Architecting financial services success

FST talks with IONA’s Eric Newcomer about why a service-oriented architecture approach could benefit companies in the financial services sector.

In his role as Chief Technology Officer at IONA, Eric Newcomer is responsible for directing and communicating IONA’s technology roadmap, as well as IONA’s product strategy as it relates to standards adoption, architecture and product design. He leads IONA’s participation in all standardization activities, and has been involved in web services standardization activities from the beginning. He was a founding member of the XML Protocols Working Group at W3C that produced SOAP 1.2, is a former editor of the Web Services Architecture specification at the W3C and is IONA’s primary representative to OASIS and WS-I.

FST. What specific business factors are driving companies in the financial services industry to evaluate how a service-oriented architecture (SOA) may benefit their organizations?
EN. Our customers, especially those in the financial services industry, are telling us they need greater ROI from existing and future assets, leverage existing assets to deliver new products and services, and streamline and modernize their IT environments to make them more adaptable to changing business requirements.

In concert with these high-level business requirements, we also see industry consolidation, regulatory change, and competition for customers as the driving forces behind the financial services industry’s interest in SOA. Industry consolidation results in mixed, heterogeneous IT environments that benefit from service orientation. The rate of constant change in industry regulation requires an IT environment that’s responsive and agile so that compliance doesn’t cost an arm and a leg. And finally, SOA provides the foundation for multi-channel access, or multi-channel delivery of industry services to customers using kiosks, Web clients, mobile devices, PC clients, ATMs, and so on. It’s all about reaching out to the customer and touching the customer in as many ways as possible, and SOA provides the foundation for accomplishing this.

FST. What, if any, specialized standards must be supported for SOA deployments to be successful in the financial services industry?
EN. The financial services industry has a long history of defining vertical standards for funds transfer, trading data formats, reporting formats, and so on. Since SOA is an approach rather than a technology, SOA embraces existing and new technologies equally well. However, as the industry moves toward the use of Web services based SOA infrastructure, adoption of XML based industry standards such as FpML, XRBL, SWIFTML, FIXML, and others will become more and more important.

FST. What is the most important thing to think about regarding SOA in Financial Services?
EN. The financial services industry, like many other industries, is strongly focused on providing good customer service. The whole idea of service orientation is to better align the services provided by the business with the services provided by the IT systems that support the business. The definition, development, and deployment of an SOA requires investment, but it is critical to understand the importance of the IT service definition. The IT service definition, when aligned with the goals of the business, such as providing a good customer experience by having all relevant data available to the teller or call center employee, is more important than the technology used to implement the IT service. The IT service, if designed properly, will outlive the technology with which it’s implemented. Getting the definition of the IT service right – that is, aligned correctly with the goals of the business – is important since it is key to realizing the return on SOA investment. As a final example, consider the constant rate of change in mobile devices today. A financial institution needs an IT service that will remain useful despite the constant change in devices used to access the service.

FST. Does the fact that many applications in the financial services industry are transactional by nature pose any special challenges to deploying SOA in a financial services context?
EN. No one likes to lose a transaction, and no one can afford the expense of correcting errors after the fact. The financial services industry has historically relied upon a combination of reliable messaging and atomic transactions to ensure data is never lost and remains accurate despite system, network, and hardware failures. Financial services industry customers have every right to expect the same levels of service from their SOA infrastructure, and the financial services customers we work with are additionally very demanding with respect to throughput and response time measurements. IONA has a long history of supplying scalable, reliable, and transactional middleware to the financial services industry, and our SOA infrastructure products, Artix and Celtix, maintain that tradition for Web services based SOA designs.

FST. What kind of adoption rate do you see for SOA in the financial services industry?
EN. Financial services companies are definitely among the leaders when it comes to SOA adoption. We also see customers in the telecommunications industry, government and, to a lesser extent, in manufacturing taking a strong interest in SOA, but we have customers in the financial services sector that have been working on enterprise level SOA deployments for seven or eight years now. I think the SOA approach is well known, especially in the financial services sector, because of the success stories of pioneers such as Credit Suisse and Zurich Insurance. With the advent of web services and ESBs, more and more financial services customers are able to take advantage of the proven benefits of SOA-style IT, including reuse, multi-channel customer access, rapid integration and automated business process management.

FST. What about hosted services, or the availability of services over the web for packaged applications such as CRM?
EN. It’s likely that the future will include a combination of externally hosted services (perhaps like those hosted by Amazon.com and Salesforce.com), and internally developed services, such as those necessary to maintain a competitive edge. So I would say buy or access external services for basic business functions (those you would have considered purchasing a packaged application for a few years ago) and use the SOA approach as the way to combine externally available and internal services into meaningful composite applications, the way you would use SOA to create new composite applications entirely using internal sources.

FST. What’s the best way to include legacy systems into an SOA?
EN. The best way to include legacy systems into an SOA is the least intrusive way possible. For some applications, IONA’s technology can create a web service that runs within the current application environment, eliminating or minimizing the disruption to operational and system administration procedure. Service enablement in the native language or using the native platform is also important, since this can help reduce cost and improve performance. IONA provides solutions in Java, C++, C#, COBOL and PL/I, running on devices from mobile to mainframe.

IONA natively enables CORBA, Tuxedo, Tibco, WebSphere MQ, CICS, IMS and other legacy technologies, connecting them to modern environment such as J2EE and .NET. IONA accomplishes this by standardizing the endpoints – that is, the points at which applications share data with each other. Legacy environments can become full participants in the SOA, giving financial services companies the best way to leverage existing IT assets, including those resulting from acquisitions, and providing the greatest flexibility for future enhancement and evolution.

FST. What advice might you give to a financial services company that is planning an SOA deployment project in 2006?
EN. The best advice for anyone planning an SOA for 2006 (whether financial services or not) is to approach the problem with the recognition that SOA is a new approach to IT. SOA is not a technology, product or vendor, although all of these things are important at some stage. The most important thing is to focus on the SOA design and how well it maps to business requirements.

Other important questions include assessing the skills mix and structure of the IT organization. Service orientation is new for many IT professionals, and it may help to provide training and an SOA office or architecture group to ensure the concepts and approach are well socialized throughout the organization.

An SOA is all about sharing and reuse of IT assets across departments, so some thought needs to be given to how the cost allocation would be put in place and how to encourage developers to create reusable services. A system of measurement against the SOA goals is also essential, because like anything else in this world it’s possible to have a good SOA or a bad SOA.

Once the design, architecture, organization, and skill-set issues are resolved, consider the technology, and especially consider something like IONA’s Artix or Celtix, which enables legacy systems and abstracts the messaging layer in the SOA. In other words, choose a company like IONA that encourages SOA technology choice and embraces, rather than fights, heterogeneity.