Planning for success: pre-transformation considerations are critical

Mark Gunning is business solutions director at Temenos

It has been suggested that banks are becoming IT companies that happen to take deposits and make loans. Whilst this is an obvious exaggeration there is no doubt for banks IT and IT projects are becoming increasingly critical to their success, yet a recent survey by Accenture found that only 6% of the directors of the world’s largest banks have any IT experience, writes Mark Gunning.

IT and IT transformation projects are no longer confined to the IT department, but have a profound effect across an entire organisation. Given the potential impact on revenue, customer satisfaction and regulatory compliance, it’s essential that banks conduct thorough planning and preparation in advance. According to Cognizant, 50% of core banking transformation projects only partially achieve their objectives; 25% achieve nothing. Before you start any major IT transformation, you need to carefully consider what you want to achieve and what your requirements are to ensure the greatest chance of success.

1. Define your goals

Before starting a large IT transformation it’s essential to understand and agree what you want to accomplish – the business objectives, financial goals, and the requirements for users, customer experience, marketing, and data.  What are you trying to achieve and what do your senior stakeholders in each of these departments need to gain? Knowing this will not only make sure you know where you are heading but will also give you a benchmark of what success means across the organisation.

If you are putting in new software then we strongly recommend that you consider dividing your goals into two categories – short and long term. Short term is for the initial implementation and should be of a restricted scope; just enough to implement the solution and to turn off the legacy software. Long term should be your long term goals that can be implemented post-live.

2. Consider your product requirements

Once you have your objectives mapped out you can then think about the functions you require from the software you are going to buy. If you were replacing a core banking system, for instance, it will have to replace some or all of your current functionality as well as be compliant to your regulatory environment, but in the future it needs to be able to support the bank you want to become in the digital and mobile age. Thinking long term now might seem like extra hassle but remember that you will live with the new system for a long time. In our experience channel technology is replaced at most every 5 years, front office every 10 years and core banking every 20 years.

Of course you will not be able to predict everything your bank will need over these long periods so you will also need a software and a supplier that offers flexibility.

3. Consider your implementation and deployment options

Your current IT landscape and the urgency of your requirements will help dictate the approach you take to migration. Experienced banking software suppliers will have seen many different approaches, everything from big bang to progressive renovation. For larger banks a “build and migrate” approach often offers the best balance between early benefits and long term certainty.

Whatever option you choose, it is best to consider an initial implementation phase that that addresses only your short term goals. Once you are live and are getting benefit from the new software you can begin to address your long term goals. We have seen too many projects struggle due to having too large a scope for the initial phases.

Modern technology also offers new deployment options but with a general move towards cloud and, in particularly, software as a service. As regulated institutions where a basic business value is trust, banks will rightly be cautious about SaaS. You should consider this for any major software migration but if you decide the time is not yet right, you ensure that your chosen software and supplier will enable you to migrate to this option in the future. Remember that you will probably have a new core banking software for the at least the next 20 years during which time cloud will almost certainly have replaced traditional on-premise deployment everywhere.

4. Identifying suppliers and inviting bids

Creating a clear set of objectives, functionality requests and deployment options will put you in an excellent position to begin identifying your potential suppliers. If you are replacing your core system then you need to have a longer term view and to ensure that your suppliers both share your long term vision for our industry and, following many years of consolidation, be in a position to support you into the future. Longevity is less important for suppliers of front office and channel technology.

Once you have settled on your shortlist of suppliers you need to decide if the traditional RFI/RFP approach is required. An increasing number of banks are bypassing this and simply laying out their requirements, inviting bids based on those requirements and deciding on the supplier through demonstrations and, most importantly, proof of concept workshops.

Whatever you choose, it is important that you look for a vendor that understands and shares your objectives and vision. You must take customer references seriously; not just to decide which vendor to choose but also to understand how best to work with your chosen vendor, both during the initial implementation and in the long term.

5. Selecting a vendor

Once you have your shortlisted vendors, meet the team you would work with. See demos of their functionality, get a feel for how you would work with them; you want a partner who matches your objectives in the short and long term. You may want a vendor that helps you focus – bringing their experience of successful implementations with other banks to your project and, where necessary, standing up to the stronger characters on your team so the project remains focused on your objectives.

Visit the reference customers, carry out a site visit and speak to users; make sure they are happy and address any concerns you might have with the vendor after the visit. When undertaking such a time consuming, expensive and high-profile project it is essential to ensure that the vendor has other satisfied customers.

6. Decide whether to use a third party system integrator

Research shows that using a third party in core banking renovations to help with the implementation and other aspects of a project will contribute heavily to its success. Top considerations for choosing a third party include:

• Governance – will your vendor own the quality assurance of the project?
• Expertise – will the third party be certified in your preferred solution? Have they done projects like yours before? Successfully?
• Resource locations – does the third party have offshore/onshore teams? How will these be governed, managed and will they provide the scale you need for your project?

Improved efficiency, higher customer satisfaction, minimised costs as well as a competitive advantage are all achievable goals if approached in the right way – there is no reason to fear an IT transformation, provided the project is scoped and planned appropriately from the outset.