|
CXO Accent
Technology and the banker
Technological trends of outsourcing, and core banking solutions
on Linux
The biggest concern for a bank in the coming years will be to implement best
practices and solutions in the area of compliance. With BASEL II and anti-money-laundering
norms, banks are required to monitor their operational activities carefully
and quantify the operational risk associated with their business products, services
and volumes. This will not be possible without the help of technology.
Technology is an essential tool in achieving value-added products and services.
With the RBI framing a strict policy for the banks to follow on technology,
there is no escape but to fall in line. However, it might not be possible for
all banks to get funds to implement the required technological innovations.
Of course, in many ways the apex body (the RBI in this case) has allowed methods
that can help cut costs.
The IT/ITeS and BFSI segments have been in the forefront of adoption of applications
and have used technology to cut costs. Two trends gaining ground are outsourcing
and the increasing usage of Linux.
Managing business
Increasingly, businesses are outsourcing pain areas within their IT infrastructure.
For technology to be successful, it has to be integrated with the business process
and banks are no different from other businesses in this regard. When organisations
outsource jobs it’s mainly because the job is not a core function of the
organisations or needs specialised skills, or is cost-driven or is a 24x7 operation.
Typically, a bank would need to manage data centres, maintain systems (servers
and PC), backups and see that service level agreements are up to the mark. It
has to also take care of housekeeping activities such as managing contracts
with suppliers of hardware and enterprise application software.
For any business, the priority areas are tracking and retaining customers, focussing
on core competencies and business strategies. From a bank’s perspective,
managing money is its core business and the value-adds such as ATMs generate
a high level of IT-related activity. An instance of this aspect is our outsourcing
of ATM outlets.
However, when opting to outsource, one needs to retain some level of expertise
based upon business needs rather than completely depending on a third party.
The decision to outsource rests on what is being outsourced and how much is
going out. That is, is it partial outsourcing or a complete makeover? Organisations
that outsource their entire infrastructure tend to depend far too much on vendors,
and in the process, a knowledge gap is created among internal employees. The
trick is to go in for selective outsourcing of IT, which does not allow the
organisation to depend on a third party and makes migration from one vendor
to another easier.
Though our ATM outlets have been outsourced, it does not go all the way. We
sub-contract managed services, gateway services, and field and switch services
to Euronet, and the assets remain with the bank. The two prime reasons are the
internal philosophy of the bank and the arrangement which can be terminated
in case services are not up to the mark. As we have chosen only a few services,
we are driving down cost, since we are not tied to a single vendor, we control
the quality and retain the assets.
This has advantages. With growing transactions and diversification into fresh
geographies, the in-house IT team is overburdened. The main advantages of outsourcing
the ATM network are reduction in cost and 24x7 network uptime. Once an ATM network
grows, the process becomes difficult to handle. The bandwidth requirements go
up, and costs also keep on rising.
A word of caution. The enterprise should be selective while giving access rights
to a third party, and make sure that in-house employees exercise a fair amount
of control over SLAs. IDBI is outsourcing routine and mundane tasks to Microland
under an annual renewal contract. Microland is responsible for managing IDBI
Bank’s data centres, backup, disaster recovery, IT systems (servers, PCs),
IT help-desk, database management and network management across branches and
providing comprehensive and proactive security solutions.
Banking on Linux
Although core banking on Linux is unheard of, it can be a viable solution for
smaller banks. Not all banks in India can afford a CBS because of the expensive
IT infrastructure required to run it. Additionally, banks end up getting locked
into vendors. Since smaller banks have low transaction volumes, a CBS on Linux
brings excellent value by helping them lower their TCO.
Linux is becoming a popular option among many Indian organisations. With the
experimental stage of testing Linux for non-critical applications, organisations
are now looking at its implementation for core applications. It has become a
popular option for mail-servers, proxies and firewalls. Having seen the benefits
of a lower TCO and gaining confidence in its scalability, India Inc is responding
positively to Linux. IDBI’s HRMS (ERP) and e-banking are powered by Tux
at its data centre.
Linux has proved that it is capable of running mission-critical applications
across industries. It is stable, reliable and handles high workloads well. The
enterprise mindset has changed over the years since they began testing Linux
on non-core applications. This trend is expected to culminate into a macro trend
as more enterprises and small and medium businesses (SMBs) look at reducing
their TCO.
One of the biggest advantages of Linux is its ability to move a system to a
faster or more cost-effective platform when the need arises. For instance, we
conducted an experiment running our e-mail server on Linux. At that time we
had 400 users. Today, Linux has allowed us to scale up to 2,000 users—that’s
a five-fold increase, without investing or upgrading to a higher box. Additionally,
there has been no downtime and no patches were required.
IDBI Bank is running Oracle Financials and HRMS successfully on an Intel Xeon
dual processor machine. Without investing in new hardware and OS, we have been
able to grow from 60 branches to 100 with the number of HRMS users growing from
400 to 1,900. The TCO is zero in the last three years as we have not upgraded
or invested in new boxes. The uptime of the Oracle Financials and HRMS applications
has been 99.9 percent. The investment in Linux is justified as we are saving
four times on the cost of hardware (RISC-based), AMC and upgrades.
The other advantage is that there is no compulsion to upgrade. What is more
appealing to us is that the decision on version upgrades and patches are left
to us, resulting in significant cost savings. We can pose any problem to the
open source forum and get the best solution from the masters of Linux. There
are new tools available for free download that help to secure the system. The
main considerations that come into play for an open source system to be considered
are organisational policies, application requirements and vendor support for
applications.
To conclude, banking industry in India has come a long way from what it was.
With lot of vendors giving attractive options both in terms of applications
and price, the critical aspect is to select what is best for the organisation.
The author is Head, IT, IDBI Bank
|
