Selecting a Systems Integrator to

Implement a Core Banking System

Given the risk and multiple stakeholders involved, banks need SI partners
that can collaborate and communicate with internal constituents and
with other third parties, and have demonstrated domain and technical
expertise aligning software solutions with business objectives.

Cognizant 20-20 Insights

Executive Summary
Historically, systems integration was largely
a technical and an operational task. It was
considered as part of the wider area of systems
engineering. However, in the last decade or so
systems integration is considered to be a strategic
enabler across different levels of the business
such as systems engineering and operations, and
is seen as critical in assisting senior management
decision making.
Implementing a core banking system (CBS) is
a prime example of this change in the thought
process. It often leads to a large, complex project,
with multiple stakeholders across multiple groups
within the bank. The outcome of a core banking
implementation can lead to a higher level of differ-
entiation in the market or an enriched customer
value proposition. Moreover, if the transition is
not managed properly it can pose serious risks
for the bank.
Considering the high level of risk involved,
coupled with the involvement of multiple stake-
holders, the importance of the role of a systems
integrator (SI) cannot be overstated. The cost,
scope, quality and importance of strategic initia-
tives around CBS implementation requires the
attention of many parties, each of whom brings
in a different dimension on the decision-making
process.
The role of an SI in a CBS project can be catego-
rized as follows:

Provide business and product expertise:
>
Business expertise: An SI is expected to
exhibit a sound understanding of the vari-
ous lines of business (LOBs) of the bank
and the business and technology impact of
a CBS implementation on each LOB.
>
Product expertise: An SI should provide
an integrated solution across multiple prod-
ucts and services that are involved in a CBS
implementation.
>
Program management: Since the SI owns
the program, it should have a consolidated
view of all activities, interdependencies
and impacts of changes across the entire
program.

Collaboration across vendor organizations:
>
Vendor collaboration: An SI is the single
cognizant 20-20 insights | december 2012
cognizant 20-20 insights 2
point of contact for the bank. It is respon-
sible for the integration of efforts across
multiple vendors, all of whom may be con-
tracted by the bank.
>
Communication management: One of the
key responsibilities of an SI is to manage
communication across vendor organiza-
tions and different groups within the bank.
The SI is expected to be aware of all chang-
es that occur as a result of a CBS implemen-
tation and is in a position to understand
the impact of these changes on the overall
program.
>
Business process management: An SI is
responsible for the integration of interde-
pendent functions and business processes
of the bank and brings in substantial domain
and process expertise that are essential to
understanding the functioning of a bank.
This white paper explores the process of SI
selection for CBS implementations by explaining
best practices and procedures as well as criteria
required.
SI Selection Process
Banks nd it increasingly difcult to differenti-
ate among SI vendors. Hence, it is recommended
that a bank use a structured decision model to
decide on the most suitable SI. We recommend
the following steps to choose the SI for a CBS
implementation.

Business case creation: In this stage, the
SI is expected to create a business case for
implementing a CBS. This could be a new
implementation or an upgrade. In either case,
the business case is expected to cover the
following areas:
>
Business benets: Such benets could in-
clude reduced time to market for products,
improved customer satisfaction, etc.
>
Financial benets: Financial benets are
typically associated with cost reductions.
Key nancial benets anticipated through
the implementation of a CBS are reduction
in ongoing costs, reduction in hardware
costs and an overall reduction in total cost
of ownership (TCO).

Develop criteria for evaluation of SIs: In this
stage, the bank develops a list of criteria for
evaluating SIs. These criteria are based on the
banks nancial stability, proven track record of
executing similar engagements, global reach,
product knowledge, etc.

Segregate criteria into mandatory and
important: At this stage, the criteria are
segregated into mandatory (i.e., those that are
absolutely essential, and the failure to meet
any of which will have an adverse impact on
the project) and important criteria that, while
important, are such that even if they are not
met, risks arising from them can be mitigated
adequately. This is discussed later in this white
paper.

Perform initial screening of SIs: As part of
the initial screening, only those vendors that
meet all mandatory criteria are considered.

SI nalization: After the initial screening,
the important criteria are assigned risk-based
weights. The shortlisted SIs are evaluated
using an analytical hierarchical process (AHP)
or other combinatorial optimization algorithms
such as UKP.

Risk assessment and management: As
part of this step, additional business risks are
identied. These risks may be related to the SI
selected (based on the important criteria that
the selected SI doesnt meet) and risks within
the computational framework. A mitigation plan
is then created; these risks are then monitored
throughout the CBS implementation.
SI Selection Criteria
Every bank will have a predened set of criteria
for vendor selection based on its vendor
management principles. The criteria for selecting
an SI to implement a CBS will be based on the
same principles. The following list can be used
as a guide where vendor management processes
have yet to mature.
We have connected various criteria used by banks
into four broad categories.

Program management capabilities: Banks
look at SI vendors as strategic partners that
can assist them in transforming project/
program management practices. As part of
the SI selection exercise, banks expect that
the SI vendor can deliver most, if not all, of the
following services:
>
Leading-edge program management
methodologies: Banks expect SI vendors to
bring proven methodologies, processes and
tools on large program governance, project
planning and governance, change manage-
ment and control, vendor/contract manage-
ment, frameworks for quality management,
etc.
cognizant 20-20 insights 3
>
Program management ofce (PMO) sup-
port: Banks expect SI vendors to provide
support for functions by dening new pro-
cesses or rening existing processes as ap-
plicable.
>
Work stream management: In addition to
the above, banks may also expect the ven-
dor to manage additional work streams. Ex-
amples of these include:

Integration management: Drive overall
solution integration ensuring integrity of
the solution design, interdependencies
and delivery of the end-to-end solution.

Deployment management: Handle the
overall deployment planning and execu-
tion including solution delivery for dif-
ferent phases of testing and rollout. An
SI vendor is expected to work with the
deployment managers and project man-
agers from other work streams in the
program to achieve the desired results.

SI focus on the banks business segment:
Another key parameter that banks must
consider is the focus of the vendor on the
banks business area. Banks typically gauge the
vendors focus and commitment to continuous-
ly enrich and improvise on available solutions
to meet evolving banking requirements. Banks
typically assess this by various criteria such as
contribution of their clients to overall revenue,
investments in the core banking space,
customer sites across the globe and the prole
of its key clients.

Financial stability: Financial strength and
business continuity are important attributes
for evaluating an SI. This is not surprising, con-
sidering that the payback for a core banking
system is approximately four to ve years.
Transforming core banking systems brings
about changes in operating processes, systems
and interfaces, and tends to involve the re-
skilling of people. The TCO is quite signicant
in most cases. Hence, it is imperative that the
SI exhibit long-term viability.

Cost-effectiveness: Investment in technology
and improved processes is seen by banks as
a way to attain competitive advantage. Banks
expect SI vendors to deliver streamlined
processes reducing overheads and providing
cost-effective services over a period of time.
Conclusion
The responsibilities of an SI are viewed differently
across regions. In Asia, banks look at an SI as a
partner that can bring in banking expertise. Banks
are keen to understand industry-specic offerings
and service/product innovations that can benet
the bank. They also look at an SI as an entity
that can help them transform
their program management
practices, bringing added ef-
ciencies in scale and execution.
In Europe, banks look at an SI to
provide expertise in two main
areas: product expertise, and
as a change agent to help them
improve internal program/
project management processes.
The dimensions used by bank
IT organizations to evaluate
core banking systems integra-
tors are not always the same
as the areas that core banking SIs focus on. A
large number of SIs emphasize more horizontal
skills across multiple core banking products. On
the other hand, banks look for SIs that exhibit
commitment to innovation and investment in
solutions in the banks areas of business, and that
have more focused models dealing with one or
two CBS products usually supported by a strong
alliance with the product vendor.
References

The Business of Systems Integration, Andrew Precipe et al., Oxford University Press.

The Forrester Wave: Global Banking Platform, Q1 2009, Jost Hoppermann, Forrester.

Trend 2005: European Banking Architecture, Jost Hoppermann, Forrester.

Corebanking Platform Replacement, Adpar Solutions.

Celents ABCD Analysis on Corebanking Products, Stephen Greer and Bart Narter, Celent.
Banks typically
gauge the
vendors focus and
commitment to
continuously enrich
and improvise
on available
solutions to meet
evolving banking
requirements.
About Cognizant
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About the Authors
Srivatsa Subbanna is a Manager within Cognizant Business Consulting, based in the Netherlands. He
has 10 years of experience with IT and business transformation projects in Europe, the U.S. and the Asia-
Pacic region. His expertise includes business analysis, process consulting and transformation using
methodologies such as Lean/Six Sigma. He holds a post-graduate diploma in management studies from
the Indian Institute of Management, Calcutta. He can be reached at Srivatsa.Subbanna@cognizant.com.
Anirvan Saha leads the Core Banking Consulting Practice within Cognizant Business Consulting. He
has 13 years of experience in consulting and software services in the retail and commercial banking
spaces. He has expertise in business process management and complex software implementation
programs in the domains of core banking, anti-money laundering, Basel II credit risk, commercial
lending, retail banking and mortgage. Anirvan holds a bachelors degree from IIT Kharagpur and is
a management graduate from the Indian Institute of Management, Calcutta. He can be reached at
Anirvan.Saha@cognizant.com.