Service Oriented Architecture: the next generation strategy
The financial community must find ways to react quickly to
market change, create intra- and inter-company business models and processes,
and possess real-time information to make decisions. The answer is Service-Oriented
Architecture, an IT strategy that organises discrete functions contained in
applications into interoperable, standards-based services that can be combined
Agility is the watchword for the financial services industry.
But how can an organisation with some many overlapping legacy systems re-new
itself as a fast, flexible and service-centric organisation?
Financial Services covers a broad spectrum of businesses,
products and services, yet the challenges across each area remain consistent.
Whether its a retail bank, a securities firm selling prime brokerage,
trading, and custody, or a financial advisor advising on wealth managementeach
one is challenged with tackling similar issues: organic growth, operational
cost reduction, and risk and regulatory compliance.
Take retail banking, for example. Outstanding service across every channel is
their battle cry. Large corporations or individual retail customers expect a
seamless, integrated customer experience. But this requires a strong infrastructure
foundation to connect information and users across the enterprise, manage business
processes, customise the user experience, and meet new requirements.
Competition for assets and fee
income is driving securities firms to enhance their institutional service
offerings. Sell-side firms are using integrated research, risk management
and trade execution as differentiators to win prime brokerage and other
business from hedge funds and other buy-side clients
The same applies to the institutional trade management community.
Here, the Directive on Markets in Financial Instruments (MiFID), which is aimed
at harmonizing and achieving higher transparency in capital markets throughout
the world, is putting a huge pressure for change to the industry. The MiFID
impact wont stop when it goes live on the 1st November 2007 either. In
fact, it represents the first chapter of a long term transformation program.
The Indian capital markets are set to change radically during the course of
the next few years and firms will need to adjust their strategies continually
to remain competitive. Investment firms that develop a joined- up response to
the directive one which meets the compliance requirements and creates
opportunities to continuously improve business processwill gain advantage.
MiFID is the latest driver adding up in a world that is already
struggling with change and innovation. Competition for assets and fee income
is driving securities firms to enhance their institutional service offerings.
Sell-side firms are using integrated research, risk management and trade execution
as differentiators to win prime brokerage and other business from hedge funds
and other buy-side clients. Global banks are incorporating treasury and custody
services into their securities offerings for improved customer service and cross
sell opportunities. And buy-side firms are streamlining internal operations
and improving channel access to boost efficiency and increase share.
Risk is also right up there on every boardroom agenda. SOX, Basel II and a more
competitive business climate have put pressure on global financial institutions
to increase visibility into risk. As a result, firms are improving monitoring,
enforcing employee compliance with policies and procedures, and assessing their
operations to identify potential problem areas. Regulatory compliance requires
a strong infrastructure foundation to connect compliance point solutions with
information and users across the enterprise. All too often an institution buys
a compliance package and checks the box for compliance only to find
serious gaps in their ability to identify and correct potential problems, because
the solution is not integrated with enterprise data sources, systems and workflow
Distil all of this down, and we reach some common denominators. The financial
communitywhichever sphere it representsmust find ways to react more
quickly to dynamic market change, create intra- and inter-company business models
and processes, and be in possession of real-time information to make decisions.
In short, these organisations must transform their traditionally separate and
fragmented silos of frozen enterprise assets into liquid enterprise assets,
plugging gaps between people, processes, applications and systems. By bridging
the gap between IT and the business and effectively aligning technology with
business goals, they will possess the customer-responsiveness, efficiency, and
agility needed to tackle the fundamental market challenges.
Liquid Computing Environment
So how can banks, the capital markets, asset management companies, and mortgage
or credit providers unlock their assets and create this liquid computing environment?
The answer is Service-Oriented Architecture, or SOA. This is an IT strategy
that organises the discrete functions contained in applications into interoperable,
standards-based services that can be combined and reused quickly to meet business
needs. SOA is a higher level of application development that enables IT to focus
on business processes, rather than the underlying IT infrastructure, to achieve
competitive advantage. It is invaluable to financial service organisations as
they struggle to minimise redundant infrastructure and create a common business
interface across customer and employee systems. In simple terms, SOA transforms
financial services organisations into liquid, service-driven enterprises.
This isnt hyperbole either: SOA is a reality that is happening right now.
Financial services organisations around the world see SOA as a top priority
over the next 12 months. In a recent IDG survey, the number of respondents who
said their company considers SOA a critical or high priority for the next 12
months increased to 52 percent, up 10 percent from a similar study conducted
by IDG Research in May 2005. In addition, 79 percent of respondents said SOA
would be a critical or high priority in the next five years, an 18 percent increase
from the survey that was conducted nine months ago.
Achieving a Service-Driven Enterprise
So where do organisations start on their road to SOA? Achieving a service-driven
enterprise requires more than just deploying products. Organisations will want
to engage an experienced SOA provider with services that can help both business
and IT stakeholders. They need to pick a starting point, plan a long term strategic
roadmap, and consistently execute on a project-by-project basis. Most importantly,
they need to consider approaching SOA via a proven practice methodology. This
methodology would include several domains: an aligned business and IT strategy,
allowing solutions to be implemented, in a coherent, repeatable way; an architectural
framework that allows the assembly of components and services for the rapid
and dynamic delivery of solutions; and the measurement of costs. The methodology
would also include the identification of applications that will be incorporated
into the SOA architecture; the identification of the building blockscode,
services, applications and componentsthat can be used and reused in a
SOA implementation. Roles and responsibilities also need to be identified for
new service-oriented IT organisations.
By Shailender Kumar, Managing Director, BEA Systems