SOA - The future of banking technology?

Julian Dobbins, Senior Marketing Development Manager at Micro Focus, reports on why it makes business sense to move to a Service Oriented Architecture approach.

The reported increased profitability in the US and Europe suggests that retail banks are meeting the challenges of recent years. They appear to have avoided the worst effects of major corporate collapses and increased regulatory demands. Yet the ongoing and repercussive effect of these and other issues is changing the nature of the competitive landscape for good. The result will be a retail banking industry that has to be quicker, smarter and far more cost efficient in order to survive.

Sarbanes-Oxley insists that all US organizations have visibility and control of key functions. To enable this, a major operator must maintain fast and efficient global connectivity, and re-align business reporting and approval processes to successfully monitor enterprise risk, ideally from a centralized point.

The challenge for all banks, large and small, is not only to create a centre of excellence with established international standards of communication, but also to reconstruct and automate their business processes to maximize efficiency.

The IT systems that currently support each service require review and extension. The technology used must be future-proofed to suit integration of existing and future development platforms. This doesn’t have to mean core system replacement. Within a bank’s legacy systems reside vital components of the organization’s competitive edge, the mission-critical processes and systems that form the heart of the enterprise. They may require rationalization, documentation and better understanding, for the benefit of extracting more value – but nevertheless they exist, and have been bought and paid for, and have proven reliability; processing billions of transactions per day across the globe. Core services should be individually identifiable and re-usable, such that systems development is far easier and quicker. In this way construction and maintenance costs are significantly reduced. Service Oriented Architecture SOA is a key technology concept to achieve this level of re-use and avoids the extreme cost and risk of complete systems replacement.

Sceptics claim that SOA is just another acronym for the same old promises of more flexibility and greater agility through re-use of technology components. However SOA applies equally to procedural programming and other paradigms for application construction. SOA offers technology-agnostic re-use.

The appeal of SOA is that it embodies good practice, but it does not set out to standardize to a level sufficient for implementation. SOA is a concept not a technology, and allows the concept to be applied regardless of middleware. SOA is useful to formalize the conceptual bridge between legacy and contemporary technologies like J2EE and .NET. There is almost universal agreement that SOA is a good model for application composition and re-use and this is leading to adoption in many financial organizations. Also, SOA underpins one of the fastest growing technologies from the last couple of years: Web services.

So how can SOA enable integration of core legacy services with future development platforms? This is essentially a two-stage process. First, the legacy applications must be converted into re-usable core business services. This means peeling away the original operator interface from the underlying ‘services’ in the applications that perform useful business functions. These core services are redeployed to their host platform in such a way that they can be invoked though some well chosen SOA-based middleware (eg. web services).

Second, these services are ‘published’ to the development teams building new client offerings, real time transfer and settlement systems, business reporting and approval processes, all using established international standards of communication. Published services appear as lists of fully production-hardened entities such as web services.

Smart IT organizations are achieving the transition in several evolutionary steps, selecting the most suitable candidate legacy applications first for conversion into core services to enable key development initiatives.

There are some important technology considerations to bear in mind. An SOA must respect the ‘statefulness’ of the services that are invoked. Legacy applications are constructed with assumptions about how long transient data storage survives and how different ‘instances’ are identified. The simplest and most effective model is one where each interaction is indivisible and independent of any other.

It is sometimes thought necessary to extend transactions across the SOA-legacy divide. There are dangers and difficulties with this approach ensuring that the different platforms can guarantee safety and performance. Until Web services matures to the point where these provide a full service capability including infrastructure and management, many tasks (like service journaling and recovery) must be handled through complex system programming techniques which require deep platform-specific understanding.

In summary, the financial sector competes and maintains profitability by consistently streamlining to reduce costs, modernizing with agility, while preserving industry expertise and the need to avoid unnecessary risks. It makes business sense for an industry that recognizes the importance of exploiting competitive advantage through technology to consider an approach that allows them to identify, upgrade and re-use existing legacy assets, while also taking advantage of new technologies. A move SOA and web services offers banks the option to do this.