How HP Achieved the Fastest Core Banking Migration in India for Bank of India | Article

Best IT Infrastructure  

Outsourcing Excellence Award – Best IT Infrastructure – Bank of India and HP India

This relationship also won the “Best First Steps” Award in 2005.

Prior to the Bank of India deciding to outsource to HP India, the branches of Bank of India were running on a COBOL-based, in-house-developed legacy application; a set of branches was networked while the rest ran on a standalone basis. “Customers were typically customers of the branch, not the bank,” explains P.A. Kalyanasundar, General Manager for Information Technology. “The bank needed a unified view of its customers,” he adds.

Bank of India was facing competition from various quarters, including its peer public-sector banks in India, the new-age private sector banks in India, and the aggressive foreign banks setting up shops in India. To remain among the top five banks in India, the bank wanted to continuously improve on every customer experience, reduce time to market, cut operational expenses, conserve capital, and improve its workforce productivity.

The bank realized that technology, if deployed in the right manner, could serve as a significant differentiator and one of the means to overtake competition.

“The bank wanted to get this right because the stakeholders knew that it would be a 10-year-long relationship that would, in a way, decide the fate of the bank. The choice of HP as the technology partner was intuitive, given HP’s proven expertise in enabling technology for better business outcomes,” says Marshal Correia, Director, Outsourcing Services, HP India.

To meet the new challenges in the market, Bank of India, one of the nation’s largest public-sector banks, needed “to switch to a flexible and scalable architecture that would give us the agility to respond to changing market dynamics,” says Kalyanasundar. “We wanted a system that would allow our employees to give better service to our customers and that would help us compete with our peers.”

First, the bank looked at choosing a single IT partner that would take complete ownership for the new applications and infrastructure it would deploy across 1000+ branches. The bank wanted the IT partner to design, build, own, and operate the IT infrastructure while it retained ownership of the network infrastructure.

“We made a conscious decision to do what we know best–banking. We wanted to give technology to the people who know technology well,” says Kalyanasundar. They banked on the fact that outsourcing was the solution.

The Supplier-Selection Process

Having realized that outsourcing was the fastest way to embark on this transformation initiative, the bank advertised an expression of interest, which received responses from 20+ suppliers in and outside India. The bank, which has operations in 12 countries in addition to India, later issued an RFP to about eight suppliers that qualified on the eligibility criteria stated in the expression of interest. “We cared about the prospects’ financial stance, their reach, and their technological capabilities,” says Kalyanasundar.

“The bank used a very elaborate techno-commercial evaluation process,” says Kapil Jain, Vice President, HP Services, India. Based on the responses to the RFP, the bank down-selected four suppliers: two household names in India and two in America. There were detailed product walk-throughs to evaluate functional/technical compliances. They called their existing customers for references. “We scored them on each parameter. We selected the supplier with the best score,” explains Kalyanasundar.

The bank selected HP, which now manages and maintains the entire IT application and infrastructure for the bank’s core banking and data-warehouse solution. HP provides the bank with a single point of accountability spanning the entire transformation project and ongoing management services across the full stack of its new enterprise applications and infrastructure. As part of the build and ongoing management, HP has built a tier-III datacenter and co-hosts a disaster-recovery facility conducting quarterly drills. HP built and is managing the central helpdesk and customer call-center facility as well as the bank’s 1000+ branch network and security solution.

The two signed a 10-year contract in 2004 for approximately US$15 million a year. Within financial services, this relationship is HP’s largest in Asia-Pacific.

“We wanted to align our IT strategy with business strategies, which would help us serve our customers better,” says Kalyanasundar. “We were looking for a partner with the right domain knowledge and expertise in integrating and managing large projects. We chose HP due to its experience in both outsourcing and systems integration. Moreover, HP also brought to the table its top-of-the-line partnerships with technology leaders; that was a further measure of HP’s capabilities as a true solutions provider.”

The Transition Period

Both partners knew from the word “go” that this relationship had to work. This was the first project of its kind in India, according to Kalyanasundar, so the bank knew it had to prove the concept. Success was also crucial for HP, since the supplier hoped that a successful deployment would qualify it for other similar engagements in India.

Both parties understood there was much at stake. Surya Narayanan, Project Director on the HP team, says HP understood that the bank’s reputation was at stake. “If there’s a fire in a branch or a short circuit in the computer room, the bank’s customers suffer. If the systems were to go down and the customers could not get their money, it would be a disaster for the bank. We knew we had to minimize the downtime as much as possible, on every occasion,” he says.

HP implemented all in-scope horizontal and vertical solutions in a phased manner with clearly defined milestones and acceptance criteria, beginning with a pilot. The duo selected 15 branches in Mumbai and Bangalore; these branches represented a good business mix. (The bank has 2,600 branches in India and 24 overseas.)

“Then we waited two months–a cooling period–to see what happened,” recalls Kalyanasundar “There were some functional issues, but they weren’t show-stoppers or roadblocks that didn’t allow us to move further. This period allowed us to fine-tune the software, which ensured we could test all functionality before starting the roll-outs across all other branches; this minimized risk to the project.”

Kalyanasundar says they held constant review meetings to sort out the difficulties. “We jointly worked out the issues during those 60 days and then went ahead with the rest of the bank,” he says.

The two partners introduced the software user interface, hardware and software support delivery, a new technology platform, and process centralization all at the same time. “There was a great challenge in managing the change and ensuring all users were comfortable in discharging their duties,” says Kalyanasundar. The teams dealt with this challenge with intensive cross-country travel to hold user meetings and training sessions at each branch.

HP conducted formal training a week before a branch had to use the new technology. Once a branch migrated, six HP and Bank of India people remained at the branch “to hold their hands,” says Kalyanasundar. Three months later, HP trainers returned to the branch with a refresher training program “so the staff could understand the nuances better.” He says training continues on an ongoing basis. The bank also set up an advanced training institute to meet the training challenge. HP increased faculty support.

The Roll-out and Build Phase

After the initial pilot began, then came the excruciating task of branch roll-out. This involved a site survey for all branches to assess readiness, migrate data and then roll out the customized software across the banks branches that were spread across 24 states in India. As for the branch roll-outs, to minimize customer service disruption, the partners had to complete the migration over a weekend. “There was no time for parallel runs. We used Sundays for testing and fall-back in case there were any migration issues,” says Narayanan.

The to partners jointly identified the branches a quarter in advance, based on their location, level of readiness, employee cooperation, etc. “We selected branches where the branch managers were enthusiastic about the change and migrated them first,” says Kalyanasundar. They identified champions of change at each branch listed for conversion and gave them special training. “Post transition, they became the bridge between the implementation team and the end users,” says Kalyanasundar. The team migrated about 900 branches in 18 months.

It didn’t take long for all the employees of a migrated branch to see the advantages of the new technology. “When it came time, the employees actually fell in line. We started getting demands from other branches, asking us, ‘When are you going to bring core banking to our center?’ Demonstrating the advantages had a good effect. The branches were relieved of the end-of-day processing. We took mundane activities of multiple report generation and account reconciliation away from the branches,” says the general manager.

Kalyanasundar says, at the outset, employees “feared the unknown” since this was a pioneering project in India. Both the bank’s chairman and executive director got involved from Day One; they sent proactive communications to the organization and its key change agents about the importance of the initiative. “We explained to senior management why we had to make this effort successful,” says Kalyanasundar.

When the roll-out got to second-tier towns in India, the bank had to explore another communication technology because the communication infrastructure there is less reliable. “We looked at alternative technologies like wireless to deal with the frequent infrastructure failures,” reports Kalyanasundar.

The project–converting 1,000 branches with 13,000 users–was completed one year ahead of schedule, making it the fastest core banking migration in India at the time. “That was a milestone achievement. This pace was unprecedented in the Indian banking industry,” says Kalyanasundar.

Prayas Vanarse, Enterprise Account Manager, HP India, says this was only possible because HP “had huge support from the bank. Without that support from the bank, we couldn’t have succeeded. It was an excellent demonstration of teamwork.”

One year into the branch transition, HP began to build an enterprise data warehouse for the bank. When completed, it will become the central repository for all the information from every branch. “The bank will be able to mine the warehouse so it can analyze product profitability and trends as it designs new products,” says Kalyanasundar.

Governance

Each party to the engagement has a project sponsor. A steering committee has top-level executives from both parties; it meets every month and decides on open action points that need decision. They check to see if their teams resolved those points at the next meeting.

An operations committee meets fortnightly. The bank’s operations committee uses HP enterprise management software to constantly monitor the service level agreements (SLAs), studying monthly and quarterly reports. The SLA-based contract has both rewards and penalties. “Month on month, HP has been meeting SLAs,” says Kalyanasundar.

Even though there have been no disputes to date, the contract has an escalation clause and an arbitration mechanism. There is an exit clause, too. “HP is committed to us; we know whatever issue comes up, we will discuss it and then sort it out. We solve problems mutually,” says Kalyanasundar.

Business Benefits

“For Bank of India, HP does what it is does best–managing IT. This allows the bank to do what it does best–serving customers,” says Kalyanasundar. He says HP “changed the way we do business.” For the first time, the bank’s employees can market and sell at the branch level. “Now we can concentrate on our customers,” says the bank executive. He says the branches that have the core banking system are growing “much faster” than the others because of this new ability to sell.

And the employees have more to sell. They now can offer new products like ATMs, telebanking, and Internet banking. This has helped the bank build relationships with its customers beyond banking.

Outsourcing IT to HP gave the bank its first unified view of its business. Until it outsourced, the bank did not have a consolidated view of its profit and loss at the customer level. Today, thanks to HP’s help, the bank is in a position to have its P&L and balance sheet ready almost the same day as financial closure; auditing and publishing the same takes just 17 days after financial closure. “This is a phenomenal achievement for the bank as these timeframes are at par with those for other global organizations,” adds Kalyanasundar.

The bank is also getting a lot of data that was “difficult if not impossible to get before. This IT project was also used to enrich customer data through a ‘Know-Your-Customer’ initiative,” says Kalyanasundar. For example, it now has data for its private-sector banking, which caters to small- to medium-sized enterprises. The bank can now look at the costs of each business unit and do a product profitability analysis. “This helps us decide what kinds of products to sell and if we need to make a mid-course correction. Better data collection and analysis tools allow us to make better decisions,” he adds.

Outsourcing saves the bank money: 20 percent over the 10-year period, Kalyanasundar estimates. He adds, “The bank today has visibility on the overall IT expenditure for the next eight-ten years on a quarterly basis. HP’s pay-as-you-grow model has helped reduce up-front cash outflows, helping us conserve capital and deploy it more effectively. By virtue of periodic technology refresh, HP also keeps the deployed IT assets up to date. Predictable IT expenses, smoothed cash outflows, coupled with obsolescence protection has helped the bank reduce operational expense,” explains Kalyanasunder.

Why This Relationship Is Successful

  • There is stability on the supplier side. “This is important because the tasks we outsourced require a lot of expertise. You need people who understand both technology and banking. Then they have to know our processes,” says Kalyanasundar.
  • No one has an ego. “Everyone understands they are working for the cause. Issues that come up are related to the project, not to the individuals. Everyone has a positive attitude,” reports Kalyanasundar.
  • The buyer knew how important it was for the supplier to be successful. “They knew once we implemented, this outsourcing would be a showcase for them. It proved they could be successful. So successful, Thomas Friedman mentioned it in his book The World Is Flat, says Kalyanasundar.
  • The supplier will go the extra mile to protect the reputation of the bank. Narayanan says a modem and router burned when there was a fire in a branch. He and a colleague drove 10 hours to the branch to install new equipment.

Lessons from the Outsourcing Journal:

  • Buyer and supplier tend to support each other when a lot is at stake. Here the buyer was changing how it went about banking because it had to compete with the multinationals. The supplier had to make this successful so it could find similar customers.
  • Training is crucial with new IT infrastructure. And that training needs to be ongoing.
  • The partners selected branches with enthusiastic supporters to migrate first. Then it used its successes there to convince the others.
  • Supplier stability is crucial, especially in complex relationships.


Post a Comment

Your email address will not be published.

( required )

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>