Table of Contents # Topic Slides 3 4 Objectives of this - PowerPoint PPT Presentation

Table of Contents # Topic Slides 3 – 4 Objectives of this Presentation 5 – 7 Core Banking Evolution 1980 – 2015 8 – 14 Complex IT Project Implementation: Lessons Learned 1990 – 2015 15 - 22 International Core Banking Projects: Lessons Learned 2005 – 2015 23 – 30 Thailand Core Banking – A Roadmap for Iran Not to Follow 2015 – 2xxx 31 Questions, Comments, & Answers 32 – 41 Appendix – Anatomy of A Failure 2 Iran Core Banking Conference

Objectives of this Presentation 1 3

Goal of this Presentation CBS …We’ve come a long way in 25 years …A CBS is Just Another Complex Piece of Software …Banks have learned much since 2000 …Iran can learn from Thailand …and apply the key to transformation Iran Core Banking Conference 4

The Evolution of Core Banking 2 5

CBS Solutions – 40 years of evolution Technology 1975 – 1995 1995 – 2010 2010 – 20xx IBM Mainframe or Platform Unix Agnostic IBM System 32 / 38 Architecture Centralized Client – server Agnostic – SOA Operating System DOS / VSE, AS/400 HP/UX, AIX Agnostic Mode of operation Batch Real-time, batch accruals Real-time, true 24x7 VSAM flat files File Structure Relational database Relational database ISAM flat files COBOL Language C, C# Java RPGII Modules Silos Integrated modules Components Client ‘Dumb’ terminal ‘Fat’ Client – Windows xx ‘Thin client’ – browser Integration Point-to-point Messaging EAI/ESB Industry trends Leading edge 5 years behind the trends Back to early adoption Iran Core Banking Conference 6

Banking Solution Panorama as at 2015 Technology US Europe Asia Small banks Core iSeries / Unix Unix Unix Channels Omni-channel Omni-channel Multi-channel Operating Model Outsourced In-house In-house Mid-size banks Core Unix Unix Unix Channels Omni-channel Omni-channel Multi-channel Operating Model Outsource & in-house In-house In-house Large Banks Core zSeries mainframes Mixed Unix / zSeries Mixed Unix / zSeries Channels Omni-channel Omni-channel Multi-channel Operating Model In-house In-house In-house Iran Core Banking Conference 7

Risk Factors in Complex IT Project Implementation 3 8

Risk Factors in Complex IT Projects The Study is updated every year – the In 1994, the Standish Group conducted a survey of organizations who had complex IT projects latest is 2013 The participants included: • IT executive managers (CIO’s) • Large, medium and small companies • All sectors - Banking - Securities - Manufacturing - Retail - Wholesale - Healthcare - Insurance - Services - Government The survey sample included: • 365 organizations • 8,380 IT application projects Iran Core Banking Conference 9

Risk Factors in Complex IT Implementations The 1994 Standish Scorecard for IT Complex Project Success 16% 53% Challenged 31% Cancelled Success Cost / Time Overrun Write-off Iran Core Banking Conference 10

Complex IT Project Implementation Challenges 40% 35% 40% 36% 30% 35% 31% 30% 25% 30% 20% 25% 20% 15% 18% 20% 16% 14% 10% 15% 11% 10% 9% 5% 10% 4% 0% 5% 1% 0% Cost overruns Feature & Function Fulfillment Time overruns 11 Iran Core Banking Conference

Success Factors – IT Project Implementations Success Factors Clear Requirements 24% Executive Support 18% User Involvement 17% Proper Planning 17% Realistic Expectations 10% Competent Staff 8% Sufficient Resources 7% 0% 5% 10% 15% 20% 25% Iran Core Banking Conference 12

Progress in IT Project Implementation – 1994 – 2013 60% 53% 50% 43% 39% 40% 31% ١٩٩۴ 30% ٢٠١٣ 18% 16% 20% 10% 0% Success Challenged Cancelled Iran Core Banking Conference 13

Progress in IT Project Implementation – 2004 – 2012 90% 80% 70% Time Cost 60% Features 50% 40% ٢٠٠۴ ٢٠٠۶ ٢٠٠٨ ٢٠١٠ ٢٠١٢ Time Cost Features 2004 84% 56% 64% 2006 72% 47% 68% 2008 79% 54% 67% 2010 71% 46% 74% 2012 74% 59% 69% Iran Core Banking Conference 14

International CBS Implementations - Trends in the last decade 4 15

International Trends in Core Banking Replacement General themes and trends globally 80% Improve operational efficiency 70% Speed up loan approval 70% Launch innovative payments products 65% Improve time to market 60% Improve customer satisfaction 55% Provide unified customer experience 55% Increase penetration 50% Increase cross-selling 0% 20% 40% 60% 80% 100% Sources: Ovum study of European banks; IDC study of Asian banks. Iran Core Banking Conference 16

International Trends in Core Banking Replacement Global drivers for changing core banking system, from IBS study 27% Broader functionality 25% Centralization/standardization 23% Support future strategy 16% Support for new products 16% Scalability 11% High costs of legacy system 9% Start-up bank 7% Legacy system not supported 7% Obsolete technology 5% Manual processes 5% Improved risk management 5% Bank merger/acquisition 0% 5% 10% 15% 20% 25% 30% Sources: International Banking Systems Intelligence. “Core Banking Systems Case Studies Online”. IBS: 22 August 2011. Updated July 2013. Iran Core Banking Conference 17

International Trends in Core Banking Replacement Many banks view core banking replacement as necessary, but a smaller percentage have definite plans to replace 100% 80% 75% 80% 65% Replacement 60% 45% Necessary 40% 28% Replacement 20% Planned 20% 0% Europe North America Asia/Pacific Sources: North America: Oracle, The Impact of the Financial Crisis on Core Systems Replacement, July 2010, page 3 Europe: Ovum, “The Business Case for Core System Transformation”, February 2012 Asia: IDC, Financial Insights, “Core Banking Renewal Strategies of top 150 Asia/Pacific Banks, 2011-2014”, 2011. Iran Core Banking Conference 18

International Trends in Core Banking Replacement Why is there such a gap between necessity and actual core banking replacement? • Three factors account for reluctance to changing of core banking systems 1. High cost – minimum of $30 million for a medium-sized bank 2. Long timeframe – minimum of 3 years, average 4 years for a replacement project 3. High risk – core banking replacements have a high failure rate Three common core banking replacement trends around the world • 1. Banks are being driven to undertake core replacements by market pressure 2. Cost and customer demands for agility are key drivers of replacement 3. Vendor core banking products have matured enough to overcome fear of change Sources: Forbes. Groenfeldt, Tom. “Why Core Banking Replacement Remains Locked in the Future”. Forbes Report 10 September 2013. Celent. Greer, Stephen and Daniel Latimore. “Global Core Banking: Steady but Unspectacular Growth”. 23 July 2013. Iran Core Banking Conference 19

International Trends in Core Banking Replacement Bank transformation follows a path from (1) product innovation, to (2) sales innovation, to (3) market share innovation, and finally to (4) customer service innovation China Bangladesh Sri Lanka Vietnam Indonesia Private Banks India Malaysia / Philippines Korea Taiwan Hong Kong Singapore Australia Iran Core Banking Conference 20

International Trends in Core Banking Replacement Lessons Learned in 63 case studies of core banking transformation, from IBS Retail Universal Lesson learnt from 63 case studies of CBS transformation Banks Banks Vendor selection time 10 months 13.5 months Implementation time 19 months 22.3 months Total transformation time 29 months 35.8 months Level of satisfaction for completed transformation projects High High Select a solution that is already successful in the country 85% 80% Banks are split between ‘big bang’ and ‘phased’ implementation 45% ‘big bang’ 45% ‘big bang’ Sources: International Banking Systems Intelligence. “Core Banking Systems Case Studies Online”. IBS: 22 August 2011. Updated July 2013. 21 Iran Core Banking Conference

International Trends in Core Banking Replacement The most common risk factor is the interface between business and IT Risk Factor Risk Mitigation 1. Establish a joint IT-business implementation team, with 1. Managing the interface between business and IT KPIs based on successful collaboration. 2. Employees’ behavior 2. Establish employee KPIs based on project success 3. Technology bottlenecks 3. Select the most scalable technology 4. Managerial attitudes 4. Establish managerial KPs based on project success 5. HR if training and management is insufficient 5. Provide intensive training for project team 6. Flexibility of IT systems 6. Select the most flexible IT system 7. Huge level of hierarchy 7. Establish horizontal project team structure 8. Lack of adequate technical expertise 8. Provide in-depth technical training to project team 9. Lack of support from IT vendors 9. Structure the project contract to guarantee support 10. Regulations and compliance 10. Streamline internal bank regulations 22 Iran Core Banking Conference Sources: The Asian Banker. “Retail Banking Innovation Report”. AB: Sept. 2010, page 56

Case Studies of 6 Banks in Thailand 5 23