Banking Transformations Setting up for Failure

Banks across the globe have been embarking on core banking
transformations with a view to enhance productivity and
augment customer experience. However, they need to be
cognizant of several pitfalls that await any core banking
transformation.
Banking Transformations –
Setting up for Failure
View Point

2Maveric Systems
Banking Transformation Landscape
Driven by the rapid changes to technology landscape and customer preferences, global banks have been
embarking on transformation of their core banking systems to achieve business efficiency and agility in
operations. Banks embark on transformation initiatives thrilled at the thought of overhauling their
inefficient ways of operations, get dejected mid-way understanding the magnitude of transformation and
their unpreparedness, and finally go live compromising on quite a lot of objectives that they expected the
transformation to solve. While many banks claim to have realized success through core transformation
initiatives, the expectation to reality gap continues to mire majority of transformation projects even now.
Even the ones that achieve success, rarely spent time to document the best practices or the do’s and
don’ts of transformation.
Having been associated with 50+ banking transformation engagements till date, we realize that majority
of issues can be resolved by having an understanding much earlier in the lifecycle, even before embarking
on a transformation initiative. However, most of the challenges are not obvious and are easily overlooked
by banks. A transformation initiative has tremendous interplay across multiple service providers including
solution providers, system integrators, assurance specialists and PMO organizations. Understanding the
challenges across the diverse provider landscape is key to ensuring the success of transformation.
Banking Transformations – Setting up for Failure
Lack of Standardized Selection Process
First and foremost among the set of pitfalls is the absence of a formal process to capture the exact or
near exact expectations from a transformation program. Most of the times the RFP is a replica of previous
RFPs or copy paste from similar ones that have been used for earlier engagements. The most preferred
approach is to explore the services of an intermediary or advisory firm. However what banks don’t realize
is that this approach again suffers from the copy-paste issue mentioned earlier – the only difference being
the copy-paste comes from the existing repository of RFPs with the advisory firm. This is extremely
detrimental since the transformation objectives of each bank differ and cannot be compared with one
another. Many a times the intermediary is overly focused on the product selection part of the
transformation engagement and fails to realize the needs of multiple critical components including
system integration and quality assurance of the application landscape.
Product selection is only one aspect of the transformation engagement. A flawed RFP process does not
effectively capture requirements from the perspective of implementation, timelines and quality
assurance. Incomplete requirements not capturing the needs of transformation translate into inaccurate
product/solution delivery, further causing a ripple effect across all stages of the transformation process,
ultimately leading to disaster. To complicate matters further, vendors are forced to commit to a fixed bid
engagement without service level agreements. The product vendor might complete implementation
within the committed timelines but does not adhere to the intermediate SLAs and milestones. Resulting
delays and staggered approach inhibits the ability of assurance provider to ensure accurate testing of
critical product modules. The net effect is that the bank has to content with what they have achieved at
the end of the transformation process – an image that is grossly different from what they wanted to be
when they started the exercise.
Banking Solution and Transformation Objectives Mismatch
The other side of the spectrum shows banks finalizing on a core banking solution much before the
transformation objectives are set in place. Rather than doing a requirements study for transformation
much ahead of product selection, the bank gets the product vendor to anchor its transformation
objective. Needless to say, the vendor pretty much tries to force fit their product to the bank’s
transformation requirements, and in the process, skewing it such that it is extremely product centric with
heavy customization. All other providers – the integrators, surround applications and assurance vendors
are forced to work on the lines of what the product dictates. However, the expectations from the bank
across all vendors continue to be from the perspective of transformation – a total mismatch between two
requirement streams.

ABOUT MAVERIC
Started in 2000, Maveric Systems is a leading provider of IT Lifecycle Assurance with expertise across
requirements to release. With a strong focus on the Banking and Telecom sectors, Maveric has built a business on
the principles of deep domain expertise and innovation. Maveric’s client portfolio includes a wide array of
renowned banks, financial institutions, insurance companies, leading software product companies and telecom
companies.
Maveric Systems Limited (Corporate Office): “Lords Tower” Block 1, 2nd Floor, Plot No 1&2 NP, Jawaharlal Nehru
Road, Thiru Vi Ka Industrial Estate, Ekkatuthangal, Chennai 600032
India | Singapore | Saudi Arabia | UAE | UK | USA
Write to us at info@maveric-systems.com | www.maveric-systems.com
The governing power that the advisory firm has with the vendors is insufficient since the contractual
agreements and SLAs are directly signed between vendors and the bank. The advisory firm finds itself in
troubled waters; it has to resort to cajoling and relationship driven tactics to get the vendors agree to the
timelines – a totally ineffective measure. The natural outcome of this situation involves delays in go-live
dates and resulting ramifications to business, else a compromise on the quality of applications in case of
no delay in the launch date.
Diluted Focus on Transformation Scope
The third mistake that banks commonly make is to bundle all surround system replacements along with
the core transformation. This is similar to making changes to the heart while simultaneously making
changes to other organs in the body. The impact can be so huge that death becomes a certainty. The
ability of the bank and for that matter advisory firm, to contain the changes that take place on account of
this pitfall is insufficient. Most likely, the advisory is not able to convince the bank on the need to focus on
the core transformation in entirety and then take up the surround systems in a phased manner. By being
flexible enough to accommodate multiple requirements of the bank along with the needs of the
transformation project, the advisory firm sets itself up for failure, and simultaneously, pulling other
system vendors along with itself to doom.
Purely from an assurance perspective, any change that happens to the surround system need to be tested
in isolation and then in integration. As a last minute effort to salvage the initiative, the bank starts
crunching timelines required for adequate testing types. Of course, what inevitably follows is delayed
launch of a much awaited transformation project with, quality issues.
Conclusion
No core transformation project is free from challenges. While many banks claim to have realized benefits
through such transformation engagements, the results are sub-optimal in terms of cost, time and
promised functionality. By being cognizant of the common pitfalls that we have addressed in this article,
banks can ensure rectification of majority of issues. Service providers definitely have the capability to
execute various transformation advisory services, but may lack the vision required to understand the
transformation from the bank’s point of view. By pointing service providers in the right direction and
incorporating an effective governance mechanism, the bank can ensure that its core operations are truly
transformed.
In addition to vendor evaluation and solution selection, advisory firms in this role act as a PMO for the
transformation engagement. It needs to interact with the system integrator, product vendor, assurance
vendor and multiple other surround system vendors to ensure that the transformation initiative moves in
line with the stated objectives. In reality, this rarely happens.

Banking Transformations Setting up for Failure

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Banking Transformations Setting up for Failure