In this last part of our series on technology issues facing senior banking executives, we turn to tactical, practical ways to take full advantage of the emerging technology.
It has been axiomatic in the banking industry for years that banks are data rich and information poor. But the competitive pressures fueled by shifting consumer expectations, regulatory changes, the disinter-mediation of products and services, and consolidations in the industry mean that the information poor will soon be starved out of the market.
Bankers have been talking about the need for better, more timely information for decades, and in their quest have spent considerable time, money, and resources in largely futile efforts to extract data from disparate systems. The results have been frustrating, and the solutions have been fragmented, inconsistent, and inflexible.
From these expensive past lessons, two main facts have emerged about the shifting technological landscape. Both are intertwined, and understanding them is critical to successfully leading your bank into the future.
* Legacy systems cannot meet the information needs of the '90s and beyond.
The basic design of legacy systems - the mainframes that support transaction processing - limits data access. Since these systems were designed from an account-centered viewpoint, they process their transactions within their own data structures.
While ideal for operational audits of a single account, these systems am typically restricted to single, inflexibly structured data bases and don't easily support strategic and management information needs.
Meanwhile, remember that vendors of legacy-based systems and applications have made substantial investments in their products and tool sets. Naturally, these vendors have a strong incentive to maximize the return on their investments, and are resisting the new technology. The simple fact to remember is: No new mainframe systems are currently being planned or created.
* Client-server-based core systems are not available yet.
The paradox is that when it comes to handling the core transactions of your business, no client-server system is available to replace the aging legacy systems. Although several companies are working on systems to meet core system needs, proven, robust, mission-critical systems will not be generally available until the late 1990s.
It will take some time to develop and hone the management tools for a client-server platform that can reliably monitor and diagnose a huge number of transactions over complex networks.
The competitive challenge, then, is to design a bridge to close the gap between your current information needs and the future technology that will ultimately solve the problem.
This bridge needs to be extensible - that is, it should be based on the same information infrastructure as the ultimate solution, and it must meet your current information requirements in a way that helps lay the foundation for true client-server core applications.
The Roundhouse Model
We recommend bridging the gap between system capabilities and information needs by developing an information roundhouse system. The metaphor of the roundhouse has its roots in the railroad industry. The roundhouse was a circular piece of track that joined all the disparate tracks of a railway.
In the middle of the roundhouse was a movable piece of track that allowed cars from different trains to be broken up and repackaged for a new trip. Hence, the roundhouse mixed, matched, and routed passenger cars, freight cars, and livestock cars the same way a bank needs to consolidate and manipulate account information, customer information, and financial information.
The information roundhouse should be positioned as not only a bridge from the legacy systems, but also as a foundation system for moving toward client-server core-based solutions.
As a bridge system, the roundhouse addresses the key paradox facing the bankers: Customers are demanding greater integration and customization of their financial services just as the disaggregation of products and systems is accelerating in the industry.
With productivity and customer service pressures, banks are commonly outsourcing their systems to a multitude of vendors that specialize in core processing, mortgage servicing, trust, mutual fund, and credit card processing.
While these outsourced providers execute their specialty very well, they have little expertise nor concern for integrating all of this information so that both customer relationships and the bottom line can be managed effectively.
The roundhouse model addresses this challenge and allows bankers to build for the future. It acts as a repository of strategic information accessed through a common interface focused on strategic applications and supporting both internal and external connectivity.
Using today's technology, it is finally possible to build a powerful, relational data base that can warehouse the combined strategic information from multiple legacy systems, and previously uncaptured data.
Extraction programs may be designed to select appropriate data from separate systems, schedule frequency and timing of download, and reformat and transmit the data into the roundhouse data base. This results in true cross-functional information.
In addition, because the roundhouse conforms to clientserver architectural needs, the data base offers unlimited potential accessibility and a wide range of powerful tools that can be used to access, manipulate, and report information. Finally, since the data base is relational, information can be readily added, deleted, or modified in response to competitive, market, or regulatory changes.
Because the roundhouse system complies with future clientserver developments, it will use a standard graphical user interface such as Windows.
The "look and feel" of all applications within the bank should be consistent. Adherence to a user interface standard will mean reduced training time, less user resistance, an less user error. Furthermore, by employing a standard user interface, all users of the roundhouse have a huge range of tool sets available.
Word processing, spreadsheets, and mail systems can work seamlessly and simultaneously with the roundhouse data. This interoperability can result in significant productivity gains.
One of the most compelling attributes of the information roundhouse is that it will force bank executives to recognize information as their key strategic resource. In the future, outsourced vendors will provide the bulk of information processing while the responsibility for the strategic management of information will fall squarely on the bank itself.
Specifically, this means that strategic applications such as the central information file, financial management, and process management will begin to move in-house.
The roundhouse model is especially suited to build, maintain, and make accessible a flexible CIF. Because it is a relational data base, the roundhouse model not only allows integration of customer information from a wide range of systems, but also provides easier assessment of customer and account profitability while incorporating new products and services.
Additionally, the architecture of this in-house CIF will eventually force the merger of Currently separate applications: the customer CIF, the marketing CIF, and the customer service tracking systems.
As a financial management tool, the roundhouse will be used to warehouse legacy-based information about financial consolidation, budgeting, cash flow analysis, asset/liability modeling, and board and regulatory reporting.
The power and flexibility of the analysis and reporting tools, and the unparalleled integration with other desktop applications can result in new ways of understanding and running the business. Additionally, the flexibility of the roundhouse data base will allow banks to move their general ledger system in-house onto a client-server platform. Many large industrial companies have successfully made this move.
Finally, the roundhouse model will form the centerpiece of any business reengineering and process management initiative that a bank undertakes. The data base and client-server infrastructure built with the roundhouse model will facilitate the creation of new, customer-driven and cross-functional processes.
Ms. Seymann is president and chief executive of M One Inc., a Phoenix-based consulting firm. Mr. Faulkner is the firm's managing director of technology services. This is the last of four parts.