IBM explores SOA in banking

Source: IBM

There has been a great deal of hype about SOA and little in the way of practical real-world guides to it's use, until now. Banks everywhere have been criticised for not having a single view of their customers and of not being able to deliver consistently excellent service over multiple channels.

To argue, as many have done, that banks don't understand what they need to do is wrong. Banks understand the problem and most have a clear vision of where they want to be, but their ability to change has been hampered by the complexity and inflexibility of their operational structure which consists of a variety of siloed operations, many of which have either been developed in isolation as individual divisions have done their own thing, or have been acquired through mergers.

After years of concerted cost-cutting, sustained and consistent revenue growth has returned to the agenda of many banks. However, regulatory requirements, new products, new channels and new geographies have made operating models too complex. The opportunity-cost to a bank of not dealing with the complexity and inflexibility of their operating model is potentially significant. Uncoordinated and siloed operations only add to complexity, and will not prove sustainable over time.

Fortunately changes in technology such as open standards and componentized applications have made it possible to attack the problems of complexity and inflexibility from the top down (using CBM - the Component Business Model) and from the bottom up (using SOA - Service Oriented Architecture), and many banks have already started on the journey. The benefits they realise could include moving products to market in a fraction of the time it currently takes; greater innovation and a wider variety of products; significantly improved customer service; greater flexibility in process change; cost reductions of up to 50 percent (cost-income ratios may register at less than 35 percent); and the ability to merge with or acquire other businesses that are following similar architectural standards in a much more flexible way.

IBM has just published a white paper on progressive transformation that addresses these issues and outlines how CBM can be used to simplify the business model, and how SOA can be used to simplify the technology model. Together they offer a way for banks to transform on a progressive and manageable basis.

Download the paper here

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