The Vision of modern (Cloud) Computing within Financial Services Business Michael Schüttler (MBA) - Leader Cloud Solution Sales
The reality of living in a globally integrated world is upon us Economic growth remains uncertain Operating margins continue to shrink New regulations call for larger capital and liquidity cushions Decreasing returns on equity require greater operational efficiency Traditional banking business is threatened by adjacent industries Consumer expectations are rapidly evolving The world is connected: economically, socially and technically 2
For financial institutions this means finding a way to navigate key forces of change ECONOMY Weak conditions impact investment decisions and reduces the need for financial services. CLIENTS Rapidly evolving expectations for offerings, service, unbiased advice and convenience. COMPETITION Intensified competition with increased M&A, divestitures and entry of nonbank service providers. TRUST Rebuilding trust and confidence across the system is critical to future growth and stability. REGULATION Radically increased oversight is ushering in a new era of increased government intervention. CAPITALIZATION Mature markets and emerging markets alike are focused on rebuilding their capital reserves. 3
To drive profitability as margins shrink, financial organizations need the agility to continually re-focus on evolving customer demands. They must find ways to dramatically accelerate innovation and reduce time-to-market while cutting costs. 4
The need for progress is clear 85% $0.66 per $1 82% In distributed computing environments, up to 85% of computing capacity sits idle.¹ On average, enterprises spend two-thirds or more of their IT operating budgets on maintaining current IT infrastructures versus adding new capabilities.² Of executives who report a security breach are not confident that they can prevent future breaches.³ Sources: 1. IBM client engagements 2. Forrester Research, The State of Global Enterprise IT Budgets: 2009 to 2010 3. Ponemon Institute, Business Case for Data Protection: A Study of CEOs and Other C-Level Executives 5
The opportunity for progress is clear 40% reduction in total cost of ownership Business services: Banco Industrial e Comercial SA The bank reduced total cost of ownership by 40% by creating an inter-site cloud to host previously existing distributed physical servers. $400,000 in annual hardware costs avoided Desktop and devices: Samsung Securities $400,000 in annual hardware costs were avoided by implementing a desktop cloud and server virtualization solution that eliminated network complexity and improved manageability. Single view of data Analytics: ING Bank Slaski Data can now be entered into the system once, instead of entering it up to 20 times for different applications, giving the bank a 360-degree view of customer data which embedded analytics can use to help generate more sales. 6
The evolution of the data center Integrate and optimize Consolidate and virtualize Improve efficiency and utilization of IT resources Reduced management complexity and infrastructure costs through standardization Leverage integrated server and storage management Automate and manage Security and governance System platform optimization and integration Single interface to manage servers, storage and networking Image management to improve service delivery Integrated and secure virtual infrastructure Monitoring, capacity and analytics along with infrastructure provisioning Automated billing usage and metering Optimized environment for workload Get started: Implementing an Advanced Cloud Infrastructure Get started: Create a Cloud Strategy and Roadmap Consolidate and Virtualize Your Infrastructure Access Compute and Storage as a Service Get started: Image and Virtual Environment Management Implementing an Entry Cloud Infrastructure Cloud Service Management and Integration 7
The cloud is a user experience and a business model in which IT resources are delivered and consumed over a network Key attributes of the cloud: Rapid scalability Increased flexibility Variable pricing Faster time-to-value Early adopters of the cloud have: Reduced IT labor cost by up to 50% in configuration, operations, management and monitoring.¹ Improved capital utilization by as much as 75%, significantly reducing license costs.¹ Reduced provisioning cycle times from weeks to minutes.¹ Improved quality, eliminating up to 30% of software defects.¹ It s an evolution of the back office that is becoming an enabler of business transformation. Source: IBM Technology Adoption Program 8
The banking industry currently faces many challenges and imperatives, presenting opportunities for cloud computing Challenges Enabled through cloud Specific applications of cloud Changing marketplace Banks need to develop more innovative products and services and reduce operational expenditure to drive profitability in a rapidly evolving marketplace. A more flexible and responsive development and test environment Development and testing Enables banks that develop applications internally to procure or configure a development environment in less time and with reduced operational requirements Complex customer needs Customer expectations and needs are more complex than ever. Banks need to provide a more engaging experience and deliver more customer-centric services to retain old customers and attract new ones. Increased customer centricity Web hosting Helps deliver marketing campaign websites faster and dynamically iterate and refine messages based on market insights and trends New regulations and standards Banks need to reform their risk management culture and enable a more integrated, enterprise-wide view to better manage changing regulatory mandates. Integrated risk and compliance management Batch processing Can provide near-real-time insight into risk, business processes and performance 9
Of the dozens of business services essential to financial organizations today Processing Payments Reconciliations Authorizations Billing Settlements Customer Account Deposits (DDA) Collections and Recovery Financial Capture Customer Profile Application Processing Collateral Handling Document Management Servicing Management Portfolio Administration Custody Administration Product Tracking Wireroom (S.W.I.F.T) Trading (Front Office) Trading (Back Office) Acquisition Administration Product Processing Statements Alliance Administration Operations Administration Valuations Confirmations Contract Notes Contact/Event History Customer Interaction and Distribution Sales Market Information Service/Sales Administration Case Handling Customer Contact Handler Correspondence Relationship Management Teller Services Campaign Execution Self-service Channel Advertising Campaigns Channel Distribution Management Dialogue Handler Applications Smart Routing Financials Consolidation In-bound Call Center Local Branch Administration Insight Customer Behavior and Models Market Research Customer Portfolio Analysis Alliance and Authority Management Fixed Asset Register Business Unit Tracking Segment Analysis and Planning Acquisition Planning Business Architecture Business and Resource Planning Customer Servicing and Sales Planning Manufacturing Risk and Financial Management Product Management Product Development and Deployment Marketing Merchant Operations Product Directory Inventory Management Rewards Management Retail Securities OTC Services Portfolio Trading Fund Management Retail Lending (Mortgages) Security Market Analysis Production and Operations Management Credit Management Asset and Liability Policy and Planning Consolidated Book/ Position Maintenance Accounting General Ledger Branch Cash Inventory Financial Control Risk Management Securitization Loan Syndication Finance Policies Customer Accounting Policies Audit/Assurance/Legal Customer Credit Administration Business Policies and Procedures Treasury Business Management Technology Management 10
IBM can support you identify those that can be delivered and consumed most efficiently, effectively and securely over the cloud Business services Processing Customer Interaction and Distribution Insight Manufacturing Risk and Financial Management Business Management Technology Management Platform as a service Infrastructure as a service Deployment models Public clouds Hybrid clouds Private clouds 11
These emerging front-office capabilities are made possible by five core back-office workloads DESKTOP AND DEVICES Storing files and applications remotely and pushing them to clients in real time. ANALYTICS Turning data into insight to anticipate business conditions, avoid risks and capture new opportunities. STORAGE Putting rapidly increasing volumes of data in a location that is scalable and accessible from anywhere. 12 Cloud business services COLLABORATION Simplifying and improving daily business interactions with customers, partners and colleagues. DEVELOPMENT AND TEST Deploying virtual environments for the construction of software applications.
Collaboration: Connecting globally distributed team members can be fraught with efficiency and security challenges Critical team members can be left out Authorized people can be included inadvertently Responsibilities can be confused or unclear Version control can quickly fall apart, with many similar files and assets being referenced simultaneously Authorized participants Unauthorized participants 13
Collaboration: Collaboration software may help, but it can still leave some security and version-control issues unresolved Assets are largely centralized but can become scattered due to undefined processes The timeliness of centralized assets is in question due to side interactions Security is still a concern as the activities of authorized and unauthorized individuals intersect Authorized participants Unauthorized participants 14
Collaboration: The cloud centralizes and simplifies all interactions, enabling team members to collaborate easily and securely Cloud Processes are clearly defined and managed All team members have uninterrupted access to the latest versions of all assets, from anywhere Only authorized team members have access to assets and communications The progress of projects and materials is clear at all times Authorized participants Unauthorized participants 15
Collaboration: IBM has developed and delivered innovative solutions to organizations around the world Signature Mortgage Corporation enabled customers to complete, review and sign mortgage applications electronically via the cloud reducing average loan-processing time from seven days to 24 hours, cutting costs, improving efficiency, increasing customer service and gaining a competitive advantage. Erste Bank facilitated continuous, standardized operations and enabled employees across its distributed branches to work when and where they want by quickly accessing trading and banking systems through a security-rich infrastructure. The Horton Group, one of the largest privately-held insurance brokers in the United States gained the ability to deliver critical privacy policy training to employees in a faster, more convenient and less costly manner, and also allows it to respond more quickly to changes in legal and regulatory requirements. 16
Analytics: The traditional approach to business intelligence involves limited quantities of data and largely manual processes Administrator Inputs User Queries Data sources are limited stock prices, interest rates, defaults, etc. Data is of a single format and must be managed manually Data remains at rest until a user prompts the system Insight generated from a single query is finite the process must be repeated to gain additional insights Data source Data Insight 17
Analytics: More advanced computing draws on large volumes of data, converting it into a stream of real-time insights automatically Data sources increase in number and type macroeconomic, transportation, weather and more Data types are varied Insight generation is automated and continuous Data source Data Insight 18
Analytics: Smart analytics on the cloud pulls from countless data sources to drive a massive, continuous chain of insight generation Cloud Data sources are further increased in number and type Insights generated are used to drive more insights, which are used to drive still more insights, and so on in real time Insights trigger automated actions buys, sells, rate changes, etc. instantly Data source Data Insight 19
Analytics: IBM has developed and delivered innovative solutions to organizations around the world A major Japanese investment firm adopted an on-demand computing solution with a dedicated grid infrastructure to provide a secure, high-power computing environment which provides the company with the high-power computing it needs to run financial risk analysis applications at a very low cost. ING Bank Slaski designed a new sales platform based on an application package which enables tellers to enter data into the system only once, instead of entering it up to 20 times for different applications, giving the bank a 360-degree view of customer data which when combined with embedded artificial intelligence can help generate more sales. The treasury department of a computer services company created a worldwide, centralized BI service to make analytics and business intelligence (BI) capabilities available company-wide and uses that platform to integrate a set of financial applications that centralize global treasury operations on a single platform and facilitate visibility into a range of global treasury processes. 20
Development and test: With the cloud, teams can select from a catalogue of preconfigured assets to deploy in minutes Cloud Selecting and provisioning assets, and deploying a cloud environment Developing and testing software A system administrator selects preconfigured assets from a catalogue on the cloud and deploys a unique cloud environment in minutes Because fewer IT professionals are necessary, a greater percentage of staff can be devoted to development and testing Developers can access the environment and collaborate with each other in real time, from anywhere in the world Time to market is optimized Assets IT professionals Software developers 21 21
Financial institutions can move beyond today s challenges of increasing profitability in the face of shrinking margins and begin driving long-term value through innovation and forging deeper relationships with customers and partners. The time is now. The key is a flexible, dynamic IT infrastructure enabled by cloud computing. 22
Michael Schuettler Leader Cloud Solution Sales IBM Deutschland GmbH Mobile +49 171 86 26 454 schuettl@de.ibm.com 23
ibm.com/smartcloud 24
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