March 31, 2005

A service-oriented architecture can provide a bank with the robust, resilient IT architecture it needs to grow, achieve speed-to-market and optimize customer service. It also provides a platform to help meet compliance requirements and assure security and integrity of information assets.

Hinrich Voelcker, Global Head of Payments Processing IT, Deutsche Bank (New York)

Danny Peltz, EVP, Wholesale Internet & Treasury Solutions, Wells Fargo (San Francisco)

Mark Cages, Chief Technology Officer, BEA Systems (San Jose, Calif.)

Ian Goldsmith, VP of Product Marketing, SOA Software (Santa Monica, Calif.)

Q: How can banks benefit from a service-oriented architecture?

Hinrich Voelcker, Deutsche Bank: The IT trend now is looking for services covering business processes that are registered for usage across the enterprise. This could result in the replacement of legacy applications and could provide common services to various applications for multiple business processes around the globe. If customers use several products with overlapping service parts, they would experience the exact same handling in each product offering. Besides benefiting from improved customer service, this approach could also help decrease costs through shared usage.

Ian Goldsmith, SOA Software: All large organizations can realize significant cost savings and much faster project and application implementation by migrating to SOA. The ability to build applications faster (often in less than half the time of more traditional approaches) allows companies to bring products to market more quickly and improve their time-to-value. More specific to banking and financial services is the ability SOA brings to quickly integrate business units and companies.

Probably the most exciting aspect of SOA in financial services and banking is the ability to use standards-based communication to securely offer information-based new business models to partners and customers. Using Web services and SOA to allow partners to use a bank's services as core parts of their business processes reduces the cost of partner integration, makes this integration happen much faster than with traditional mechanisms and encourages partners to use the bank's services.

Mark Cages, BEA Systems: A real-time, 360-degree view of the customer not only encompasses customer data, but it also includes credit rating, risk assessment/management, a multiproduct portfolio, hedge management and more. Creating this customer view has been hampered in the past by legacy systems, integration issues and costs, multiple (and often contradictory) semantic models and other roadblocks. Financial institutions that adopt SOA have the opportunity to realize the real-time 360-degree customer view that will allow customer reps, traders, brokers and others within the financial institution to offer a more personalized service and with it an opportunity to cross- and up-sell further services with greater success. In addition, SOA will allow FIs to offer new and/or improved bank and product services in a shorter time frame than in the past. The result: SOA-enabled FIs will be in a great position to capture a larger market and dollar share over their competitors.

Q: What are the challenges to implementing SOA?

Danny Peltz, Wells Fargo: SOA is a new approach to application development that requires people to work and think more cohesively and collaboratively than before, when the application development cycle followed a more siloed track. We're handling the key obstacles in leveraging SOA in our environment by educating employees, monitoring performance and creating a collaborative culture.

Varying levels of understanding about SOA are being addressed through a rigorous educational program on best practices for building shared services and ways to fully leverage SOA. A certification program is in development. Also, we've installed an automated management system to monitor traffic and response rates and flag any potential performance issues. Finally, an organization's culture has to foster continual cross-discipline, cross-business collaboration. Our business and technology groups work side by side to jointly review the application design and identify shared services up front to leverage.

Voelcker, Deutsche Bank: Striving for a service-oriented architecture begins with the cultural background of both IT and business units. To handle the complexity of large enterprises, the business and IT partners are bundled into manageable units to deliver results quickly and efficiently. It would be too ambitious to start with an enterprisewide SOA approach, as the existing application-oriented culture would be hard to overcome all at once. A reasonably sized applications portfolio should be selected to create a starting point.

Cages, BEA Systems: Culture is probably the main obstacle that financial institutions need to overcome in order to realize the benefits of SOA. In many FIs, divisions and departments are often run as if they are individual companies; in some cases, these divisions can even be competing with each other for the customer time and investment dollars. Many FIs tend to have siloed development teams, which rarely share code, frameworks, etc., with other divisions.

Goldsmith, SOA Software: Industry-specific standards make adapting SOA for banking a challenge, though one that can be overcome. Regulatory and compliance issues also create concerns about adoption of SOA in the banking industry, although, in our experience, SOA provides a strong framework for helping organizations collect the data required to meet new and emerging regulatory standards.

Q: What are the key architecture considerations for banks?

Peltz, Wells Fargo: We like the architecture to be simple, secure, flexible, scalable, always available and have little degradation in performance under heavy load. The architecture needs to be able to support interactions with legacy systems as well as J2EE applications and Web services. At the same time, the business can't become a slave to the technology/architecture. We use technology to provide solutions to meet our customers' business needs. Cost is also a key concern for banks, especially in terms of balancing the need to aggressively pursue new products in light of heavy competition with the need to maintain availability, security and performance in our systems.

Voelcker, Deutsche Bank: The first priority is to minimize the risk of transaction processing and to ensure reliable, secure and performing message delivery in a payment transaction-oriented environment. The next priority is cost consideration: IT architecture should support the trend of decreasing unit prices by higher STP rates with lower costs per transaction. Open source operating systems, like Linux, are considered a strategic choice to reduce costs in the infrastructure area, whereas open source options need to be considered very carefully with respect to security, reliability and accountability in other areas, especially in the payment transaction arena.

Goldsmith, SOA Software: Security, performance, time-to-value and the ability to reuse legacy assets are major deciding factors driving banks to transition to SOA. Banking transactions have to be secure - SOAs have to comply with all the regulatory, compliance and internal controls that are necessary to run bank systems securely. The ability to leverage Linux and open source systems can be a deciding factor because the Web services and XML applications that make up an SOA are relatively platform-independent, but this really falls under the classification of cost reduction.

Q: What's the next step for SOA?

Peltz, Wells Fargo: The real value of SOA - in terms of fully leveraging reusable components, faster time-to-market and lower costs - has yet to be fully realized. The next stage is about connecting the bank's internal systems to the customers' to seamlessly integrate with their workflow.

Voelcker, Deutsche Bank: Deutsche Bank is introducing a standard integration reference architecture and backbone, uniform financial messaging with respect to syntax and semantics (e.g., standard components of a payment) and the implementation of benchmark managed shared services (e.g., legal archiving, money laundering, filtering). The next step will be stronger business involvement with the introduction of business process management. The business owners will then control the application portfolio on a workflow and process level in a flexible and controlled manner. The enabler will be an IT application portfolio that follows SOA principles.