FEATURE ARTICLE
'Patchwork'? Just Another Term for 'Plug 'n Play'

BY KENNETH CLINE

Our roundtable of bankers argues in favor of formal project planning and enterprise-wide technology implementations. But they say a “patchwork quilt” may be the inevitable, acceptable result of financial institutions’ need for maximum flexibility to support an ever-expanding product set.

| SYNOPSIS | Technology vendors and consultants often cite the “patchwork” nature of bank systems, which are continually being modified and added to. Yet formal project planning and cross-functional teams in general and specific current needs (including the transition from the paper to the image environment) are expected to lead to greater technology integration. Our round-table of bank technology leaders seeks implementations whose elements are interchangeable and can be replaced when they become obsolete. “Patchwork” may be another term for the “plug ‘n play” that financial institutions say they want.

Roundtable Participants:

Preben Ebbesen, Senior Vice President, Process Improvement, Navy Federal Credit Union, Vienna, Va.

Peg Johnson, Group Vice President, Technology, SunTrust Banks Inc., Atlanta

Ron Lewis, Senior Vice President, Emerging Technology and Payments, Comerica Inc., Detroit

Steve Madura, Executive Vice President, Transaction Services, Compass Bancshares Inc., Birmingham, Ala.

Carol A. Malicki, Senior Vice President, Strategic Business Initiatives Leader, Wachovia Corp., Charlotte

The cover story of Banking Strategies’ May/June issue featured leading technology providers’ views on how financial institutions leverage their investments in technology. Overly complex and fragmented processes, siloed decision-making and short-term strategic horizons were among problems identified.

And now, it’s the bankers’ turn.

As you’ll read in the following pages, our roundtable of top bank technology leaders, conducted at BAI’s TransPay Conference & Expo in May, have their own, quite different perspectives. The bankers admit to some failings in terms of systems oversight, but find fault with the technology vendors for historically pushing their own agendas at the expense of the financial institutions.

“I’ve heard technology vendors talking about ‘solutions’ now for 20 years, but I’ve yet to see a true integrated solution to a business problem,” said Ron Lewis, senior vice president, emerging technology and payments, with Comerica Inc. in Detroit.

One issue the group continually returned to was the need for “plug ’n play” or open systems. Our panelists don’t want to be in the position of purchasing proprietary systems that can’t interact with other vendors’ systems. They expect to be able to acquire “pieces” of technology that could be fitted onto other pieces and then be discarded or replaced when necessary. In this manner, the “patchwork” systems that are the hallmark of banking could be both integrated and continually updated without the disruption of a major overhaul.

“Banks need solutions that are easily added to, changed and removed, that are flexible enough to address future business needs, and that leverage current infrastructures,” said Peg Johnson, group vice president, technology, at Atlanta-based SunTrust Banks Inc.

BANKING STRATEGIES: So, is banking’s approach to technology “crazy quilt” and dysfunctional?

MALICKI: The statement was probably more accurate and appropriate three to five years ago. With the transition in payments from paper to electronics, most of the banks in the country started to step back and take a look at how their infrastructure is laid out. As a result of that, although there may be areas of patchwork left, most of the bankers that I talk to make very conscious decisions now about what technology they’re going to add, and how they’re going to layer it.

EBBESEN: I suppose, by definition, credit unions are less complex than large banks, but we have many of the same problems. We work hard to develop a consistent strategy. We look at product development and systems development very carefully. But there’s a magic word used in the industry nowadays for handling these issues: “governance.” I’m not sure we’re there yet.

JOHNSON: Banks are establishing governance structures and procedures for adopting new technology because it’s too expensive to do this in a crazy-quilt manner. Implementing new technology constitutes costly investments of manpower and capital for hardware, software, project management, installation, testing and training. So banks are turning to enterprise strategies that leverage existing infrastructure and refine project methodologies to use our technology budgets as wisely as possible.

MADURA: Over the last 30 years, a lot of banks have adopted a best-of-breed approach from a variety of vendors, which has worked well in the paper environment. As we enter the imaging environment, though, there’s an issue of how we’re going to get all these big vendors to talk and work together. They all want to sell you their version of the image process.

LEWIS: I’m not sure technology vendors had given us much choice except to build patchwork quilt technologies. I’ve heard technology vendors talking about “solutions” now for 20 years, but I’ve yet to see a true integrated solution to a business problem.

BANKING STRATEGIES: Is it difficult for your respective institutions to get an integrated, enterprise-wide view of your technology investments, as opposed to a business unit-by-business unit perspective?

JOHNSON: At SunTrust, we tie our technical teams and our business units together. They become partners who are both accountable for selecting the right solutions. We have moved away from silos, where technology and the business units go in different directions.

MALICKI: We take a very similar approach. If we want to start a project, there are certain folks you need on that project team to assess the viability of moving forward. Aside from the business unit owner, you need people from finance, technology, customer service and support, such as legal and compliance. That cross-functional team stays together from the start of the project all the way through to implementation. Another thing we do is have an assessment period after the project is finished to determine what worked well, what didn’t, and then try to integrate those lessons learned into the next project.

It’s our view that technology has to be a partner with the business unit and the support folks early on in the process. And although we still have silos in the sense of reporting responsibilities, we look at technology investment from more of an enterprise perspective.

We also reach out to other business units. If the retail bank, for example, brings a project forward, we might ask other areas in the bank, can you leverage this infrastructure?

MADURA: We basically do the same thing. We have a project manager assigned to every major project who is responsible for pulling the various business lines and technology together to produce a very formal project plan. There’s a conceptual phase of planning and investigation which typically results in a white paper or recommendation to proceed to a business case. And once that’s approved you go forward into the project.

LEWIS: Like the others, we have very formal, fairly ma-ture processes around project governance and execution. It’s not hard to get an enterprise-wide view at all; it’s hard to get a “do.” Having a view doesn’t always mean you can execute against it. Sometimes you have dependencies on legacy systems and technology that just don’t let you do what you want to do. You’d like to wipe the slate clean and start over today but you can’t.

So we’ve got enterprise-wide awareness, but we need to do better.

I don’t think project management is the problem, by the way. We have plenty of project management, maybe too much. What we lack is the “solution architect” on the project. This is the person that’s supposed to be able to come in and bring oversight and assess whether we’re proliferating the technology or bringing it all together into a standardized architecture.

We just don’t have enough people with that skill and knowledge.

JOHNSON: I agree with Ron. When it comes to both technical architecture and business architecture, we don’t have enough folks available who can bridge both.

Business architects focus on solutions to business problems from a functional and process perspective. Technical architects have traditionally been more focused on a bank’s technology infrastructure, like operating platforms, networks, data structures, etc. The demand for people with the skills to provide oversight for both often exceeds the supply.

MADURA: We do have people functioning as systems architects. They work with the project sponsor as they map out a strategy to leverage our existing technology. But people who are really skilled at that are pretty hard to find. If you get one, they’re involved in every single project.

BANKING STRATEGIES: Let’s turn now to the technology vendors. Most companies seek to offer solutions for your technology challenges but are they themselves sometimes part of the problem?

MADURA: They all claim to have the answer. But no two banks are exactly alike. Trying to integrate one particular vendor’s product into your architecture may be extremely easy or it may be difficult. Is that the fault of the vendor or the bank? It may just be that what is good for one institution is not good for another.

JOHNSON: Banks are accountable to let our vendors know what our problems are and give them guidelines and requirements. Some vendors are a little more amenable than others to asking us for those requirements. Even so, we should take some accountability for giving them sufficient information.

One problem I find with the vendors is that they’re very optimistic. They tell us they have these solutions, which often turn out to be vaporware. That’s one of the hardest things to manage once we’re working with them. The vendors should maybe take a cue from us in terms of how to manage projects.

MALICKI: Although there’s a challenge with the vendors, I’m not sure we’re always as clear and precise as we could be in terms of what we need exactly and what we’re trying to accomplish.

At least in the last eight years or so, banks have been extremely reactive and not nearly proactive enough. First we reacted to the Internet, then we reacted to image exchange, etc., as opposed to stepping back and saying, “What does it all really mean?” We’re trying to do that as an industry now, but I’m not sure we’re there yet.

On the other hand, vendors sometimes don’t listen to our specific needs. In the past, if they built a product a certain way, we made it fit. Now, as we step back and take an enterprise-wide perspective of our architecture, we might tell them: “I’m not going to use that because it only provides a solution for my teller platform. It doesn’t take into account the ATM platform, the Internet, my remote devices, or any new offerings we might be considering. You need to give me a much more holistic view.”

And that’s where the vendors are struggling.

JOHNSON: I think we’re finally seeing some products where vendors are trying to build platforms that provide some integrated solutions.

For example, solutions are being offered that provide workflows that can handle input from multiple distribution points, such as check, branches, corporate customers, vault, or ATM, and to multiple distribution points such as ACH, FED, electronic cash letter or check. We’re seeing them grasp that we’re looking for open solutions that can address future needs. But I don’t think the products are mature enough yet.

MADURA: I agree that at some point in time we will see the true end-to-end solutions, but it’s going to be a while.

EBBESEN: I’m not sure we’re going to get there. I’ve watched this integration problem for many years now. When I came on board more than 20 years ago, we had legacy systems that were created in-house and tailored to the institution. Then we made a decision 10 to 12 years ago to purchase software from outside vendors to keep up with the changing marketplace.

Since then, for us to continue to grow and offer new products and services, the issue has been integration. While we on the business side try to decide what’s best to meet our needs, the IT folks are arguing about how it’s going to fit. Integration is a big problem and I don’t think it’s going to go away.

MADURA: One of the things that could drive this integration is the transition from the paper environment to the image environment. That’s creating a new thought process for vendors since the image has to be controlled from the point of capture to placing it in your archive.

JOHNSON: Some of the larger vendors have too much invested in current software and technology. How many of us feel like we’ve bought the same product five times? Sometimes they try to build on what they’ve got and it’s not solving today’s problems, just patching onto something they already have. We don’t need 95% of it.

Vendors are trying to leverage their investments, but I think it backfires on them sometimes. They need to stop and build something new. Some of us have gone with newer vendors. While there’s pain with that, at least you’re not starting with 20 year-old technology.

LEWIS: I think the mother of all dysfunctional, crazy-quilt manifestations is the way the large vendors have confused having a business partner cadre with offering a solution. The big vendors all affiliate with third-party firms that offer pieces of technology that would be the solution, if the elements could ever be miraculously woven together.

But they can’t even rationalize the business partners in their solutions group, let alone weave them together. And by the way, they leave the job of weaving the elements together to us. Ultimately what they’re offering is a menu, not a solution.

BANKING STRATEGIES: It seems the technology vendors have the same problem as banks when it comes to integrating systems ...

LEWIS: But they don’t have to live with it. Their business partners change all the time.

JOHNSON: Vendors have got to build connectors for us so that it doesn’t mater what kind of technology we have. As a big bank, there’s no way we would ever be able to throw out everything and start over. We have too much invested. When you have so many systems that work, there’s no incentive or need to modify them.

We talk about open systems that are flexible enough to fit into our current technology infrastructure, to adapt to future infrastructure changes, and to easily be modified to handle future business needs. But how many of us feel we’ve got good, flexible, open systems from our vendors?

MALICKI: I’d like to see vendors get a better handle on plug ’n play. Because what’s going to happen over the next three to five years is that pieces of technology are going to be needed and then they’re going to be obsolete very quickly. So, you’re going to need to be able to plug them in, pull them out and throw them away.

Vendors want us to agree to three- or five-year maintenance agreements, but why should I do that? I’m not even sure that the process in question is going to be here. Remote deposit capture, for example, could be gone in three to five years because if we move everybody to cards, what do we need it for? We’re building this big infrastructure around image that could virtually go away within 10 years. That’s why you have to be able to take those pieces out and replace them with the next opportunity.

MADURA: That’s what we as banks would want to see, but what’s the incentive for the vendors to do that? They want to sell you a new product.

MALICKI: Yes, but a young company might someday win our business by doing that. There’s a whole generation of entrepreneurial people coming up in this world who don’t think like we do. They’re not tied to the traditional thought process that our age group is saddled with. They aren’t afraid to take a risk on new things. This new thought process allows them to seize new opportunities.

EBBESEN: It seems to me we’ve come back to where we started in that we like the patchwork quilt, i.e., plug ’n play. We like having whatever system we want to satisfy different needs. As long as it’s integrated and we get the results we need, so what if it’s patchwork?

MALICKI: Amish women make beautiful quilts. They fit together well and keep you warm at night. The question is: Do you have the strategy and vision to decide what your quilt should look like? It’s okay to have a patchwork quilt if it’s integrated and it works well.

LEWIS: It has to be built on some common framework. That’s where you do need the strategy, the enterprise-wide architecture.

BANKING STRATEGIES: Is the patchwork to some extent inevitable in banking because you’re always adding new channels?

MALICKI: It is inevitable. I don’t think we as an industry ever retire a payments channel or product. As long as we have customers using products and making the choices they want to make, we’re going to have that situation. We’re just going to continue to layer more things on top of the other things that are already there. So your infrastructure has to be able to manage ongoing expansion of the product set.

LEWIS: But going forward, we have to do a better job of not putting each of these things in its own silo. Banks originally built the infrastructure for branches. Then, when we did ATMs, we put in a whole duplicate infrastructure, same for call centers and the Web. What we need to do is somehow put this into a layer cake and each time we have some sort of new channel or payment mechanism, it sits on a common infrastructure. I’m sure we have the vision to do that, I’m not sure we have all the architecture to do that, let alone the technology underneath the architecture.

JOHNSON: I think the architecture for this layering is becoming available. We are looking for technologies for image exchange that are open enough to handle input from multiple channels, such as check, branches, ATM, lockbox, cash vault and others.

Banks need solutions that are easily added, changed and removed, that are flexible enough to address future business needs and that leverage current infrastructures. We will be supporting a patchwork technology for some time to come as we support the old and the new.

As Carol said, it’s not the “patchwork” that is the problem as long as it’s planned, integrated and works well.

Questions or comments about this article? Post them at the Banking Strategies blog.