January 03, 2006

SAP (West Chester, Pa.) has lined up several banks to participate in its Industry Value Network for Banks, a consortium that will define business processes that can be shared between network members, deployed as components of a service-oriented architecture (SOA). The participating banks announced last month are ABN Amro, Absa, Barclays, Banco Bilbao Vizcaya Argentaria, Credit Suisse, Deutsche Postbank, ING, and Standard Bank.

The idea is to identify business processes that do not add strategic advantage for banks, and then make these processes available as a networked resource so that participating banks can accomplish them at a lower cost.

One example of how it might be used is in anti-money laundering (AML), a compliance area in which cooperation can lead to better results than independent efforts. "One of the biggest expenses [banks] have right now is in the area of compliance, specifically because the networks are not linked together," says Jim Hughes, SAP's senior vice president of financial services, North America.

"There is no value for [a bank] setting up a world-class AML group," adds Hughes. "There's all kind of value for us setting up a global AML group."

Such a global component for AML would increase the utility of the service in that money launderers trying to use the banking network would find it more difficult to switch between money center banks. Similar network benefits might be find for other business processes, both inside and outside of compliance. As such, the ability to use one of the SOA components would not be limited to customers of SAP. "The processes cannot be just SAP-specific, but they have to be industry-specific," says Hughes.

As an SOA, the Industry Value Network would not rely upon a central hub for managing either network traffic or data, but rather upon a peer-to-peer networking model. "If it was built on top of a classic hub-and-spoke model, by definition it would have inherent limitations," says Hughes. "It has to be scalable, highly flexible, and accessible by all members, both on and off networks. Those are the kind of value points that we can achieve very readily."

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