re-use services.
Integrating processes across channels is another key challenge.
Financial services companies all face the task of managing multiple
customer interfaces. Integrating these channels is critical because
it touches everything from customer service to new product distribution
to productivity and more. Typically, each channel acts as an individual
business with its own processes. The challenge is integrating and
sharing processes to enable quick adjustments across the channels
rather than changing multiple, individual processes.
For example, BMO Financial Group in Canada uses IBM WebSphere integration
so its Internet, call centers and branches use the same processes
and information. The company can quickly deliver new information
to customer service representatives or its branches or the Web,
and this greatly improves productivity. It also integrates service
channels into the sales process to help boost revenue and profits,
and it lowers costs because the systems are simpler and easier to
change and maintain.
Similarly, Banca Popolare di Milano in Italy has developed Europe's
first integrated multi-channel banking solution, which provides
the ability to view all customer activity across all channels. With
this complete customer picture, the bank can increase revenue through
cross-selling and up-selling. Also, customers get a consistent,
positive experience no matter how they interact with the bank.
SOA isn't just helping large enterprises; these solutions may be
even more beneficial to medium-sized businesses. As we've seen,
the value of SOA is that it allows organizations to create services
and they don't have to deal too much with the underlying technology.
Most growing companies are not exceptionally deep with technical
skills. So by leveraging these services it makes it easier and faster
to make necessary progress.
For instance, say there is a company that specializes in sales tax
calculation and it has created a process based on Web services.
Any application can call that service and calculate sales tax. Now
if I'm a mid-sized enterprise, this might not be central to my business,
but it is absolutely necessary. So I don't want use my limited IT
resources to create a sales tax application. I can purchase or access
that service and use it across my business and not have to create
it myself. That's a huge advantage.
Traditionally,
there's been a divide between the business and IT sides of the house.
Now, IT folks are increasingly working with their business counterparts
to improve overall communications within an enterprise. At the same
time, today's generation of business professionals have grown up
in the digital age; they recognize the importance of IT and are
looking toward their colleagues in the IT department to gain a comprehensive
understand of current technical issues and concepts. I believe the
movement toward a services-based environment can contribute to erasing
the division all together.
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Sandy
Carter is vice president for IBM WebSphere strategy, channels
and marketing with worldwide responsibility for marketing, strategy,
and channels. IBM WebSphere software provides businesses with
integration capabilities that can help maximize both flexibility
and responsiveness. Understanding that a flexible IT infrastructure
is integral to becoming an On Demand Business(TM) has led to
IBM WebSphere's position as the market-leading integration software,
or middleware, for integrating, people, processes and information,
as well as the applications and infrastructure software that
support them, across a wide variety of computing platforms.
For more information on IBM's on demand strategy, visit http://www.ibm.com/websphere
or contact Scott Sykes at sykessc@us.ibm.com. |
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