Commentary: SOA support for banks

May 28, 2008 — Oliver Kling and Koen Van den Brande explain how the newly launched Banking Industry Architecture Network will help smooth the way for SOA.

Banks have seen many changes over recent years, both on an individual business basis and in terms of industry change. They know they need the support of agile technology in order to compete, but when it comes to their legacy IT systems, many banks feel they are backed into a corner. Complex, unwieldy technology and siloed applications are raising the costs of integration by creating issues with processes such as mapping between the different meanings of data elements, and this is leaving banks unable to introduce or experiment with new software or systems, while compelling them to spend a small fortune on maintaining the ones they have.

Both financial services institutions and technology providers are constantly looking for ways to address the industry’s issues. Both know that, in a competitive market, IT is constantly challenged to deliver more flexibility and efficiency. But for many financial firms, approaching IT transformation while ensuring optimised performance can be a daunting task. It is time for the two industries to coordinate their efforts and set the standard for the future of banking technology.

When financial institutions decide to update their legacy core banking technology, service-orientated architecture (SOA) is increasingly seen as the answer. SOA enables the flexibility that banks need by allowing for the assembly of loosely coupled functions across the IT infrastructure, which communicate to provide a particular service or business process, thereby better supporting changing requirements.

Microsoft’s as well as SAP’s core banking strategy sees SOA as the basis of the end-state architecture for a new generation of agile banking platforms, which will consist of a collection of ‘banking enterprise services’ that can be orchestrated by means of business process design and management tools. SOA enables banks to maximise the reuse of existing inhouse and third-party IT applications — for example, an application that a cashier uses to access customer account information in-branch can be reused by the customer to access their account online — the same service, just a different type of access.

To aid the industry’s gradual transition to SOA, 17 financial services and technology industry leaders have joined forces to launch the Banking Industry Architecture Network (BIAN). Major banks such as Credit Suisse, Deutsche Bank, ING, Deutsche Postbank, Standard Bank, and Zürcher Kantonalbank are working with leading technology and services providers Microsoft, SAP, Swift, SunGard, Axon, Callataÿ & Wouters, Finanz IT, ifb group, Steria Mummert and Syskoplan to lend significant support to BIAN, creating an initiative from the banking industry for the banking industry that will assist banks with the implementation of SOA roadmaps and removing barriers to the interoperability of applications.

Through this consortium, we aim to define a common global language that can be spoken by different applications, thus reducing the expensive and labour intensive process of mapping between them. The emphasis is very much on an open membership — SAP and Microsoft believe it is important for the industry to converge and work towards standards independently of any particular implementation platform.

Microsoft is working together with SAP because both organisations believe the industry will benefit from a consensus around a common services landscape and standard semantic definitions. By active engagement in the initiative, Microsoft can give direction to its ecosystem of partners in terms of the solutions that banks need. The fact that Microsoft and SAP are working together emphasises the open and non-proprietary basis on which BIAN will operate. It also ensures that the resulting services and specifications can be implemented on a variety of technology platforms.

BIAN operates through working groups, which bring together leading banks and software vendors. The focus is on the delivery of immediate results by building on past experience to define services within an agreed common landscape. By taking a fast and pragmatic approach to the issues, we hope to continually push things forward. An architecture committee ensures that all parties adopt a common SOA-based approach, and the resulting specifications are recorded in a way that enables them to be used to develop and implement services in an efficient manner.

One of our most important principles is not to create standards in competition with those that already exist. We aim to make use of existing vertical standards such as IFX and FIX wherever possible, while still looking to close the gaps that exist in some banking scenarios. BIAN will concentrate on functional architectures and semantics.

The need for BIAN, and its potential impact, cannot be underestimated. Large global banks have a worldwide perspective on service requirements, and arriving at a consensus on the sorts of services required by them will encourage the vendors to provide suitable solutions, with BIAN addressing the semantic standards where necessary. Many banks have already joined BIAN, and are gaining insight into the prerequisites for an SOA in order to pursue the development of their implementation roadmap. They will be able to learn from leading experts and exchange thoughts and experiences on standardised services with other institutions.

When banks come to implement their SOA roadmap they can continually benchmark it against the latest industry opinions, making a successful implementation much more feasible. Through member discussion and agreement, BIAN aims to provide a detailed picture of what SOA end-states look like, which will give vendors a backdrop against which to supply solutions and make it easier for banks to buy at the level defined in their roadmap. Participation offers immediate benefits for both BIAN and the bank’s own organisation, says Marc De Groote, CEO of Callataÿ and Wouters: “The major deliverables we found are meta model and service landscape. It boosts and accelerates service definition in the company.”

The potential cost of IT can pose a significant challenge to the business case of large-scale SOA implementations, and both banks and suppliers would benefit if that cost hurdle were lowered somewhat. One of BIAN’s foremost goals is to help achieve that. By bringing to market services aligned with BIAN’s common services landscape, software vendors will be providing solutions to suit all needs, encouraging the transition from in-house development of banking applications to a more balanced buying and building approach.

There are significant organisational implications from moving to an SOA, not least of which is the fact that it is the business that funds investment in technology. It is not sufficient to simply buy a ‘perfect and complete’ service repository. Even with an ideal set of services available and clearly defined in one repository, banks still need to address organisational changes and changes to the mindset if the technology is to be fully integrated with the business, accepted by users across the organisation and, ultimately, used to its full potential.

Many banks want to know not only which services are available, but also how best to use them. Internal IT needs to show the business that there are clear benefits from changing the way projects are funded and initiated to allow the build-up of common services that can be used across different business silos. Ultimately, BIAN will help foster and develop existing service ecosystems, while driving the industry towards greater harmonisation and the successful realisation of many SOA projects.

Oliver Kling is solution architect at SAP, and Koen Van den Brande is industry manager for core banking worldwide at Microsoft. This article was first published in the Summer 2008 issue of Finance on Windows magazine.