19 Core Banking with Microsoft Technology 19 and by leading software and solution providers in support of Itanium-based solutions. 15 Microsoft is a member of the Itanium Solutions Alliance. In 2006, IDC reported on the availability of scalable servers running the Windows operation system: The process of IT transformation built on a new generation of hardware and software products will result in both scale-up and scale-out server deployments. In some cases, customers will choose to link multiple servers with clustering or grid software to support a given workload. In others, the processing power of larger, scalable servers will be needed to support large single system image (SSI) databases or to ensure the highest levels of availability and manageability for mission-critical applications. IDC worldwide server data shows that servers using Windows generated about U.S.$16 billion in customer revenue in 2004. Based on IDC‘s latest annual forecast, the Windows-based server segment is expected to grow to $23 billion in 2009 and to become the largest single operating system–defined segment of the worldwide server market. Windows technology now runs on servers across all three categories of the worldwide server market, as follows: Millions of units are sold annually in the volume server market, which comprises servers priced at less than $25,000. Most of these units are 1-way or 2-way systems. Tens of thousands of units are sold annually in the midrange and enterprise server market, which comprises servers priced from $25,000 to $499,999. Most of these units are 2-way to 8-way servers. Many hundreds of units are sold in the high-end enterprise server market, which comprises servers priced at $500,000 or more. Most of these units are larger than 8-way servers. With the entire computing ecosystem in the worldwide server market moving to 64-bit and multi-core processor technologies, the capabilities of underlying server hardware based on new processor technology to support mission-critical enterprise workloads have improved, and this improvement in turn has brought Windows workloads to a new level of capability within the enterprise data center. As a result, servers running Windows are now available to take on enterprise workloads that traditionally have been assigned to midrange and high-end servers based on RISC and CISC architectures and running a variety of operating systems other than Microsoft Windows. 16 Mainframe Migration Alliance The Mainframe Migration Alliance (MMA) is a group of companies that are working together to help customers migrate workloads from the mainframe and to the Windows platform. The MMA represents a group of companies that have their interests aligned in making mainframe migrations easier and more efficient for customers. 15 ―The End of the Proprietary Era: Itanium 2–Based Solutions Are Changing the Economics of Business-Critical Computing,‖ Intel. April 2006, p. 11. 16 Bozman, Jean S. and Matthew Eastwood. ―Scalable Windows Servers for the Datacenter.‖ IDC. March 2006. (http://www.itaniumsolutionsalliance.org/news/whitepapers_brochures/IDC_Scalable_Windows_Servers_for_the_Data_Center.pdf) 20 Core Banking with Microsoft Technology 20 21 Core Banking with Microsoft Technology 21 Figure 9. Members of the Mainframe Migration Alliance Mission Critical Program In recognition of the growing adoption of Microsoft software for truly mission-critical applications such as core banking, Microsoft Services has created the Mission Critical Program. Its mission is outlined as follows: The Microsoft Mission Critical Program (MCP) is a set of premium enterprise, solution- level service and support offerings that address enterprise customer needs for high availability, performance, and supportability for their Microsoft-based mission-critical applications. Delivered with qualified MCP partners, the MCP helps ensure that 22 Core Banking with Microsoft Technology 22 mission-critical applications that are based on Windows are architected, designed, developed, implemented, operated, and supported to increase the quality and maintainability of the solution for the life of the solution. The MCP delivers the confidence that data center class systems will achieve target levels of availability and performance based on Microsoft and industry best practices. The MCP is a shared commitment and contribution to customer success from Microsoft for mission-critical IT systems. 17 MCP engagements are available on a case-by-case basis, depending on requirements, and the service is custom priced. Engagements are designed for continuity across the development life cycle. Figure 10. MCP covers the complete solution life cycle of mission-critical projects. Source: “Mission Critical Program: Introduction and Overview.” October 17, 2007. The MCP Components are: Solution Management o Continuity throughout the solution life cycle and Microsoft accountability for system success Architecture Services o Architectural and design guidance and validation by Microsoft solution and product group experts Operations Services o Help ensure the system is operated using industry best practices to meet or exceed required service levels Proactive Support o A regimen of guidance, testing, and change management, designed to prevent downtime 17 Mission Critical Program: Introduction and Overview.‖ Microsoft. October 17, 2007, p. 1. 23 Core Banking with Microsoft Technology 23 Incident Management o 24-hours-a-day, 7-days-a-week solution-level support and optimized escalation process into the product groups Windows Server and SQL Server The growing market acceptance of Microsoft technology for mission-critical operations such as core banking is based on the very substantial investments made by Microsoft in server operating system, database, and systems management technologies. The long-awaited launch of Windows Server 2008 (formerly code-named ―Longhorn‖) will take place in 2008. The following from the Windows Server 2008 Web site provides a preview of how the new releases of Windows Server and SQL Server will build on what has been achieved with previous versions. Windows Server 2008 is the most advanced Windows Server operating system yet, designed to power the next-generation of networks, applications, and Web services. With Windows Server 2008, the IT team can develop, deliver, and manage rich user experiences and applications, provide a secure network infrastructure, and increase technological efficiency and value within the organization. Windows Server 2008 builds on the success and strengths of its Windows Server predecessors while delivering valuable new functionality and powerful improvements to the base operating system. New Web tools, virtualization technologies, security enhancements, and management utilities help save time, reduce costs, and provide a solid foundation for the organization‘s information technology (IT) infrastructure. Windows Server 2008 is the most secure Windows Server yet. The operating system has been hardened to protect against failure and several new technologies help prevent unauthorized connections to networks, servers, data, and user accounts. Network Access Protection (NAP) helps ensure that computers that try to connect to the organization‘s network comply with its security policy. Technology integration and several enhancements make the Active Directory® service a potent, unified, and integrated Identify and Access (IDA) solution. Windows Server 2008 provides a solid foundation for all server workload and application requirements while being easy to deploy and manage. The all-new Server Manager provides a unified management console that simplifies and streamlines server setup, configuration, and ongoing management. Windows PowerShell™, is a new command-line interface that administrators can use to automate routine system administration tasks across multiple servers. Windows Deployment Services provides a simplified, secure means of rapidly deploying the operating system via network-based installations. And Windows Server 2008 Failover Clustering wizards, and full IPv6 support plus consolidated management of Network Load Balancing, make high availability easy to implement, even by IT generalists. Finally, the new Server Core installation option of Windows Server 2008 allows for installation of server roles with only the necessary components and subsystems without a graphical user interface. Fewer roles and features means minimizing disk and service footprints while reducing 24 Core Banking with Microsoft Technology 24 attack surfaces. It also enables IT staff to specialize according to the server roles they need to support. Core banking is a typical mission-critical environment that combines the need for highly scalable, Online Transaction Processing (OLTP) capabilities with an important element of large- volume batch processing and transaction history warehousing, within an overall context of 24- hours-a-day, 7-days-a-week availability. In terms of mission-critical OLTP support, SQL Server 2008 builds on the momentum of SQL Server 2005: Microsoft SQL Server 2008 provides a database platform that is optimized for today‘s applications and that can scale for any size of business. It drives cost-efficiencies by dramatically reducing downtime and enabling dynamic and proactive management that significantly reduces administrative overhead. Finally, SQL Server 2008 provides a highly secure platform that you can trust with your organization‘s sensitive, business- critical data. SQL Server 2008 focuses on four key areas to meet today‘s OLTP database needs: Scale and Performance. SQL Server 2008 enables companies to build a database solution with the performance and scalability capabilities that are required by today‘s applications. High Availability. SQL Server 2008 provides a database application with always- on capabilities, while minimizing the management and performance overhead of high-availability solutions. Security. SQL Server 2008 provides an enhanced, secure data platform by encrypting valuable data, auditing changes to data and metadata, incorporating external cryptographic keys, and encrypting and signing data in backup files. Manageability. SQL Server 2008 helps companies to reduce the time and cost of managing their data infrastructure by providing innovative and automated policy- based administration and improved tools for performance monitoring, troubleshooting, and tuning. 18 Service-Oriented Architecture It is clear from an analysis of market trends that many large banks see SOA as the correct architectural approach to modernizing and replacing legacy core systems in a gradual way. Microsoft advocates a ―real-world‖ approach to SOA, which aligns well with the desire of larger banks to approach the migration away from legacy core systems in this way. This real-world approach stands in stark contrast to a potentially disruptive ―rip and replace‖ approach associated with the implementation of a complete core banking solution, and it is likely to be more appropriate for larger banks. On the other hand, a real-world approach also tries to avoid a pure top-down approach that does not take into account the existing IT infrastructure. As a result, it can take a very long time to be implemented, by which time business requirements are likely to have changed. 18 ―Online Transaction Processing in SQL Server 2008.‖ Microsoft. August 2007, summary and p. 1. (http://www.microsoft.com/sql/techinfo/whitepapers/sql_2008_oltp.mspx) 25 Core Banking with Microsoft Technology 25 At the same time, a real-world approach tries to avoid a pure bottom-up approach that leaves the initiative entirely to developers to create small-scale services on an ad-hoc basis. Working with the New “Middle-Out” Approach Microsoft advocates a real-world, or ―middle-out,‖ approach in which SOA efforts are driven by a combination of long-term strategic vision and short-term business needs and priorities. The aim in this approach is to identify an iterative series of SOA projects, each of which is limited in scope and delivers clear benefits in a relatively short period of time. Figure 11. The Microsoft Middle-Out Approach to SOA The middle-out approach is a successful hybrid of the top-down and bottom-up approaches. Business drivers and strategic vision are first used to set clear direction and priorities. Based on these, the organization takes multiple iterative steps to build out areas of end-to-end capabilities, with each iteration delivering new, dynamic applications back to the business for immediate benefit. Such a strategy results in a roadmap that can be deployed in incremental steps. Once the business drivers are defined, the process of implementing the technology can begin. Based upon the clearly defined and prioritized vision, each implementation project is an iterative one of creating (―exposing‖) new services, aggregating (―composing‖) these services into larger processes, and making these services available for use (―consuming‖) ubiquitously. Microsoft has successfully helped customers with their SOA efforts since 1999, when it first announced its Web services model and followed up with the release of the Microsoft .NET Framework together with a set of SOA tools and design approaches built into and supported by its application platform. Since then, Microsoft‘s real-world approach has helped organizations of all sizes optimize their business processes and realize greater agility through the use of SOA design principles, best practices, tools, and technologies. Guidance for both customers and partners on how to build and implement an SOA roadmap is available from a number of sources, including Microsoft Patterns and Practices, the Mission Critical Program, and the Financial Services Industry team‘s initiatives such as the Banking Integration Factory. 26 Core Banking with Microsoft Technology 26 Looking at an SOA Roadmap In order to identify which ―banking enterprise services‖ to focus on, it is worth looking at a typical banking SOA roadmap (Figure 12). Historically, banks have built up a number of processing silos as new product lines were added to the original core business. That means that most banks today are likely to have separate systems to deal with deposits, loans and mortgages, and cards. They invariably have separate systems when it comes to the areas of corporate and investment banking. In many cases they also have externally provided products such as insurance, which are based on collaboration with partners. Over time, a number of distribution channels were added, some of which may initially have been associated with a single business line, as was often the case with call centers and credit cards. Then, gradually the bank‘s need to serve customers across all distribution channels resulted in a multitude of cross-connections between these channels and the different product silos. Internal Product Engines Distribution Channels The Journey to SOA in Banking Loans Cards Mutual Funds Pensions Deposits Insurance ANO Branch Call Centre Internet Mobile Agent General Ledger BI – Risk – Profitability – Statutory Reporting Middleware S e r v i c e B u s Customer Payment Document Fees Limit P r o c e s s External Insurance Partner Credit Bureau Clearing House Regulator SWIFT Figure 12. Microsoft SOA Roadmap for Banking Often the first step on the SOA roadmap is to separate distribution from manufacturing by introducing application programming interfaces (APIs) into the back-office systems and making their functions available as services. These can then be connected to by distribution systems through a variety of different types of ―middleware.‖ This is equivalent to the ―expose‖ part of the middle-out approach. This approach by itself can lead to a form of desktop integration often referred to as ―composition.‖ Composite applications are a particular aspect of SOA that is an area of specific interest to Microsoft, for the reason that composite applications are concerned with orchestrating services at the level of the user interface. The user interface of Microsoft software is undoubtedly the 27 Core Banking with Microsoft Technology 27 most widely used and familiar one in the world. As a result, it makes sense to consider how to enable the integration of new services into an already familiar user interface. This is in effect what Office Business Applications makes possible. A good example of this approach comes from the world of enterprise resource planning (ERP) and the collaboration between Microsoft and SAP that resulted in the delivery of Duet. Duet in essence makes available common SAP enterprise services—such as booking a holiday—within a familiar Microsoft Office user interface. This approach was also the basis on which Microsoft added CRM capabilities to the existing, familiar user interface of the Microsoft Office Outlook® messaging and collaboration client and in turn the reason why Microsoft Dynamics CRM offers specialist or vertical financial services as well as in-house developers the ability to add capabilities on top of a largely horizontal CRM infrastructure. Office Business Applications make available a range of capabilities within the Microsoft Office environment so that additional services can be added, such as transactional ones. These capabilities include: Business data catalog Extensible user interface Open XML file formats Workflow Search If we apply this logic and approach to banking in general and core banking enterprise services in particular, then it is easy to see that for those people in the bank who are already familiar with and use the Microsoft Office user interface for the majority of their time, it makes sense to consider adding the additional transactional services they require to this familiar user interface. The case is most compelling for those people—such as advisors or salespeople—who deal with customers on a day-to-day basis and use functions such as chat, e-mail, calendar, word processing, and Microsoft Office Excel® spreadsheets for much of the time. This is especially the case where these people have a mobile role, which means that they may be working disconnected from the network from time to time. This approach has also been used in other specialized areas such as the call center, where the Microsoft Customer Care Framework enables a similar desktop integration capability aimed at making it easier for call center agents to access information from a multitude of systems. Unfortunately, the functionality available as ―services‖ from legacy core systems has several associated issues. First of all, the resulting services may not be of the right granularity, making it necessary to combine too many separate service calls to achieve a single step in a process. In addition, many back-office systems duplicate common functions, resulting in the complex issues of keeping different systems synchronized and inconsistencies as to what data or even what format of data is required. For this reason, SOA roadmaps are now starting to incorporate the extraction of these common banking enterprise services from legacy core systems as an important next step. In a way, this is nothing new. Banks have long been accustomed to accessing external services from service providers, such as credit bureaus and clearing houses, or the providers of specialist 28 Core Banking with Microsoft Technology 28 real-time market data. The area that was often addressed first when it came to recognizing the need for similar internal services was customer information. It is relatively easy to make a business case for managing customer data in a more coordinated way, and it is easy to deliver immediate business benefits from enriched customer information and better processes for managing customer interactions (such as complaints or interactions that result in sales leads). Many CRM initiatives resulted from this line of thinking. In the same way, regulation—at least in Europe—is driving a similar approach for payments. Putting in place a single payments infrastructure, or service, can be the basis for achieving significant business benefits, such as reduced transaction costs through better automation and fewer errors. It can also provide new capabilities such as more sophisticated cash flow projections and the timing of the release of payments. Meanwhile, specialist software vendors are gradually beginning to address many more such enterprise services in areas such as relationship-based pricing, origination, customer document production, or limit monitoring. Business Process Management The section on Market Trends earlier in this paper discussed the announcements by leading vendors of the implementation of BPM initiatives to start making it possible to orchestrate core-banking services. Microsoft defines the scope of BPM technologies as broadly encompassing the following capabilities and products: Technologies for defining and executing human workflows, which are processes that connect people. Providing automated support for human-oriented processes is a fundamental aspect of BPM, as are the graphical tools used to define those processes. Technologies for defining and executing system workflows, which are processes that connect software. Supporting these automated interactions among applications is another fundamental part of BPM, and it again includes graphical tools to define those interactions. Integration technologies are often included here as well, such as adapters for connecting to diverse systems and tools for defining data transformations. The ability to combine human and system workflows is also important, since many business processes involve both. Business rules engines (BREs). If decisions made by a business process can be expressed as a set of rules, a BRE can frequently be used to make those decisions in software. Doing this can help decision making be faster, cheaper, and more consistent. Business activity monitoring (BAM). The people who rely on a business process can often benefit from visibility into currently running instances of that process. BAM provides this visibility, exposing relevant information about running processes in terms that are meaningful to the information workers who use it. Process description tools: Having a clear understanding of a business process commonly starts with a picture of that process. Graphical tools for illustrating the actions and relationships in a process are useful for creating this picture. Microsoft‘s primary BPM technologies fit quite well into these five categories. Those technologies are the following: . (http://www.itaniumsolutionsalliance.org/news/whitepapers_brochures/IDC_Scalable_Windows_Servers_for_the_Data_Center.pdf) 20 Core Banking with Microsoft Technology 20 21 Core Banking with Microsoft Technology 21 Figure. 17 Mission Critical Program: Introduction and Overview.‖ Microsoft. October 17, 2007, p. 1. 23 Core Banking with Microsoft Technology 23 Incident Management o 24-hours-a-day, 7-days-a-week. supportability for their Microsoft- based mission-critical applications. Delivered with qualified MCP partners, the MCP helps ensure that 22 Core Banking with Microsoft Technology 22 mission-critical