Banking institutions across the world pursue coarse grained application level reuse as a means to achieve a higher level of agility and cost saving. The reality is that the cost of achieving this reuse often exceeds the actual cost and time-to-market benefit derived from it.
The challenges associated with reuse in larger established banks are many and the solutions are far from simple. Many IT shops are trying to consolidate their solutions accompanied by the re-centralisation of their operating models, while the business maintains a highly federated view.
The result obtained from these seemingly different co-existing models is costly bureaucratic technology selection processes supported by several redundant layers of IT governance. There will also be attempts to convince both the IT and business execs that running most solutions centrally will save costs. The business will yield to some degree and try to support reuse by implementing so-called “enterprise assets” on a per project basis, leading to eventual narrowly scoped solutions that require compete replacement or rewrite to realise their intended reuse potential. Does this sound familiar?
But all is not lost. Reuse can still be achieved, but requires a different approach and mind set. Building blocks that need critical attention include:
• The Operating Model Mismatch: Business needs to formally decide on their operating model and standardise processes (and supporting technology solutions) where true market differentiation is not a necessity. Business level incentives will be needed to support and maintain operating model decisions.
• Business Domain Expertise: Many IT shops (or even business areas) do not possess deep business domain understanding to fully address the reuse problem. What works for retail, may inevitably not work for business or corporate banking.
• Analytical Skills: Achieving reuse often requires intense analysis and the intellectual outputs of these efforts remain on an abstract level. The devil lies in the detail. Distinguishing between what is common and central and what is not common is a difficult exercise that requires skilled resources. Time and cost trade-offs need to be weighed carefully as opposed to just assuming that costs will only be saved in the medium to long term. “Long term” could mean 20 years, which may not be the ideal ROI figures the business is expecting.
• Funding: The scope of project-based implementation will always be narrow. Strategic funding is necessary to put basic building blocks in place that are applicable across the enterprise.
• Knowing what you have: IT needs to keep their house clean. If IT and business do not know what solutions they own then duplication will be inevitable. Build close relationships with the business and market assets to keep stakeholders informed.
These points are just some of the considerations that need to be taken into account. Reuse has become an age old mantra in banking, but has only delivered benefits in a limited number of cases.
Without some of the basic reuse building blocks the exercise will simply continue to ramp up costs until the next restructure comes into effect. Think about it.