By: Robin Hinds, Senior Architect
In the banking world, where technology is one of the most critical differentiating factors for the business, many institutions are struggling to understand and manage the partnership that exists between business and technology and how this partnership provides and supports the best customer service and products available. Could enterprise architecture be the answer your bank is looking for?
Whether your strategy is best in breed or best bang for your buck, chances are that your bank has evolved to a multi-vendor technology landscape where many commodity and differentiated services are provided by external vendors alongside your core internal applications and infrastructure. In fact, this trend is accelerating as more technology vendors provide extremely cost-effective and secure “cloud-based” solutions for banking technology needs. Even at the foundation of banking technology, an increasing number of banks now utilize hosted solutions for their core banking as well as many ancillary systems.
Ultimately, efficient businesses are able to integrate and manage internally and externally provided technology capabilities together as enterprise resources that help provide the best, most seamless and consistent customer service, whether it be in the branch, on the phone or across ATM, Internet or Mobile channels.
At many banks, technology vendor relationships are managed directly by the primary business unit user of the system and are distributed across the organization. While this keeps the technology vendor close to the business it serves, there is often limited framework or support in the organization to provide visibility and share functionality with other business units that may be able to leverage capabilities of a given system.
The term enterprise architecture has many definitions and interpretations. As a practice, enterprise architecture has two key dimensions:
1. Understanding and modeling the enterprise view of how the business and its technology and data work together to support today’s business outcomes; and
2. Aligning and guiding future changes relating to corporate, business and technology strategy.
As the banking industry continues to become increasingly technology-centric, it also becomes an industry for which enterprise architecture will have a pivotal future role. This is true for banks across the size spectrum, from smaller banks that may be much more inclined to use external technology providers to larger banks with more complex and larger scale business and technology operations to control and manage.
Understanding the current state
In the banking world, the first dimension of a “Banking Enterprise Architecture Model” represents your bank’s unique functions, the technology applications supporting them and, where appropriate, the technology assets that support those applications, even down to the servers, storage devices, and networks. This enables a shared understanding of how the complex network of applications work together to support your business. For example, it is important that your organization holds and retains the knowledge of how technology supports your critical customer channels (teller, ATM, phone, online and mobile banking systems) as well as your payments processing (wire, ACH, transfer and bill-pay) and your core products (core deposits, loans, credit cards, etc.). This is particularly important when these systems are provided and supported by multiple vendors and internal IT partners. Having this knowledge within the bank is critical in order to retain control of your organization’s future and avoid costly reliance on vendor resources. It is always important to be an educated buyer of technology, and enterprise architecture allows you to represent, use and maintain this critical knowledge.
With a shared model and understanding of how technology supports the business functions across the enterprise and the interdependencies between technology components, organizations have a foundation that enables a multitude of benefits, including:
- Common definitions of internal and external technology for reference and comparison
- A framework for transparent internal IT cost allocation and comparison to external providers (removing arbitrary allocations and driving the right business behavior)
- Knowledge to support coordination of issue resolution and disaster recovery
- Understanding of the flow and control of data through the bank’s systems
- A view of current capabilities that could be used to satisfy immediate business needs
Mapping the future (the known knowns)
The second dimension of enterprise architecture is time. Enterprise architecture allows you to take corporate, business, and technology strategies alongside changing business or technology requirements to work collaboratively to define and agree on the changes required across the organization. This, in turn, allows institutions to leverage known current capabilities most effectively, satisfy business requirements, and align technology with strategy. This change can be visualized as a whole or segmented by each business unit in the form of a “technology roadmaps.” These roadmaps are anchored by the representation of the known current state and show the planned change over time and the resulting future state(s).
Technology roadmaps combine internal and external technology and allow the business and technology providers to align on a shared expected journey. This journey can incorporate vendor roadmaps, support life-cycles and technology upgrades to allow a business to best utilize the technology it owns and minimize any risks relating to support or aging technology.
In addition, roadmaps provide the basis for more responsive discussions around unplanned challenges that invariably arise, whether that be using existing technology to provide immediate tactical solutions or changing overall direction and strategy to cope with market, regulatory, or strategy change.
Technology roadmaps allow organizations to take advantage of additional benefits, such as:
- Optimizing usage of current capabilities and maximizing ROI
- Incorporating vendor product roadmaps to provide insight and help influence business strategy
- Showing alignment of planned change to strategies
- Responding to urgent business needs
- Providing guidance and context to projects implementing or changing technology
- Reducing reliance or tie-in to technology vendors
Establishing an enterprise architecture capability at your bank
Where do you start? Establishing enterprise architecture is about defining and populating the right model that allows you to map your business to your technology world over time. This involves both business and technology analysis, but it does not have to be a multi-month effort across the organization. Once established, your business and technology does not typically change drastically over time, so maintaining the model is not a large overhead for the bank and does not require a large FTE investment.
Organizationally, enterprise architecture can be a part of your bank’s technology function or it can be a separated function that sits independently from internal technology and vendor-provided technology. This depends on the dynamics of your organization and the defined responsibilities of your internal technology capability. Enterprise architecture can also be related and aligned to strategic planning, vendor management, and procurement/sourcing functions within your organization. In particular, annual strategic planning and budgeting processes related to technology can be greatly simplified by having access to the latest view of your enterprise architecture model and technology roadmaps.
By establishing enterprise architecture, many organizations are able to rationalize applications, identify cost savings, and reduce risk across the enterprise. This provides some financial return on the initial cost, but the real ongoing benefit of enterprise architecture for banks is the ability to continue to grow competitive advantage and operational efficiency for returns that far exceed investment.