Core Processes That Deliver ROI

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1 Core Processes That Deliver ROI The SOA & Business Rules Advantage Wed, Oct 24th 2007 FST Banking Technology Conference Stephane Marouani, ILOG Operations Manager, ILOG Australia P/L

2 The theory of SOA Applications Coarse-grained Services = business services Fined-grained Services ready for reuse Mainframe ERP Reuse = cost reduction = agility Legacy 10/24/2007 ILOG, All rights reserved 2

3 The benefits of SOA for your business processes What SOA does Accelerate the implementation of business processes By exposing IT Assets as services Simplify the expression of business processes By removing integration logic from business processes What SOA does not You re at the mercy of your services Limited business visibility - Services are black-boxes Reduced agility - Services encapsulate business logic but don t make it easier to manage Copyright 2007 by ILOG, Inc. - All Rights Reserved 3

processes What SOA does not You re at the mercy of your services Limited business visibility - Services are black-boxes

6 Decision-points exist in every layer User Interfaces Interaction flows Human process flow Personalization Cross-sell Smart Questionnaire Business services Integration process flow Eligibility Data Quality Credit Decisioning i i Routing Application services Pricing ERP Custom apps CRM Vertical apps Underwriting Data services Data Quality Data Compliance

process flow Eligibility Data Quality Credit Decisioning i i Routing Application

7 Typical Issues with Decision Services Impact on Business & IT Issues IT Impact Business Impact Decision Services are black boxes Poor reuse Increased development time/cost Weak agility cannot respond effectively to changing environments Decision i Services are No improvement of Weak flexibility cannot hard-coded maintenance time/cost IT is the bottleneck revise current actions to achieve higher degree of performance Decision Services are hard to audit Unable to meet audit requirements of traceability and reporting No transparency (ROI) risk of incarceration Copyright 2007 by ILOG, Inc. - All Rights Reserved 7

hard-coded maintenance time/cost IT is the bottleneck revise current actions to achieve higher degree of performance Decision Services are hard to audit

8 What the FSI is facing? over 200 Billion lines of COBOL code are still in existence 1/3 is business logic the median age of the COBOL programmer is 47-51

10 Traditional vs. Transparent Decision Services Traditional Decisions Services Transparent Decision Services Hard-coded decision logic Developed by IT Maintained by IT Managed by IT IT log No reusable Externalized decision logic Modeled by Business Analysts Maintained by Business/Policy Mgrs Managed by IT BAM reports Easy to reuse and repurpose Copyright 2007 by ILOG, Inc. - All Rights Reserved 10

Hard-coded decision logic Developed by IT Maintained by IT Managed by IT IT log No reusable

14 Who can change what? Will I break something? What do I need to change? How to Manage Change? What is the How do I undo impact? a change? What has changed? When will it take effect? Who changed what? 10/24/2007 ILOG, All rights reserved 14

15 Transparent Decision Services Benefits Agility and compliance first (short term) - Accelerate the time to value by leveraging flexible decision services - Improve compliance management by making the decision logic transparent Reuse and governance next (long term) - Maximize the reuse of decision services - Improve SOA governance by empowering business teams 10/24/2007 ILOG, All rights reserved 15

the decision logic transparent Reuse and governance next (long term) - Maximize the reuse of

16 Decision Service Best Practices Think reuse Think access to the business teams Think integration ti on all fronts Runtime, modeling, reporting Keep your processes simple Identify eligible decision services Separate business policies & processes Copyright 2007 by ILOG, Inc. - All Rights Reserved 16

your processes simple Identify eligible decision services Separate

17 Best Practice: Quick Win Biggest bang for the buck Loan Sourcing Loan Processing Funding & Closing Servicing Portfolio Management Pre-qualification Pricing Deal structuring Product/deal selection (best-fit) Loan disclosures Fraud detection & management Automated underwriting Collateral valuation Pricing & pipeline management Document tracking Quality control Alerts/triggers Investor remittance Collections & recovery Line management Dispute management Customer service Customer segmentation ti Customer retention Cross-sell Profitability & account management Application submission Workload balancing Copyright 2007 by ILOG, Inc. - All Rights Reserved 17

management Document tracking Quality control Alerts/triggers Investor remittance Collections & recovery Line management Dispute management Customer service Customer

18 Best Practice: Quick Win Identify baseline first & enhance in iterations Options Fixed Adjustable rate 80/20 Neg. Am Programs Prime ALT-A A Home Equity Decisions Eligibility Pricing Credit scoring Condition & stipulations Referral, case management Product optimization Deal repair / counter offers Channels Retail Wholesale Web Copyright 2007 by ILOG, Inc. - All Rights Reserved 18

Am Programs Prime ALT-A A Home Equity Decisions Eligibility Pricing Credit scoring Condition &

19 Success at Option One Mortgage Company (OOMC) Pre-qualification & Underwriting s Goal Reduce loan sourcing and processing costs Respond more quickly to pre-qualification requests Augment capacity without increasing staff efore B Account Executives frustrated with inability to provide the type of service customers expect Back office and IT staff frustrated with tedious maintenance of similar business rules in multiple systems After Faster, more reliable and easily auditable loan sourcing and processing All business rules managed in a centralized repository Business rules maintained by business analysts How ILOG BRMS to support pre-qualification, underwriting and pricing decisioning Business rules re-use across business processes, applications and channels Benefits Improved customer service Web enabled pre-qualification Increased Account Executives productivity by 50% Improved IT infrastructure to support growth and e-mortgage initiative Copyright 2007 by ILOG, Inc. - All Rights Reserved 19

business rules in multiple systems After Faster, more reliable and easily auditable loan sourcing and processing All business rules managed in a centralized repository Business rules maintained by

20 Success at Equifax Credit Decisioning s Goal Improve credit decisioning services and customer experience Provide greater customer control by enabling rules management at customer level Consolidate inventory of decisioning and automation capabilities into one integrated platform efore B Decisioning platform would not scale to adapt to growing customer base Hard to integrate and deploy across channels Hard to integrate and use all data sources After High performance, scalable platform Flexible, rapid and business user friendly rule definition and maintenance Business rules are centrally managed and can refer to any data source How ILOG BRMS to support risk assessment, compliance and credit decisioning Business rules re-use across business processes, channels and custom solutions Extend certain rule management capabilities to customers through web-based access Benefits Improved customer retention and acquisition with enhanced and new service (ASP) Reduced time-to-market by 50% Policy changes in real-time or days vs. weeks and months More standardized decision making while enabling custom solutions Copyright 2007 by ILOG, Inc. - All Rights Reserved 20

channels Hard to integrate and use all data sources After High performance, scalable platform Flexible, rapid and business user friendly rule definition and maintenance Business rules are centrally

21 Take Aways Think big, start small, build incrementally LOB focused project as pilot Enterprise shared services & platform as goal Do not shortcut requirement gathering & formalization Involve IT & business stakeholders - have them work together Involve end users from day 1 - ask them want they want & do not want from the system Do not think process first or rules first Avoid major rework Get increased flexibility to accommodate changing requirements Focus on business goal rather than automation for the sake of IT infrastructure enhancements Copyright 2007 by ILOG, Inc. - All Rights Reserved 21

22 Sept 24 th, 2007 Business Rules Software: Why You Need To Care John Rymer Business rules software should no longer be considered a niche product. Indeed, business rules will enable most of the next generation of applications 10/24/2007 ILOG, All rights reserved 22

23 Sept 28 th, 2007 The Anatomy of a Business Rule Management System Eric Deitert, David W. McCoy Organizations should invest now in a BRM strategy. [ ] a strategy for BRM is much more important than the purchase of any particular rule-enabling technology 10/24/2007 ILOG, All rights reserved 23

24 Oct 7 th, 2007 The historical, but naïve, approach to business rules must change. Enterprises that expect to generate agility through service orientation and BPM must build support for explicit business rules and a comprehensive business rule management strategy. 10/24/2007 ILOG, All rights reserved 24

25 Wamu Flexible lending rules

26 Q&A Thank You Wed, Oct 24 rd 2007 Business Rules Forum Stephane Marouani

Answers to Top BRMS Questions

November 2009 Answers to Top BRMS Questions Answers to ten frequently asked questions about what business rule management systems are and how they are used Brett Stineman Product Marketing, Business Rules