Compared to Wachovia's Jupiter, Middlesex Savings Bank is Pluto. Not only in size, but in orbital pace: the $3.3 billion mutual savings institution, which doesn't have shareholders breathing down its neck, has been content to grow at a modest pace of one branch annually in recent years.
But to meet customer demands for seamless cross-channel experiences, Middlesex knows it must still fight for its place in the sun. For the past year, the Natick, MA-based bank has grown more nimble in product and service adoption, and adapted new back-office capabilities in support of heady business plan objectives-and has even expanded by a break-neck tempo of three new Metro Boston branches in 2006. Aggressive commercial loan growth strategies and CRM use highlight what has been an eventful year, says Middlesex evp and CIO Chuck Bauer. Another major feat was creating self-managed disaster recovery operations using cross-silo, near-time data replication, says Bauer. "That was something we did not have before."
All this was not possible until Middlesex abandoned its proprietary core system in late 2005 in favor of an open standards platform that provided a gateway to service-oriented architecture (SOA)-a red-hot IT infrastructure subject normally dominated by the tech plays of the universal giants of banking.
SOA, which is more about an approach to technology instead of specific systems and software, has trickled down into the middle- and community-tier layers of banking to become "the talk of the town," according to recent Celent report on CIO priorities. Thirty-six percent of bank tech officers make it a top-three IT priority, alongside such staples as core enhancements and upgrades to lending and branch systems. Eleven percent of bank apps are already SOA-based, and 27 percent will use SOA by the end of 2007-which is far ahead of many other industries, say analyst. "Banks are the leaders in adopting service-oriented architecture," says Larry Fulton, senior analyst with Forrester Research.
What SOA promises to deliver, if applications and services are designed and integrated properly, is an interoperable interface between all of a bank's systems-Web banking, core, sales, teller, call center, etc.-so that customer data and business logic are streamed to complement and support all elements of a strategic plan. These interfaces are quick to deploy, and also reusable for further application buildout.
Some of the major IT initiatives in the past year by Wachovia, Bank of America, Wells Fargo and VISA involve SOA. BofA announce late in 2005, for example, it was beginning work through a next-generation SOA to support an expected billion monthly on-line transactions through its Web services. Wachovia's open-architecture efforts, among the most watched in the industry, use IBM mainframe and WebSphere software to build interoperability among all the platforms and systems inherited in mergers and acquisitions - including systems running on HPUX, AIX or Solaris platforms. "The number one thing banks are trying to address is the cost of integration," says Jim Sizemore, evp and CIO of Fiserv subsidiary ITI. "But what's challenged the industry is that each one of those [interfaces] is a different and unique integration experience...than it was in the past."
For that reason, many banks are choosing SOA to re-engineer legacy applications and build them as services, according to Celent, instead of replacing IT. Providers like ITI have rapidly adapted to the SOA evolution with an outsourced or in-house support antidote. ITI, which markets the flagship Premier core platform primarily to smaller banks, has introduced middleware for institutions to adapt to SOA strategies for both in-house and outsourcing environments. "[SOA] wrappers the business logic around the data to create a service that provides that open integration, open framework, without having to understand the underlying infrastructure to make it happen," says Sizemore.
Karen Massey, a senior analyst with Financial Insights, says one undisclosed institution she's spoken with is "building a lot of one-off applications internally" that will be able to accommodate the disparate data across divisions with CRM and analytics on top of the core system already in place.
Some banks like Middlesex still opt for the "rip and replace" method. For Middlesex, the SOA task came about by accepting the limitations of a seven-year-old mainframe system that wasn't able to adapt. "We didn't look at [open architecture] from a technology standpoint," says Bauer. "Our concern was functionality."
Middlesex opted to move to a new platform from Open Solutions Inc., working in a Unix-based environment maintenance and support agreements with HP and Oracle, according to Bauer. While Bauer says the deployment hasn't been installed long enough to determine cost metrics, he's convinced the new cross-selling capabilities and new customer service protocols will no doubt be evident in time. "To support growth both from a numbers of accounts perspective and number of users, it's a lot easier to manage this in an open architecture," says Bauer.
Another consideration for Middlesex in the change was in the trouble it had recruiting qualified IT personnel who knew how to build applications or apply business processes with their proprietary system. Most of today's application builders have grown up in an open environment. Service-oriented architecture, in other words, is fast becoming the default knowledge base for approaching IT.
