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Anyone who has worked in the banking domain can tell that both IT vendor and bank face a dilemma when it comes to core banking replacement.
Have you ever thought why so many large programs face rough patches while walking the path of IT transformation? A fear of failure, rather than the anticipated joy of success, has gripped the IT transformation of the big elephants in the banking industry. The record shows that more than half of IT transformation programs do not see success. The reasons could be many, including the following, which we have observed:
Moving towards agility
THOUGHT PAPER
2 | Infosys
If the rate of success is so low and
challenges in terms of manpower, time
and money so big, should banks stop
looking at the opportunity to modernize
their core banking ecosystem? We believe
that transformation programs should
not be written off, simply because of the
fact that it is only through core banking
transformation that a bank can unleash
operational efficiency and acquire the
momentum to compete effectively. So
the question is not whether or not to
undertake a core transformation program,
but rather, how to do it and which
methodology and principles to follow.
Introducing Agile
Agile is one of the upcoming transformation
methodologies. However, like any other new
player in an established market, Agile also
received a lukewarm response gaining few
takers, especially in the product landscape.
Their biggest arguments – apples versus
oranges, and one size does not fit all. They
believed that Agile was suitable for the
service industry where projects are started
from scratch, but was not optimal for
products.
While the product companies lived in denial,
the takers of Agile grew in number and soon
it had success stories to show. Banks and
financial companies started to recognize
the benefits of Agile – that it pushed players
to rise above the mindset, which said that
financial products could only be delivered in
a Waterfall. IT companies started harnessing
the opportunity, realizing that Agile was
most applicable to the financial industry.
Why Agile?
What is it that makes Agile rise above the
traditional waterfall and why is it creating
a buzz everywhere? The answer lies in the
methodology itself, which from the very
outset tries to break down and simplify
the program life cycle. The basic principle
of Agile is to fail early, rather than succeed
late. It is a time -boxed iterative approach,
in which vendors logically plan smaller
releases, knows as sprints or iterations, at
the end of which a potentially shippable
and tangible product increment is
delivered. Banks apply the 80-20 rule, that
is, they try to identify and address high
priority items, but with small effort.
Simplification
Agile doesn’t believe in the Big Bang.
The whole idea is to break the complex
transformation program into multiple
simplified steps and harness early business
benefits for banks to gain their leadership’s
confidence.
Faster time to market
Agile attacks the problem of the typical
software delivery model, which is that
stakeholders cannot realize any tangible
benefits until the mammoth task of
transformation is complete. Agile helps
banks by quickly delivering a business
function with limited features and then
continuing to add more functions. This
helps in gaining first mover advantage.
Reasons for Failure of Core Banking Transformation
Complexity
in migration
Communicationlapses b/w
Vendor s andBank s teams
Change indynamicsleading to
scope change
Dependencyon Legacy
and itsin�exibility
Big BangApproach
Complexityof IT
Landscape
Lack ofOwnership
of Bank
Limitedvisibility and
control ondeliverables
IT CostsRun Over
Transition ofcore teamsof Vendors,SI and Bank
Lack ofoperational
readiness
EarlyIssue
detection
Faster time
to market
Adaptability
More
transparency
& visibility
Simpli�cationRisk Mitigation Why Agile?
Early product launchPrevents defect leakage
Re-plan and optimize Outcome traceability
Ea
rly
fe
ed
ba
ck
Pro
gre
ssive
de
live
ries
3 | Infosys
More transparency and visibility
The lack of visibility and control is resolved
by the deliverables for different sprints
or iterations defined in each release,
which are delivered by the vendors
to the embedded team onsite, which
does the required business validation
before acceptance. A working product
demonstration is made to stakeholders.
Adaptability
The “inspect-and-adapt” approach reduces
the risk of getting an irrelevant and
outdated product at the end of delivery,
and also rules out any change requests for
aligning the project to shifting business
requirements. Agile empowers the
stakeholders to continuously re-plan the
releases and optimize the plan to stay most
relevant and competitive in the market.
Risk mitigation
Agile helps to mitigate market risk to
a great extent. Early feedback from
stakeholders, progressive gathering and
building of requirements, greater flexibility
in accommodating changes to these, and
most importantly, early cancellation rather
than late failure help in making Agile least
risk prone.
Early issue detection
Since the deliveries are planned in small
iterations, the bank need not wait till the
end of the project to do operational/user
acceptance testing. Instead, the inclusion
of testing at the end of each iteration or
release ensures that critical defects are not
permeated to the end stages of the project,
but are captured and worked upon early.
The above diagram showcases a hybrid
Agile methodology in practice. Core
banking products undoubtedly operate
under a different set of ground realities
and hence different rules apply to their
implementation.
• Business comes up with requirements
and unlike in the Big Bang approach of
the waterfall model, business critical
requirements are prioritized and
segmented in the first few releases ,with
‘nice to have’ features and wish list items
relegated to the last set of releases.
• Based on factors, such as priority,
criticality, complexity and the sequence
if applicable, sprints are designed under
a given release. For example, to launch
and offer a product in the market, the
primary step would be to configure the
product, do customer onboarding, offer
the product to the customer and then
manage its life cycle.
• Under each sprint, tasks are configured
and tracked in the system in the form
of a dashboard. The dependencies
between sprints and tasks are marked
out clearly.
• The first release may not be realized as
quickly as Agile advocates would like,
the reason being the time required
to set up and configure the base
product with seed data on which the
customization or localization layer must
sit.
• Once the base product is deployed and
available, the subsequent set of releases
providing add -on features to the
existing set of products or for launching
new products can be controlled and
rolled out much faster.
• In a typical core transformation
program, the first release may take
somewhere between 3 and 6 months
Hybrid Agile Methodology for Core Banking Implementation
Re
qu
ire
me
nts
fro
m b
usi
ne
ss
Dis
trib
uti
on
of
fun
ctio
na
lity
in
to s
pri
nts
Critical Business needs
Release 1
Sprint 1
Sprint 2
Sprint 3
Sprint 4
Sprint 5
Sprint 6
Plan &Develop
Feedback
*Includes Base Product
setup and con�guration Release 2
Sprint 1
Sprint 2
Sprint 3
Sprint 4
Sprint 5
Dis
trib
uti
on
of
fun
cti
on
ali
ty i
nto
sp
rin
ts
Priority 2 Business needs
Task 1
Task 2
Task 3
Task 1
Task 2
Task 3
Deliver
Validate& Evaluate
Release 1 : Relatively longer release
Acceptfunctionality
Go-LiveEarly Launchwith basic features
Go-LiveAdd-on features,New products
Release 2 : Shorter releases from hereon
Plan &Develop
Feedback
Deliver
Validate& Evaluate
© 2014 Infosys Limited, Bangalore, India. All Rights Reserved. Infosys believes the information in this document is accurate as of its publication date; such information is subject to change without notice. Infosys acknowledges the proprietary rights of other companies to the trademarks, product names and such other intellectual property rights mentioned in this document. Except as expressly permitted, neither this documentation nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, printing, photocopying, recording or otherwise, without the prior permission of Infosys Limited and/ or any named intellectual property rights holders under this document.
About Infosys FinacleInfosys Finacle partners with banks to ‘simplify’ banking and arms them with accelerated innovation to build tomorrow’s bank, today.
For more information, contact �[email protected] www.infosys.com/�nacle
Varun Goyal Lead Consultant, Infosys Finacle
based on how many customizations
are prioritized and clubbed with the
base product release. From there on,
subsequent releases may be rolled out
every 2 to 4 months.
• Each release will have its independent
requirement gathering session and
solutioning, build and testing stages
followed by operational or user
acceptance testing.
• The releases need not be sequential
in nature. Activities between two or
more releases may happen in parallel.
For instance, while Release 1 is in build
phase, requirements for release 2 may
be gathered, and while testing of release
1 is going on, build for release 2 may
start.
• The bank is able to bring critical
business benefits to consumers much
faster as time to market is reasonably
short and cycles for go-live are iterative.
Unlike in the traditional model, the
bank need not wait years to realize the
tangible benefits of the transformation
program.
• The bank may designate some releases
as internal and others as business
releases with actial business go-live
It is prudent for large banks not to
shift their development methodology
paradigm to a new methodology without
the potential of formidable, measurable
business improvement and efficiency. But
in order to realize the benefits of the Agile
methodology, banks must time it right.
Agile is like a spectrum; banks have an
option to adopt selective Agile practices, to
the extent they want to, as well as identify
a sweet spot, which works best for them.
It is worthwhile to start with a hybrid of
existing methodologies and Agile elements
and tailor them to achieve the business
objectives in a time bound fashion. After
acquiring hands-on experience with Agile
methodologies and realizing its benefits,
once the ground becomes fertile for Agile
to nurture, banks can progress towards
extensive and elaborate Agile project
management and tools.
References
1. http://epmlive.com/articles/5-benefits-
of-agile/
2. http://en.wikipedia.org/wiki/Agile_
software_development
3. http://agile-only.com/master-thesis
4. http://www.versionone.com/Agile101