IBM today announced a new solution to help banks renovate their back-office systems and compete more effectively in the emerging “on demand” world.  

The new Core Systems Transformation solution (CST) represents a $140 million investment by IBM. It is a comprehensive portfolio of transaction processing platforms and services from IBM, which allow banks to migrate their back-office systems to modern Internet architectures in a phased, risk-minimizing manner.

The move comes at a time when banks worldwide are grappling with aging back-office systems that are hampering bankers as they seek to improve service to customers, deliver new products, manage costs and strengthen risk controls in today’s competitive and increasingly global banking environment. Banks’ “back-office” or “core-banking” systems are the mission-critical systems that process data and transactions for mortgages, loans and deposits.

IBM has blended innovations in business processes optimization and technology advances into a comprehensive approach to core systems renovation. The main components of the CST solution are:

Business Transformation Methodology.  IBM’s Component Business Model technique and Information FrameWork data models help banks identify back-office “hot spots” ripe for optimization.  This methodology, currently in use at dozens of financial institutions worldwide, uses a phased, modular approach to core-systems replacement, allowing these systems to be renovated in a progressive fashion rather than the traditional “big bang” approach.

IBM’s Business Consulting Services unit has trained hundreds of banking specialists in this methodology, which is capable of supporting even complex multi-national engagements.

Transaction Processing Infrastructure for core banking, based on IBM’s flagship WebSphere software and eServer and TotalStorage systems. This open, standards-based platform uses a services-oriented architecture to deliver core banking functions as flexible web services. For CST, IBM is enhancing WebSphere by boosting transaction processing throughput, incorporating batch processing capabilities, and extending system monitoring/management capabilities, thus meeting the mission-critical operating requirements of core-banking systems.

This software has been optimized to run on IBM’s market-leading p- and z-series eServer hardware, under either Z/OS or Linux; database and transaction processing workloads can be split on to separate platforms if desired, and mixed z/p configurations are supported.

Support for market-leading core-banking applications. IBM is working with best-of-breed providers to tightly integrate and adapt their back-office applications to exploit the advantages of the new CST transaction processing platform.

IBM and strategic partner Fidelity Information Services are now delivering the first implementation of CST, a version of Fidelity’s Corebank product that has been rearchitected as a fully compliant Java application exploiting CST infrastructure including IBM zSeries, pSeries and TotalStorage. This new Java version is available immediately and has been shipped in Japan under the name “Next Evolution in Financial Services Systems” (NEFSS), and has been delivered to the first client, Suruga Bank.

NEFFS builds on the extensive functionality available in Fidelity’s existing Corebank product. Corebank provides true real-time, component-based core-processing capabilities within a relational database environment based on IBM’s Information FrameWork data models and is tightly integrated with IBM’s software/hardware stack. Fidelity has long been a feature/function leader in core banking, with more than 2,000 financial institution clients.

“We are delighted to build on our successful partnership with IBM to bring to market this ground-breaking solution. Working within the CST framework, global banks are now able to migrate to best-of-breed technology through a componentized implementation approach working with two leading companies,” said Jim Wilson, president, Fidelity International Division.

“We are at the beginning of an important new era in the evolution of banking technology,” said Mark Greene, IBM’s general manager for the global banking industry. “The combination of IBM’s business-process expertise, standards-based advances in our software and hardware, and next-generation applications marks a new age of back-office capability.”

Multi-Tiered Approach Provides Transformation as Needed
CST is a multi-tiered offering designed to be flexible and modular. Its open architecture can be adopted progressively, as banks decide over time on appropriate levels of transformation. Software components - along with applications from leading business partners – rely on IBM WebSphere technology. WebSphere helps bring mission-critical transaction processing to a component- based J2EE environment.  The CST solution helps to enable the rapid creation, deployment and maintenance of new high-transaction-volume solutions faster than previously available.  In addition, new automatic work-load balancing, batch scheduling and quick recovery features greatly enhance the resilience of this next-generation banking system.

“Core system transformation tools that link to business process management are extremely powerful,” said Guillermo Kopp, vice president at Tower Group. “This should not be a one-size-fits-all solution or an impossible boil-the-ocean effort. Banks should be able to use such holistic, multi-layer tools in different ways, and transform their legacy business functions at their own pace through modular implementations.”

Through WebSphere, CST offers the integration of real-time, core-bank processing with existing enterprise systems in a service-oriented architecture.  The real-time capabilities allow operations (such as loan processing) to be integrated with other applications both inside (e.g. marketing programs, account activity verification) and outside (e.g. third-party credit scoring) of the banking enterprise.  This real-time capability allows the bank to improve information currency and enhance the ability to provide new on-demand products and services.

IBM has established a unique set of interlocked, transformational tools to automate and reduce the risk of complex system transformations. This allows the use of best-practice business-process and data models, simulation of re-design scenarios, and direct population of downstream application modeling and integration support tools.  IBM has also established industry-leading tools and techniques for driving IT service management, including the monitoring and automated management of systems once deployed.

Key components of the CST tool set include the IBM Information FrameWork (IFW) and the IBM Rational software development platform leveraging tools from IBM WebSphere, Rational, Information Management, and Tivoli software.

IFW provides best-practice information, process and integration models that can accelerate the process of designing and building new business functionality.  The IFW models, such as Banking Data Warehouse, are in use in more than 250 financial institutions worldwide.

The IBM Rational software development platform enables model-driven development, which allows progressive simulation of new processes and application function throughout the project in order to reduce time and risk of software implementation.  These complementary tools improve productivity and reduce errors through data integration. This same tool set provides progressive instrumentation of application services enabling information security, availability and resilience to be built into new services, increasing reliability while reducing operational overhead after deployment.