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Bank Tech Experts Debate The Business Case For A Core Systems Transformation

To enable more agile business processes and improve service, banks must transform their legacy core systems. But given the resources required, the business case for a core systems transformation and the selection of a solution must be based on delivering long-term value.

Q: Should banks transform their legacy core processing systems now? How are current offerings different from previous generations of core banking systems?

Dean Brown, Principal Bank: The decision for a bank to transform its legacy processing systems cannot be generalized. The focus should center on whether or not the current systems align with the bank's future business strategy, key financial objectives and operational efficiencies. The current generation of core banking packages provides architectural features that enable more-effective integration of other internal or external applications that interface to the core systems. The ability to effectively integrate all systems to the core processing solution should be a key decision point for a bank in selecting a vendor.

Jost Hoppermann, Forrester Research: Twenty- or even 30-year-old assembler-based core systems can be sufficient for a bank with a relatively static business or a huge IT budget. On the other hand, mergers, acquisitions, reorganizations or a new product strategy can make a youthful five-year-old banking platform obsolete.

Next-generation banking platforms offer a high degree of agility across different business divisions, products, channels and processes. Today, banks can build or buy good off-the-shelf banking platforms; in a couple of years, they will be able to buy great banking platforms.

Karen Massey, Financial Insights: It is absolutely time for banks to evaluate their core processing environment and determine if the existing core is capable of supporting the bank in its current and planned initiatives. A bank must clearly understand what it is today and what it wants to be in the future, or it will be impossible to select the transformation path and the technology for support along the journey.

Generally speaking, the prominent U.S. core processing systems themselves are not radically different from what they were several decades ago. What has evolved are the myriad options available to banks in terms of core banking. The objective for all U.S. banks is growth, and for this reason, a dynamic IT approach is fast becoming a new paradigm in this market. Additionally, many banks are evaluating an evolutionary approach, considering a component-based strategy and/or a service-oriented architecture (SOA) approach.

Q: What are the success factors and risks involved in implementing new core systems?

Brown, Principal Bank: The short-term success factors focus primarily on the quality of the conversion and implementation of the new systems. The implementation should be relatively transparent to existing customers while minimizing impacts to internal business operations. The long-term success factors center on achievement of the primary strategic, financial and operational benefits that formed the basis to transition to the new core banking systems.

Hoppermann, Forrester: Migrating to new banking platforms needs sound preparation. An understanding of a bank's business processes, the functional building blocks supporting these processes, a comprehensive overview of existing application systems and, in particular, a good grasp of the sensible steps in a gradual migration are vital -- ideally encompassing today and tomorrow. This preparation will also support a bank in defining a sound target state architecture or picking the most appropriate banking platform vendor.

V. Senthil Kumar, i-flex solutions: Success can be measured by the benefits delivered to each of the stakeholders: business, operations and technology.

Peggy Bresnick Kendler has been a writer for 30 years. She has worked as an editor, publicist and school district technology coordinator. During the past decade, Bresnick Kendler has worked for UBM TechWeb on special financialservices technology-centered ... View Full Bio

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