SOA: Creating Business Agility in the Financial Services Industry

In the face of steady change, CIOs at companies in the financial services industry are seeking technology solutions that can help them achieve their goals. They also need to generate a better return on the previous investments that they made and the IT assets that they currently have in place. The financial services industry demands that IT organizations can modernize and streamline their enterprises to better support innovation and the introduction of new products or services and achieve competitive advantage. But CIOs cannot afford to rip and replace existing systems to accomplish their goals. Most of all, they need to achieve all of this while lowering the Total Cost of Ownership (TCO) required to support their enterprise. The financial services industry requires an IT infrastructure that enables business agility in the most cost effective manner possible.

It’s clear that these CIOs are not necessarily searching for more technology, but rather are searching for a new computing model that can leverage what they have in place in order to meet their needs. The good news is that the computing model they seek is already here, and has been evolving over the past decade. Service Oriented Architecture (SOA) offers an approach to best meet the needs of today’s financial services industry. SOA provides a means for companies to rethink the very nature of their IT infrastructure and the applications and processes that run their businesses. Unlike previous computing models that focused on the development of individual and isolated applications, SOA enables interoperability among disparate, complex applications through the concept of reusable services. This approach makes applications more agile, easier to integrate and better able to support changing business requirements. SOA also promises increased developer productivity, greater flexibility and ultimately, reduced cost because previously created services can easily be reused to support the creation of new applications.

Another significant benefit of adopting SOA is that, unlike earlier approaches to integration in support of new applications, it can be implemented in an incremental and distributed manner. The traditional centralized, server-centric approach required significant investments in new hardware and software to support new initiatives. This is in direct opposition to what CIOs need today. Additionally, the hub-and-spoke nature of a centralized approach makes it difficult and expensive to scale your IT infrastructure while maintaining performance levels as new applications are added. In an industry where disruptions to your core systems may result in losses in the millions of dollars per minutes, a wholesale rip and replace approach is unmanageable. As such, integration projects based on centralized approaches became identified with significant upfront project costs, significant ongoing support costs and an architectural approach that was simply too rigid to support business agility and IT evolution. SOA eliminates many of these hurdles and can provide an environment in which IT capabilities are better aligned with business goals.

But what are the drivers for transformation that are pushing the financial services industry toward SOA and are these drivers consistent across the industry segment? In many cases, the business drivers, as addressed earlier, that may prompt a retail bank to explore SOA are quite similar to those of a brokerage house, insurance company or other financial services company. But the question remains, how does adopting an SOA approach to new application development and deployment alleviate the concerns of a financial services CIO?

Meeting Customer Demands: Attracting and Keeping Customers

Across the financial services industry, competition to attract and keep customers is intensifying. Banks, brokerage houses and insurance companies are all aggressively working to ensure that customers want to do business with their organization. The race is on to roll out new product and services, and new ways of interacting with the company. One simple example of efforts in this area is the move toward online customer self-service. Whether we are talking about online bill pay, the ability to trade stocks or to change the desired coverage on an auto insurance policy from your laptop, these activities require the development and deployment of new applications. For financial services companies that have embraced SOA, the task is significantly easier.

In the effort to offer products and services more quickly, financial services companies can incrementally introduce the concept of SOA into their organizations using an Enterprise Service Bus (ESB) such as IONA’s Artix. ESBs offer a distributed, lightweight means of service enabling existing applications without requiring rewrites of the existing code in these applications. Artix provides additional flexibility beyond other ESB offerings as a result of its extensible, plug-in architecture, allowing CIOs to deploy only what is needed to accomplish the goal at hand. This allows developers and architects not only to manage the size of the Artix footprint, but also limit, if not eliminate entirely, the need to deploy new hardware to support innovation. The new services, created and supported by existing IT assets can now be reassembled, quickly and with little impact on existing systems, into new applications that promote business agility.

Dealing with Industry Consolidation

It seems that every time you turn around, one company in the financial services industry is merging with another. Throughout the segment, mergers, acquisitions and partnerships are executed to bring customers the widest possible variety of products and services. This level of consolidation can have its downside, especially when it comes to ensuring that the IT systems in one organization can be integrated with those of another.

SOA can again offer an effective solution to the problem that the integration of disparate, complex systems places on the financial services industry. This is of course providing that the right choice is made when selecting the infrastructure software to support your SOA initiatives. At the most fundamental level, look for an ESB that is technology agnostic. Because starting with a new integration platform is too expensive and time consuming, you need to be able to effectively work with what you have. Artix supports multiple platforms and protocols, including those associated with mainframe environments. This means that Artix endpoints can use the existing application and messaging infrastructure to bring together disparate systems into a cohesive whole. And it can be done at lower cost and without disruption to existing systems.

Regulatory Change

An industry that deals with other people’s money is going to be one that is highly regulated, and new demands based on regulatory requirements have now become the bane of the financial services industry. For multi-nationals, the problems of dealing with government regulations and mandates can be even more daunting. Much like the technical issues facing financial services firms in an era of consolidation, it can be the technical aspects of meeting government regulations that cause the most concern for financial services companies. There are certainly no guarantees that the reporting systems or data feeds with which financial services companies are mandated to comply are actually compatible with their internal systems. How then can regulations be met without forcing a complete re-engineering of the systems on which the rest of the business is run? This requires a flexible approach to service enablement using existing resources.

SOA principles, supported by an extensible ESB such as Artix, provide an excellent solution. Service enabling internal systems at the point where they intersect with government mandated applications not only eases integration, but also provides a level of flexibility that can help maintain compliance should things change. Case in point is that of a leading US-based financial services company that specializes in the trading of municipal bonds. They chose Artix to facilitate integration between various messaging technologies using an extensible service bus to comply with changing regulations. Now, they are not only compliant with today’s regulations, but also ready to adapt their systems as and when the regulations change.

Conclusion

The financial services industry must offer new products and services while managing operating expenses as competition in the marketplace accelerates at an extremely rapid pace. In response, CIOs are tasking their architects and developers to reduce IT operations cost and complexity, deploy new systems and applications that are complementary to existing infrastructures, but can allow integration to be carried out in an incremental manner. A new computing model is needed to address these formidable challenges and SOA is the answer. An innovative and cost-effective means to adopting SOA is to use a lightweight, distributed and flexible service enabling technology, such as the one offered by IONA’s Artix ESB. Artix provides the ability to reuse current applications and the hardware that they run on with the flexibility to adapt to infrastructure changes based on business demands.