Implementing a core banking system leads to a large and complex project, which involve high risk and multiple stakeholders - a classic case for hiring a Systems Integrator to handle the complexity. (Flyvberg and Al, 2003; Altshuler and Luberoff, 2003; Miller and Lessard, 2000; Morris and Hough, 1987).
The cost, scope, quality and importance of strategic initiatives around the CBS implementation require the attention of many parties, each of whom bring in a different dimension on the decision making process (Nehme Joseph, Chebil Fethi and Miller Roger)
The role of a system integrator in a CBS project can be largely categorized under the following tasks –
1. Integration of interdependent functions and business processes of the bank (Burns and Stalker, 1961)
2. Manage the quality of communication and collaboration between the various departments (Lawrence and Lorsch, 1967)
3. Integration of efforts deployed by different firms –all of whom are usually contracted by a bank (Sayles and Chandler, 1971)
4. Integrated solution including multiple products and services (Davies, 2003, Brady et al., 2005)
5. The system integrator is also expected to manage collaborative and integrative activities of several separate modules of the core banking product and allied systems that require different knowledge and expertise (Davies and Hobday, 2005)
Selection of an SI
Banks increasingly find it difficult to differentiate between the different SI vendors. It is recommended that the Client use a structured decision analytics tool to decide on the most suitable SI using the following steps –
• Start with the problem statement (e.g. Select an SI to create a business case for a CBS)
• Develop criteria aligned with the bank’s overall vendor management policy. Include criteria to assess financial stability, product knowledge, domain knowledge, etc [Elaborated later]
• Classify the criteria into ‘must’ and ‘want’
• Have a screening done for all SIs based on only the ‘must’ criteria
• Assign weights for ‘want’ criteria and evaluate the shortlisted SIs using an appropriate technique (e.g. heuristic algorithm or more complex mechanisms like usage of UKP mechanisms)
• Factor in additional risks to business either within the computational framework or outside the framework, with appropriate mitigation steps identified
Selection Criteria Set
Each bank will have its own set of criteria for selection of a core banking vendor, based on its vendor management principles. The following is a list that can be used by a new bank or banks where vendor management processes are yet to mature (Reference - controlsys.org) -
• Management - Strategic Management, Organization & Governance, Facilities & Equipment, Loss Insurance
• Human Resources - Quality of personnel, Size of core banking operations, Availability of senior management for resolving issue
• Project & Program Management
• Quality Management
• Financial Management
• Business Sustenance & Continuity
• Technical & Domain Expertise
Selection Criteria in Asia
Analysis of 5 large Asian core banking RFP/RFIs to evaluate the dimensions that are typically found to be important in Asia (mapped to above criteria set).
The dimensions used by the client organizations to evaluate core banking systems integrators are not always the same as the areas that core banking SIs focus on. A large number of SIs try to broadbase their offerings to use their expertise across multiple core banking products.
On the other hand, the banks usually like to deal with SIs that have more focused models dealing with one or two CBS products - usually backed by a strong relationship or alliance with the product vendor.
The views expressed in this column are the author's own and do not necessarily reflect this publication's view, and this article is not edited by Asian Banking & Finance. The author was not remunerated for this article.
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