Issuu on Google+


EMERGING FROM THE CRISIS BS&T’s 2009 Executive Summit p.34-35

Business Innovation Powered By Technology

Gary Greenwald Citi Global Transaction Services

John Beran Comerica

Barbara Perino Washington Trust

Francisco DeArmas Whitney National Bank

Thomas Kunz PNC Financial

Fred Cook North Shore Credit Union

David Downing First National of Nebraska

Donald Westermann Eastern Bank

$8.95 www.banktech.com

October 2009


Eastern Bank is girding for the return of a thriving economy, and Donald Westermann is leading an IT transformation to ensure the bank’s architecture is ready for a return to growth.

Building a New Foundation

T

BY M A R I A B R U N O-B R ITZ

AKE ONE LOOK at the bustling IT shop at Eastern Bank and one might feel as if beamed back in time about four years, when the financial crisis was still unthinkable and banks’ coffers were flush with funding. Donald Westermann, SVP, technology engineering and operations at the Boston-based bank, and his team are busy rebuilding Eastern’s entire IT infrastructure from the ground up

so it’s ready for the upturn. In the two years he has been on the job, Westermann has led several significant transformational projects, all in the name of making the bank a more nimble, more competitive financial institution. “Two years ago, we sat back and asked ourselves what we were doing at Eastern from a business perspective and how we, as an infrastructure team, could assist the business lines in achieving their targets,” Westermann relates. “We came up with some key constructs. First, security in general, with the monetization of information breaches, is always a great concern. Second, we have to realize that security and functionality are often at odds with each other. Expense management was also vital. ... So we needed to

28

O C TO B E R 2 0 0 9

W W W. B A N K T E C H . C O M

balance all these elements as we developed our strategy.” The result of this strategizing was an infrastructure services architecture framework that, Westermann says, gave him and his team a road map for how they would rebuild Eastern Bank’s ($6 billion in assets) foundational architecture to best support the business. According to Westermann, the tenets of that framework include realizing economies of scale by standardizing and simplifying technology, leveraging advanced and emerging technologies, gaining efficiencies and cost reductions with the use of common processes and technologies, and increasing the bank’s scalability and flexibility to allow for future growth. “We have grown through a series of acquisitions and

B A N K S Y S T E M S & T E C H N O L O GY


hope to continue growing with the upturn in the economy,” Westermann notes. “That’s our focus as a bank.” The use of standardized technologies plays a large role in that focus as Eastern seeks to unify its IT following those acquisitions, Westermann relates. Key to the effort, he reports, was moving from Novell (Waltham, Mass.) to Microsoft (Redmond, Wash.) as the base technology at the bank. “We started with an incredibly mixed environment two years ago,” Westermann says. “We started along the path to collapsing what I call ‘islands of administration’ — whether they be individual work group servers or multiple Windows domains. We rebuilt the common core services to enable larger-scale projects. We’ve also systematically reduced our management footprint.” The icing on the cake is that Westermann was able to embark on the project, which is ongoing, without staff reductions. Bucking the trend of other small banks that lean more toward outsourcing and out-of-the-box solutions, Eastern instead sought to build out its internal expertise. “A number of our processes and technologies on the infrastructure side had been outsourced, like managed services such as security,” Westermann explains. “A lot of these managed-services relationships need you to fit into some kind of mold or cookie cutter; we were too customized for these companies to offer us quality support. So we tore out a lot of those managed services and staffed up in the engineering areas to get those skills in-house. But it’s a mix for us. If we think we can get a strategic advantage by bringing skills in-house to provide that extra level of performance and scale, then that’s what we’ll do.” And Westermann remains undeterred by naysayers who advise thrift during times of crisis. On top of the rearchitecting work, he has begun migrating the bank’s entire telecommunications infrastructure to voice over IP technology. “This goes back to being platform-centric,” he says. “We ran individual phone systems in each of our locations, so you can imagine what the overhead was like. VOIP has resulted in significant cost reductions for us.” BREATHING ROOM

With so many projects to juggle at once, Westermann admits, it’s hard to come up for air. “I have an absolutely extraordinary team,” he says. “They’ve been running full speed for two years. Trying to take our foot off the accelerator to give everyone a little breathing room is the toughest thing for us now, especially as the team has such a high sense of ownership of the overall technical environment. The team just wants to keep on running.” It’s no wonder that Westermann says he just can’t unplug when he’s out of the office. “I find it difficult for me to mentally disconnect,” he relates. “I constantly focus on projects or issues on my commute, nights and weekends. I’m always connected to it. I’m not necessarily pecking away at my BlackBerry, but I’m mentally trying to prepare for the next day or week.” Incidentally, Westermann says, he’s exclusively a Black-

Berry man — no iPhone for him. However, he acknowledges, the younger generations are good bellwethers in terms of which technologies the industry should pursue next. “Personally, I go more for the application-type tools as opposed to the more collaborative ones. ... And I’m still pretty old-school in that I talk to my friends on email and on the phone,” Westermann notes. “But when I talk to my peers about these applications and I watch my wife on Facebook, you just kind of see the ebb and flow of this technology: They initially find it interesting, but then their interest wanes. So I wonder [about] the longterm viability of these technologies. However, harnessing the underlying concepts and innovations here is key.

“If we think we can get a strategic advantage by bringing skills in-house, ... then that’s what we’ll do.” And if it’s so engaging for the younger generations, then it’s important to see if it will be the next e-mail.” Westermann recalls when he was a member of the younger generation. With his degrees in economics, business administration and management information systems, he landed a position in the technology risk consulting practice at Arthur Andersen. When his group later moved to Grant Thornton after the Andersen implosion, he noticed that one of Andersen’s former clients, Eastern Bank, also made the move to Grant Thornton. The familiarity eventually led to a position with the bank. “When you focus on information security, systems analysis and risk management, they tend to trend you toward the financial services industry,” Westermann explains of his move to Eastern Bank. “And it has been an interesting two years for me.” Things will no doubt become more interesting as the economic recovery continues. “In relation to the rest of the business, IT has gone through a lot of changes over the last few years,” Westermann notes. “Much of these changes were welcome as people were given the tools to more easily collaborate and were better able to interact with the customers. We have quite a partnership with our [internal and external] customers, and I hope it continues to grow.” ■

DONALD WESTERMANN, EASTERN BANK SVP, Technology Engineering and Operations Years With Bank: 2 Years in Current Position: 2 Number of Employees in Unit: 28 Education: B.S. in Business Administration, Economics and Management Information Systems from Villanova University Hobbies: Playing with his daughters, Lily (4) and Grace (1), and skiing with his family.

B A N K S Y S T E M S & T E C H N O L O GY

W W W. B A N K T E C H . C O M

O C TO B E R 2 0 0 9

29


EMERGING FROM THE CRISIS BS&T’s 2009 Executive Summit p. 36

Business Innovation Powered By Tec

WATCH YOUR BACK

$8.95 www.banktech.com

August/September 2009

Prevention of payments fraud increasingly is a cross-industry effort because it “is in all of our best interests,” says Iqbal Khan, JPMorgan Treasury Services. p.24


F E AT U R E

AG I LE AR C H ITE CTU R E

Despite the downturn, banks are turning to SOA, virtualization and cloud computing to enable the flexible technology architecture required to sustain cost-effective operations and remain competitive in today’s volatile market. BY D E E N A M . A M ATO-M C C OY

A

s the banking industry continues to navigate a recessionary economy, financial institutions are learning that they cannot sustain costeffective operations or superior customer service using disparate platforms and siloed databases. A move toward more-open, flexible and even emerging platforms is not only saving banks capital but also offering organizations an agility that will keep them competitive once the economy turns around.

Even while the financial crisis continues to strain banks’ technology budgets, they must maintain efficient and secure transaction processing, real-time customer interactions and business continuity — all while continuing to pursue growth. Clearly this is not easy as “Many companies are simply trying to stay afloat during the recession,” says Richard Daukant, VP and general manager, financial services, SAP (Newtown Square, Pa.). “However,” Daukant adds, “the current economy is presenting a great opportunity for banks to position themselves for the future. The way to do so is to consider transitioning to more-flexible operating platforms.” Though some banks may not believe they have the funds now for an architectural overhaul, Daukant contends that they should begin to take stock of the complexity of their data storage configurations and business applications. Mergers and acquisitions have run rampant over the past decade, he notes, and thus many institutions are operating disparate software applications or, worse, disparate business channels. “The biggest challenge we hear daily is that inter-

nal systems, either organically grown applications or those acquired through mergers, just don’t ‘talk’ to each other,” reports Daukant. “This causes issues, including not being able to bring new products to market in a timely manner or, worse, inability to present them across business channels.” SOA FOR BUILT-IN FLEXIBILITY

o combat these challenges, experts are urging banks to consider flexible platforms that support end-to-end business processes and to utilize a single set of information and reusable applications. Enter: service-oriented architecture. SOA provides an interoperable, scalable platform with loosely coupled applications. The open platform ensures that applications, which are accessible over the network, can be reused across the enterprise for various operations. “The architecture promotes flexibility and solves how to integrate today’s siloed applications,” Daukant asserts. “Since it supports the interoperability of new and existing applications, and keeps users in

T

B A N K S Y S T E M S & T E C H N O L O GY

W W W. B A N K T E C H . C O M

AU G U ST/ S E P T E M B E R 2 0 0 9

31


F E AT U R E

AG I LE AR C H ITE CTU R E

touch with information and processes in real time, it provides a low total cost of ownership.” As part of its core banking replacement project, Edmonton-based ATB Financial (US$24.5 billion in assets) is transitioning to SOA. According to Ken Casey, the bank’s EVP, major initiatives, ATB’s previous, mainframe-based computing system featured controlled user access to everything from applications and customer information to product pricing and procedures. “One of our challenges was the delivery of products and services demanded in a modern banking environment, which consists of multiple channels,” he relates. “We realized that creating a more complex computing environment to solve these issues could result in more

STANDARDIZING SOA

B

anks are attracted to the promise of serviceoriented architecture, but many remain cautious about implementing the technology. In addition to the challenges of an internal culture shift, banks tend to be unfamiliar with the best practices associated with SOA. To ease the pain, a consortium of financial industry players created a blueprint of best practices that can educate banks to the benefits of the architecture and how to prepare for an installation.

The Banking Industry Architecture Network, or BIAN, (www.bian.org) is committed to providing and defining interoperable banking IT services based on standards created by a broad membership of the banking industry, including financial institutions, technology providers, analysts and associations. According to Claus Hagen, head of integration architecture at Zurich-based Credit Suisse (US$1.1 trillion in assets), which is a member of the group, the initiative is a fundamental foundation for the adoption of SOA. Since BIAN is based on industry standards, he suggests, banks can use the best practices to adopt an SOA model and more easily integrate internal applications.

A VIRTUAL VIEW

ut reusable services are just one element of a flexible architecture. As business demands grow, banks struggle with how to optimize workloads enterprisewide. “At different points of the day, business demand changes,” explains Lee Fisher, manager, worldwide financial services business development, scalable computing, with Palo Alto, Calif.-based Hewlett-Packard. “This increases storage needs.” Historically, if a bank needed more storage, it added a new server — a costly investment when one adds the wattage needed to power the unit to the cost of the hardware itself. Today there are more cost-effective options. For example, many banks are consolidating servers in data centers and making the move to multicore servers, which can run multiple applications simultaneously. “While banking has become a 24-hour-a-day, sevenday-a-week business, there are still servers that sit idle overnight,” Fisher says. “These units can be eliminated or loaded with other business applications that are utilized more often. This reduces operating costs and increases efficiency.” Perhaps the most popular approach to server consolidation today is virtualization, which allows banks to essentially create multiple server environments on a single machine. Another, increasingly popular option — one that allows banks to scale capacity up or down with extreme flexibility — is on-demand computing: Rather

B

Deutsche Bank (US$3 trillion in assets) is a supporter of BIAN’s efforts, according to Abhijit Gupta, an enterprise architect with the Frankfurt-based bank. “As a bank we stand to benefit from BIAN’s standard service landscape definition and service certification model,” he says. “In the next generation of standardization and industrialization of the core banking products, it is in our interest that we shape the standards for the banking platforms effectively together with all BIAN members.” As more banks learn the value of BIAN, “We expect to see better interoperability between banks’ internal systems; streamlined go-to-market strategies such as acquisitions and new product introductions; and more flexibility for banks to address consumers’ needs and attract and retain their customer base,” says Bindia Hallauer, CTO of worldwide financial services for Microsoft (Redmond, Wash.), a BIAN member. —D.M.A.M.

32

AU G U ST/ S E P T E M B E R 2 0 0 9

W W W. B A N K T E C H . C O M

points of failure” across that environment. The bank chose to implement the SAP for Banking suite, which supports operational and analytic banking applications using a business process platform, according to the vendor. ATB expects the model to support a multichannel banking architecture and to reuse various applications within this framework, Casey says. ATB operates multiple channels, including branches, ATMs, online banking, interactive voice response (IVR) and telephone banking services, a call center, and an interface for an online portal that supports sales and services as well as customer relationship management capabilities, according to Kris Hansen, ATB’s chief architect. “Customer information is essential within each of these channels,” he says. “By using our new SAP platform, we can ensure that we use one customer record and have a single version of the truth.” Data will flow over the enterprise business services and be shared through the middle layer that connects ATB to the platform, Hansen explains. Then SAP’s platform will connect ATB to the interoperable services that extract the customer data from a single end-point service, he adds. The tight integration is scalable and can be reused as ATB adds more business channels or ties new applications to the customer data in the future, Hansen notes. At press time ATB was developing approximately 40 business services, including payment systems and partner services, and preparing for the first tests. The bank plans to go live on the SOA platform by summer 2010.

B A N K S Y S T E M S & T E C H N O L O GY


UBM-BST