Electronic Business: Concepts, Methodologies, Tools, and Applications (4-Volumes) P125 ppsx

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Khosrow-Pour, Volume 6, Issue 3, pp. 20-36, copyright 2008 by IGI Publishing (an imprint of IGI Global). 1178 Copyright © 2009, IGI Global, distributing in print or electronic forms without written permission of IGI Global is prohibited. Chapter 4.13 Application Integration: Pilot Project to Implement a Financial Portfolio System in a Korean Bank 1 So-Jung Lee JLee Consulting, Singapore Wing Lam U21 Global, Singapore ABSTRACT This case describes a pilot project to implement a ¿QDQFLDOSRUWIROLRV\VWHP)36ZLWKLQ-ZRQ Bank. (The case is based on a real-life organisa- tion, although the identity of the organisation has been disguised at the organisation’s request.) A strategic IT review of Jwon Bank’s IT systems and architecture revealed that a lack of integration between IT systems was hampering the bank’s capability to meet its business vision. A key recom- mendation from the review was the development of an FPS that would enable customers to man- DJHDOOWKHLU¿QDQFLDODVVHWVDQGDFFHVV¿QDQFLDO services from a single place. However, creating an FPS meant that Jwon Bank had to develop a strategic solution to meet the integration needs across the entire bank. Jwon Bank examined en- terprise application integration (EAI) tools, and embarked on a pilot project to develop a prototype FPS and test the robustness of an EAI solution. The case highlights some of the management is- su es r el ati ng to int eg rat io n proje ct s of th is na tu re, including strategic planning for integration, EAI tool selection and evaluation, and understanding RIEXVLQHVVSURFHVVÀRZDFURVVGLYLVLRQDOVLORV ORGANISATIONAL BACKGROUND Jwon Bank is one of the fastest growing providers RI¿QDQFLDOVHUYLFHVWRFRQVXPHUVLQSouth Korea. Out of all the banks in Korea, it is recognized as one of the most innovative and progressive. For H[DPSOHLWZDVRQHRIWKH¿UVWEDQNVWRRIIHU,Q- ternet banking and mobile banking services. The swiftness with which Jwon Bank has embraced technology to differentiate itself is acknowledged by industry analysts as one of the primary reasons IRUWKHVLJQL¿FDQWLQFUHDVHLQLWVFXVWRPHUEDVH 1179 Application Integration which has grown by 15% in the last 5 years to about 5 million. The majority of Jwon Bank’s new customers are young adults in the 20- to 30-year- old age group, precisely those who are most likely to adopt Internet and mobile banking services. In addition, Jwon Bank has been running a series of successful marketing campaigns that has given it a refreshingly youthful and vibrant image, unlike the conservative images associated with many of the other Korean banks. Jwon Bank’s competitive strategy is three-fold. )LUVWLVWRRIIHULQQRYDWLYH¿QDQFLDOVHUYLFHVEHIRUH its competitors. The introduction of new global trading services is one example of this. Second LVWRXVHWHFKQRORJ\WRGHOLYHU¿QDQFLDOVHUYLFHV LQÀH[LEOHZD\V7KHLQYHVWPHQWWKHEDQNPDGH in new IT systems during the period of 2000 to 2002 is estimated at between $80 to 100 million. Furthermore, with the high IT literacy rates in Korea, the bank predicts that, within 5 years time, 80% of its customers will be conducting the majority of their banking through the Internet. Third is to provide exceptional standards of cus- tomer service to attract new customers and retain existing ones. A major service-quality initiative was recently launched by the vice president (VP) of customer services to monitor levels of service quality across the entire bank. At the bank’s 2003 annual conference, the CEO FKLHIH[H FXWLYHRI¿FHURI-ZRQ%DQ NDU WLFXODWH G KLVYLVLRQRIEHLQJ³.RUHD¶VSUHIHUUHGSURYLGHU RI¿QDQFLDOVHUYLFHV´7KH&(2DOVRDQQRXQFHG WKDW-ZRQ%DQNZRXOGVLJQL¿FDQWO\GLYHUVLI\LWV SRUWIROLRRI¿QDQFLDOVHUYLFHVHQDEOLQJFRQVXPHUV WRPHHWWKHLUHQWLUH¿QDQFLDOQHHGVIURPLQYHVW- ments to insurance, through Jwon Bank. The CEO believed that being able to provide customers ZLWKDKROLVWLFVHWRILQWHUOLQNHG¿QDQFLDOVHUYLFHV ZRXOGJLYH-ZRQ%DQNDVLJQL¿FDQWFRPSHWLWLYH advantage in the industry. SETTING THE STAGE Jwon Bank’s IT Architecture Jwon Bank’s IT architecture is divided into separate clusters of IT systems that are owned by individual business units (e.g., current accounts, investments, mortgages, trading, and insurance) DQGVXSSRUWWKHVSHFL¿FEXVLQHVVQHHGVRIWKDW business unit. Each cluster has between 5 to 20 IT systems. For example, there are a total of 14 IT systems in the credit-card cluster that collectively handle the management and processing of credit cards for the credit-cards business unit. In total, Jwon Bank has over 120 IT systems across all the different clusters. Like many large organisations, Jwon Bank’s IT architecture has evolved over a long period of time to include a diverse mix of IT systems running on different platforms and employing diverse technologies. For example, many of the IT systems in the current accounts cluster are legacy systems based on older, mainframe tech- nology such as CICS and MVS. Many of the IT systems in the trading cluster are bespoke C++ applications running on the UNIX platform that have been custom built for Jwon Bank. On the other hand, the IT systems in the Internet-banking cluster are customized versions of packaged com- mercial off-the-shelf (COTS) systems running on the Windows platform. In addition, the IT system at the core of the customer services cluster is developed around the COTS Seibel system. The LQFUHDVHGXVHRI&276UHÀHFWVDJHQHUDOWUHQG within the bank over the last few years of adopt- ing a best-of-breed strategy to procure packaged COTS systems that were best in their class. 2003 Strategic Information Technology Review In 2003, the VP of technology at Jwon Bank undertook a strategic review of the bank’s IT 1180 Application Integration systems. The main purpose of the review was to ensure that the bank’s IT systems and technology architecture was well-positioned to meet future business needs and aligned to the bank’s business strategy. The strategic IT review was carried out over a 4-month period by an independent team IURPRQHRIWKH³%LJ)LYH´FRQVXOWLQJ¿UPV The VP of technology was taken aback by WKH¿QGLQJVIURPWKHVWUDWHJLF,7UHYLHZZKLFK LQGLFDWHGWKDW-ZRQ%DQNKDGVLJQL¿FDQWVKRUW- comings in its IT systems and architecture. One RIWKHNH\¿QGLQJVKLJKOLJKWHGLQWKHVWUDWHJLF IT review was the lack of integration between IT V\VWHPV7KHVWUDWHJLF,7UHYLHZLGHQWL¿HGPDQ\ cases of how the lack of integration between IT systems affected customers or potential customers of Jwon Bank. For example, if an existing Jwon Bank customer wished to purchase an insurance SROLF\IURPWKHEDQNKHRUVKHKDGWR¿OORXWD form and resubmit all their personal details again to the bank even though the bank already held such information in their IT systems. Also, if a customer informed the credit-card unit of Jwon Bank about a change in address, the change in address would not be automatically updated else- where in the bank’s other clusters of IT systems. So, while credit-card statements would be sent to the customer’s new address, bank statements would still be sent to the old address. In fact, the strategic IT review revealed that common customer data were duplicated in many different IT systems, thus leading to the possibility of data inconsistency. The review also highlighted that the bank’s IT systems and technology architecture were cur- rently unable to fully support the CEO’s vision RID KROLVWLFVHWRIFORVHO\LQWHUOLQNHG¿QDQFLDO VHUYLFHV:KLOHFHUWDLQ¿QDQFLDOVHUYLFHVZHUH interlinked, such as bank accounts and savings accounts, allowing the easy interchange of funds between the two accounts, a large number of other ¿QDQFLDO VHUYLFHV ZHUH XQOLQNHG $ FXVWRPHU for example, could not easily interchange funds between bank accounts and investment accounts. In many cases, there was no direct automation or real-time transfer of information between IT systems. Instead, back-end processes were con- ducted as daily batch jobs or, worse still, relied on some behind-the-scenes manual processing. For example, when a customer applied to open a trading account, information was captured in the IT system handling the applications. If an application was accepted, much of this informa- tion had to be manually rekeyed by the bank’s EDFNRI¿FHVWDIILQWRWKH,7V\VWHPWKDWRSHQHG trading accounts. Not only was this a manual and intensive process, there was also the possibility of administrative errors. Importantly, the strategic IT review high- lighted that the lack of integration between IT systems hampered the development of customer relationships and opportunities for cross-selling. For instance, if a customer was arranging his or her mortgage through Jwon Bank, it was likely that he or she would also be looking to purchase home insurance. However, the current IT systems in the bank did not provide any automated alert to identify such situations, so cross-selling op- portunities were lost. In short, each cluster of IT systems effectively operated within its own silo, UHÀHFWLQJLQPXFKWKHVDPHZD\KRZWKHEXVLQHVV units within Jwon Bank were operating. In many situations, however, the integration of IT systems is not only a technical activity, but a strategic enabler for new business models and processes (Sharif, Elliman, Love, & Badii, 2004). Recommendations The strategic IT review team made a number of recommendations. One of the key recom- mendations was the development of a ¿QDQFLDO portfolio system (FPS). The concept of an FPS was to provide each customer of Jwon Bank with DSHUVRQDOLVHG¿QDQFLDOSRUWIROLRWKDWLVDVLQJOH FRQVROLGDWHGYLHZRIKLVRUKHU¿QDQFLDODVVHWV 1181 Application Integration and commitments with the bank. Through an FPS, customers could manage their portfolios, for example, switch money in their savings account to a managed investment trust, through a single point of access rather than through many different interfaces. An FPS was seen as central to Jwon Bank’s competitive thrust toward providing its customers with a means of holistically manag- LQJWKHLU¿QDQFHV7KH)36ZDVDOVRVHHQDVDQ important customer relationship management tool through which opportunities for cross-sell- ing could be acted upon. In fact, a few of the smaller banks in Korea had already begun to offer portfolio-centric services, thus providing further impetus for the development of an FPS at Jwon Bank. The strategic IT review indicated that the de- YHORSPHQWRIDQ)36ZRXOGUHTXLUHDVLJQL¿FDQW degree of integration between the IT systems in Jwon Bank’s IT architecture, which currently s u f fe r e d f r o m a l a c k o f i n t e g r a t i o n . C o n s e q u e n t l y, a further recommendation was that Jwon Bank should consider an enterprise-wide integration solution that would meet the strategic integration needs of the whole bank. An enterprise-wide integration solution would be a better alternative to having multiple localized integration projects that involved point-to-point integration between VSHFL¿F,7V\VWHPVDVVKRZQLQ)LJXUH Although a point-to-point integration solution represents how organisations have traditionally integrated their IT systems, a major problem with this type of solution is that as the number of IT systems to be integrated grows, the cost of building and maintaining such a large number of interfaces becomes prohibitively expensive and often results LQ³VSDJKHWWL´LQWHJUDWLRQ/LQWKLFXP:LWK an enterprise integration solution, commonly known as an enterprise application integration (EAI) solution, this problem is addressed by the deployment of an integration hub that serves as a central point for interapplication communication (Lee et al., 2003; McKeen & Smith, 2002). Because each IT system need only be integrated with the KXEDQ($,VROXWLRQVLJQL¿FDQWO\UHGXFHVWKH overall number of interfaces that need to be built Figure 1. Two integration solutions Point-to-Point Integration Solution Enterprise-Wide Integration Solution Integration Hub IT System IT Cluster 1182 Application Integration and maintained. The IT systems in an EAI solution communicate with other IT systems by sending messages along the messaging middleware via the integration hub. Furthermore, an integration broker is able to support additional functionality, such as the translation of messages into different formats, transaction management, and the ability to apply business rules and logic. The recommendations of the strategic IT re- view were taken with seriousness by the VP of technology at Jwon bank, who initiated a project to look into both the development of an FPS and an EAI solution within the bank. The FPS would be one of the IT systems that used the EAI solution to draw information from the bank’s clusters of IT systems. So, although the VP of technology had initially considered treating the FPS and EAI solution as two separate projects, he felt that combining them into a single project with a clear business objective was more purposeful. CASE DETAILS Requirements Gathering A project team was assembled within the bank comprised of a project manager, three business analysts, and three IT architects. The business analysts were tasked with the job of establishing requirements for the FPS. Although the strategic IT review had described the notion of an FPS, further analysis needed to be carried out to de- WHUPLQHWKHVSHFL¿FIXQFWLRQDOUHTXLUHPHQWVRI the FPS. A series of interviews was carried out by the business analysts with stakeholders from the different business units within the bank. Use- case scenarios (Cockburn, 2004) were developed to illustrate how the FPS would be used by the bank’s customers; the following are examples. • Changing the customer’s address and per- VRQDOSUR¿OH • Purchasing a life insurance policy • Transferring funds between current, credit- card, trading, and investment accounts • Viewing a single consolidated summary of ¿QDQFLDODVVHWVDQGFRPPLWPHQWV • Transferring funds to and from mortgage accounts • 3HUIRUPLQJD¿QDQFLDOKHDOWKFKHFN • $VVHVVLQJWKHYDOXHRIRQH¶V¿QDQFLDODVVHWV in a future period of time Rather than develop the FPS from scratch, the business analysts recognized the potential to extending the bank’s existing Internet banking system. This would have the advantage of building upon an existing IT system that was familiar to many of the bank’s current customers. Further- more, the Internet banking system was proven to be a reliable and stable IT system. The busi- ness analysts therefore proposed making major enhancements to the Internet banking system so that it became the FPS rather than developing the FPS completely from scratch. Feasibility Study In parallel with the requirements gathering ac- tivity, the IT architects on the team were tasked with the job of evaluating different options for developing an integration solution, estimating costs, and making recommendations. Two ex- WHUQDOFRQVXOWDQWVZLWKVLJQL¿FDQWH[SHULHQFHLQ ODUJHVFDOHLQWHJUDWLRQIURPWKHFRQVXOWLQJ¿UP that had conducted the strategic IT review were also hired to work with the team as independent advice and guidance would be valuable. 7REHDVREMHFWLYHDVSRVVLEOHWKHWHDP¿UVW looked at the feasibility of a point-to-point inte- gration solution, where a set of programmatic interfaces would be built directly between the IT systems that needed to exchange information. In fact, several of the IT systems in certain clus- ters had already been integrated in this manner. 1183 Application Integration However, after further examination, a point-to- point integration solution was rejected for the following reasons. • A high level of custom development would be involved. With around 120 individual IT systems in the bank, the number of in- terfaces that would need to have been built was estimated at over 250. • There was a high level of development risk. With so many legacy IT systems in Jwon Bank’s IT architecture that used older tech- nology, it was unclear that robust and reliable interfaces could be built from scratch. • It would take a very long time to develop all the interfaces from scratch. Estimates suggested a maximum build capacity of 40 interfaces per year, resulting in a project that would take over 6 years. • 7KHUH ZDV LQVXI¿FLHQW LQKRXVH FDSDFLW\ and expertise to undertake such a sizeable project. The team agreed that a point-to-point integra- tion solution had too many high-risk elements, and turned its attention toward an EAI integration solution as suggested in the strategic IT review. $VDVWDUWLQJSRLQWWKHWHDPLGHQWL¿HGWKH leading EAI tools currently on the market. This included EAI tools from vendors such as TIBCO, IBM, WebMethods, SeeBeyond, BEA, Mercator, and Vitria. EAI tools are generally comprised of an integration hub, messaging middleware, and adapters that connect IT systems to the messaging middleware. An important consideration in the selection of EAI tools is the range of available adapters (Lam, 2005). An adapter can be consid- ered a kind of sophisticated gateway or wrapper (Brodie & Stonebraker, 1995), enabling packaged, mainframe, and other systems to be connected to the integration hub. Some adapters are prebuilt. For example, there is a prebuilt TIBCO adapter for the ERP application SAP R/3, which enables SAP R/3 to be connected to the TIBCO EAI tool. At a technical level, adapters typically make use of interfacing technologies such as application programming interfaces (APIs), SQL queries and even Web services. Where prebuilt adapters are unavailable, adapter development kits supplied by the EAI vendor can be used to create custom adapters, which is typically required for custom- built IT systems. RFP and Vendor Selection A request for proposals (RFP) was written by the team and sent to 12 of the major EAI vendors. EAI vendors who were small in size or who lacked a strong Asian presence were excluded in the RFP. As a strategic mission-critical project for the bank, the VP for technology was adamant that the FKRVHQ($,YHQGRUZRXOGQHHGWREHVXI¿FLHQWO\ resourceful and provide strong local support. The RFP included information about the FPS and Jwon Bank’s IT systems and architecture. In addition, a number of key technical requirements was highlighted in the RFP relating to reliability and resilience in the event of system failure. A high level of security was also stipulated given WKHVHQVLWLYLW\ RI¿QDQFLDOWUDQVDFWLRQVDQG LQ- formation. EAI vendors were explicitly asked in the RFP to indicate the extent to which the EAI tool and adapters covered the diverse range of IT systems at Jwon Bank. Eight replies to the RFP were received that were considered complete, from which four EAI vendors were short-listed by the team based on the RFP response. More in-depth face-to-face presentations and discussions were held between the remaining four EAI vendors. The VP of technology at Jwon Bank knew that selecting the right EAI vendor was as much a business decision for Jwon Bank as it is was a technological one. The EAI vendor would not just be a vendor; it would become a strategic partner who would need to understand Jwon Bank’s business and work hand in hand with the team at Jwon Bank to ensure project success. It became evident to the team that only two out of . technology in small business: Theory and empirical tests. Information Systems Research, 8(2), 171-195. Held, J., & Bowers, J. (2001). Securing e-business applications and communications Strategy and the Internet. Har- vard Business Review, March, 63-78. Raisinghani, M. (2000). Electronic commerce at the down of the third millennium electronic com- merce: Opportunities and challenges be a vendor; it would become a strategic partner who would need to understand Jwon Bank’s business and work hand in hand with the team at Jwon Bank to ensure project success. It became evident