Case

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BankDhofarCore banking transformation for growth,efficiency, and control

Over 13% RoI

within 17 months

of the roll out,

taking into account

only the most direct

dollar benefits.

H i g h l i g h t s

02

BankDhofar, one of the leading banks in the Sultanate of Oman, operates 59 branches, a large network of ATMs across the country, and has assets worth over RO 1.6 billion. In end 2008, the Bank started a core banking transformation project, migrating from legacy banking technology to Finacle, and changing much of the banking application portfolio and infrastructure with it. Similar to most banks that have embarked on core banking roll out projects in recent times, BankDhofar was aiming at achieving the high level of flexibility that contemporary banking technology offers.

The Finacle implementation project at BankDhofar’s remarkable because the project was completed in 18 months and was largely incident free. The Bank had the problems typical of core banking systems built on an earlier generation of technology. The system was inflexible, making new product launches, on-going customization, and integration difficult. In addition, a number of key processes were not supported by the existing core banking application, leading to unacceptable levels of visibility gaps, manual work, and manual overrides, which in turn led to inefficiencies and leakages. Of course, all of the above was in addition to the central problem of older core banking systems, of down time and end-of-day reconciliations.

Fortunately, there was much consensus about change, and the transition to a new core banking platform (and e-banking) was part of the Bank’s five year (2008-2012) strategic roadmap. In December 2008, after evaluating four shortlisted core banking vendors, BankDhofar started the transformation project with Finacle.

The project ran for 18 months, culminating in a big bang roll out across BankDhofar’s over 55 branches. The project was on time and on budget. The Bank’s IT leadership attributes the project’s success to a tight focus on sticking to a well defined set of requirements (and limiting scope creep) and selecting a solution with a high level of alignment with requirements (and therefore limiting customization). Ovum agrees with the two self reported critical success factors. Most projects of such scale fail because of inadequate attention to limiting scope and signing up for more customization that the solution and the company can bear. Both factors are ultimately linked to the quality of IT leadership and the organization’s ability to formulate the right governance structure for high value and high risk projects. The project’s success bears testimony to both. Within 17 months of roll out, the Bank has already recovered more than 13% of the project’s cost through direct dollar savings and has a much higher readiness for new products and initiatives.

This case study is by Ovum, a part of the Datamonitor group, and is based entirely on their independent research in the relevant field

E x e c u t i v e s u m m a r y

CASE STUDY

Finacle’s

standard features

met out of the

box requirements

very well...very

good fit ...very

good fit with

middle Eastern

banking

requirements

Ravi Khanna

AGMInformation Technology,BankDhofar

03This case study is by Ovum, a part of the Datamonitor group, and is based entirely on their independent research in the relevant field

The principle driving the selection process was out-of-the box alignment with the features laid out in the RFP. Similar to most companies of similar scale, BankDhofar has a formal evaluation frame work for all technology selection scenarios. The framework covers functional capabilities, technology, the vendor’s scale (and reputation), and projected costs. Ordinarily, every factor is given equal priority. Given the importance of functional capabilities in this instance, the Bank downgraded the importance of cost and prioritized functional capabilities. The Bank believes Finacle met 80% of the requirements out-of-the-box.

Requests for customizations were closely evaluated and only those with significant long terms benefits were accepted. The Bank worked on the assumption that simply getting functionality available on the earlier system to work reliably is complex enough. In enterprise IT, the importance of limiting scope has been known for a long time. However, such discipline is rarely exercised in practice. At BankDhofar, such discipline was achieved partly due to the governance structure comprising two committees – the senior management committee and the steering committee. The senior management committee was staffed with all business unit heads, including the General Manager, IT, and this committee met once a week. The executive managing the transformation project reported to this committee. The other committee, the steering committee, was the final authority and comprised the Bank’s most senior executives including the CEO and two individuals from the company’s board. The project therefore was not lacking in senior management sponsorship.

Of course in practice, project discipline and consensus comes from the leadership’s ability to argue their case successfully in cross-business unit forums. And the Bank’s IT leadership adhered to the ‘limited customization’ principle very effectively. Finally, 83 customizations were agreed to, and were all drafted into the pre-execution project plan.

The banking transformation project began in December 2008 with Infosys training the core team and with the launch of the user acquaintance testing phase. The latter involved Infosys and the Bank’s team running through individual features and identifying cases for customizations. The requirements were frozen at this stage.

K e y s e l e c t i o n c r i t e r i a

CASE STUDY

?Finacle Core Banking

solution

? Finacle CRM

? Finacle eBanking

? Finacle Alert Server

? Jataayu

?Middleware solution

using Websphere

Message Broker and

Websphere Process

Server

?OmniDocs

? Finacle Treasury

S o l u t i o n C o m p o n e n t s

80 % of the

requirements

were met out

of the box

Deepesh Saxena

Senior Manager,Information Technology,BankDhofar

04This case study is by Ovum, a part of the Datamonitor group, and is based entirely on their independent research in the relevant field

The project ran for approximately 18 months, ending in a big bang roll out in July 2010. Throughout these 18 months a team of 60-70 IT and business personnel, comprising employees from Infosys and the Bank (and another IT services organization for testing services), were on site and at its peak the team strength reached above 100. In addition to various IT roles, the Bank deployed 10 senior business employees, with each executive managing a project track. Twenty employees f rom the Bank ’s IT organizat ion were deployed full time.

An interesting aspect of the project was the outsourcing of testing services to a specialist. Ovum believes that an independent testing services provider is a practice that should be far more common, particularly for transformational projects such as core banking replacement. A Project Management Office (PMO) office was set up in collaboration with a prominent consulting firm.

Data migration and standardization, as would be expected of a project of this nature, was particularly challenging and went through over a dozen runs. A train-the-trainers approach was adopted for training branch employees. After a number of rounds of user acceptance testing, roll out simulations, and training, Finacle was rolled out to each of the Bank’s 55 branches at one go on 4th July 2010. Over the next six months, up to January 2011, the Bank’s focus was on stabilizing the new system, and this objective has been met.

The Bank deployed a number of solutions in conjunction with Finacle core banking, Finacle eBanking, Finacle Treasury, Finacle Alert Server, ATM switch, investment banking system, asset and liabilities management, anti-money laundering system, integration with Automated Clearing House (ACH) and Real Time Gross Settlement (RTGS) system, middleware technology, payroll, and account management, among many others.

The Bank reports no significant delays or catastrophic problems dur ing these 18 months. Also, the big bang rol l out was accomplished without incident.

S o l u t i o n d e p l o y m e n t

CASE STUDY

There is a much

higher level of

readiness for

change now

Ravi Khanna

AGMInformation Technology,BankDhofar

?Strong senior

management

sponsorship

? Strong IT leadership

? Limiting scope creep

? Careful vetting

of customization

requests

K e y s u c c e s s F a c t o r s

05This case study is by Ovum, a part of the Datamonitor group, and is based entirely on their independent research in the relevant field

A very comprehensive list of functional enhancements was drafted as part of the RFP. Many of the functional enhancements were in effect attempts to plug blind spots and leakage points in the banking process. For example, the previous core banking system lacked a way of capturing many fee-based services, such as charging for check books, or charging penal interests. With the system unable to capture such charges, tasks were often executed at the branch level leading to a lack of oversight on many occasions. Plugging such gaps was a key focus area for BankDhofar. The following list details some of the functional enhancements achieved through the Finacle implementation project:

• Physical inventory of Purchase Orders and Demand Drafts.

• Check book issuance and management.

• Foreign check collection.

• Stop payments register.• Cash-in-Till account (each teller can now have a separate account;

every teller shared a common cash-in-till account earlier).

• Ability to configure load amendments and rescheduling (previously

standing orders were necessary).

• Account closure.

• Statement of account.

• Account freeze status maintenance.

• Listing joint holders of an account.

• Generation of welcome letters and stop payment forms.

• Reques t of Visa Electron ATM cards.

• Comprehensive customer search.

• Listing/filtering accounts (through filters such as ‘active’, ‘closed’,

and ‘dormant’).

• Customer account summary.

• Detailed customer inquiry (previous system could generate very low level

of detail).

• Deposit receipt print.

• From a RTGS system for branches that involved faxing forms to Muscat,

the Bank has now moved on to RTG S integration at all branches.

• A similar transition has happened with ACH.

It would be relevant to call out two important points here. The above represent functional enhancements or new features. Also, most of the above represent Finacle’s off-the-shelf features.

F u n c t i o n a l e n h a n c e m e n t

CASE STUDY

06This case study is by Ovum, a part of the Datamonitor group, and is based entirely on their independent research in the relevant field

Ovum’s (and BankDhofar’s) approach to calculating Return on Investment

(RoI) has been extremely conservative. BankDhofar’s RoI estimates presented

here takes into account a single benefit source, one that can be linked to

savings in hard dollar terms with little scope for ambiguity. In the previous

somewhat decentralized model, branches were responsible for collecting

penal interest charges. Without central management, leakage of the penal

interest stream was hard to control. Post Finacle implementation, the system

of penal interest charges is part of the core banking solution, and therefore

automated, non-discretionary, and completely centralized. The level of

control has naturally gone up and with it the level of leakage on the penal

interest for overdraft accounts revenue stream has gone down considerably.

BankDhofar estimates that in the first 17 months since roll out millions

have been saved due to better control.

R e t u r n o n i n v e s t ( R O I )

CASE STUDY

Project Inception To December 2011 - BankDhofar Banking Technology Transformation

Project ROI Estimate And Costs And Benefits

Costs Benefits

RoI of 13.1% in 17 months

R O I d r i v e r s

R O I

Leakage of penal

interest fee income

plugged through

centralized solution.

Over an eighth of

investments

recovered in the

seventeen months

since roll out …

measuring only

direct dollar

? 40-50 IT and business personnel (Bank, Infosys, and other partners) on site throughout the duration of the project

? A peak strength of 80-90 professionals on site

? The figures above include around 20 IT personnel from the Bank and 10 senior employees from business units

?Multiple solutions from the Finacle portfolio and infrastructure software

?For Finacle Core, Treasury, Alerts, and CRM, four HP UX Rx6600, Rx3600 servers

?For the Finacle eBanking installation, two HP UX Rx 2660 servers and 2 Windows HP BL 460 blade servers

?RSA VeriSign certification

?Various network

devices and an improved

MPLS network

K e y i m p l e m e n t a t i o n

c o s t e l e m e n t s

S e r v i c e s

H a r d w a r e

The BankDhofar IT organization had the mandate of replacing solutions from

the previous vendor, and the mandate to overhaul led to many other pieces

of banking technology being implemented alongside core banking. From

the Finacle stack, CRM, eBanking, Treasury, and the Alert Server were

deployed. The list of infrastructure software deployed includes software from

Websphere Message Broker, Websphere Process Server, OmniDocs (from

Newgen), SigCap (from 01Systems) and database software from Oracle.

The integration points were many, and some went beyond replicating the

previous IT environment, such as integration with the RTGS and ACH system

across branches. Integration with the ATM network, the investment banking

system, the assets and liabilities management system, the anti money

laundering system, the payroll system, the Accounts Payable system, the

credit card system, SMS banking (integrated through the middleware

platform), and the content management system (OmniDocs) were some of

the 26 integration points.

The figure below segments project cost from inception to roll out. Third party

services cover the cost of engagement with all non-bank and non-Infosys

entities, such as the cost of the consultant who helped set up the Project

Management Office and the cost of engaging the dedicated testing vendor.

The third cost category covers all licensing cost (software from Infosys and all

other software) and cost of engaging Finacle’s professional services team.

C o r e b a n k i n g t r a n s f o r m a t i o n i n v e s t m e n t

CASE STUDYCASE STUDY

07This case study is by Ovum, a part of the Datamonitor group, and is based entirely on their independent research in the relevant field

Quantifying Core Banking Transformation Investment (Project inception to roll out)

55.00%

15.00%

30.00%

Hardware

Third Party Services

Licensing (Including Non -Infosys Software) and Infosys Provided Services

?A single unified and centralized core banking system.

? High visibility and control over processes that used to be branch-based, manual, and somewhatdiscretionary.

? A number of processes that were executed outside the core banking solution are now executed within Finacle, improving visibility.

? The reconciliation and availability problem has now been eliminated.

? Branch employees now have more time to focus on sales and high value customer service.

? Reduced time to launch a branch.

? Integration is much easier.

? Readiness for change is now much higher.

? Enhanced customer visibility

? Much higher level of automation.

K e y s t r a t e g i c a n d o p e r a t i o n a l

b e n e f i t s

System maintenance, extensions through integrations and customization,

and new product or product variant launches are all possible now at

reasonable cost and reasonable time. The second key benefit of course is

reducing downtime and real time reconciliation across channels.

BankDhofar has experienced the entire set of standard core banking

transformation benefits. Prior to Finacle, the Bank’s ATM network had a

planned downtime of one-two hours every day. For non-ATM channels the

figure was 4-5 hours per day. There is no planned down time for any channel

post Finacle roll out. Most kinds of change are easier now, including launch of

new branches, as the following figure illustrates.

CASE STUDY

O p e r a t i o n a l b e n e f i t s

CASE STUDY

08This case study is by Ovum, a part of the Datamonitor group, and is based entirely on their independent research in the relevant field

Time To Launch A New Branch Reduced From Three Days To Less Than A Day

0.9 Days

3 Days

Pre - Finacle Post - Finacle

K e y f u n c t i o n a l

b e n e f i t s

? Automation of many hitherto manual tasks.

? Processes that were performed outside the core banking system are now part of Finacle.

? Enhanced information capture and ability to retrieve customer data easily.

09This case study is by Ovum, a part of the Datamonitor group, and is based entirely on their independent research in the relevant field

CASE STUDY

F u n c t i o n a l b e n e f i t s

CASE STUDY

Over and above the many benefits that come from being on a system built

on contemporary technology, BankDhofar has realized a number of

functional benefits. The full list of functional enhancements that were part of

the RFP was compiled in the ‘Long list of functional enhancements’ section of

this case study. Some of the most important categories of functional

enhancements achieved are:

• Automation of many hitherto manual tasks:

The Bank lists a series of tasks in this category, including loan schedule

payments, charge collection for balancing certificate, housing loan

processing, document collection, credit appraisal, and EMI

calculation.The Bank credits higher level of automation with reducing

turn-aroundtime, reducing instances of error, and increasing output.

• Processes that were performed outside the core banking system,

and are now part of Finacle:

This is a large category and includes many types of processes and tasks.

Generation of welcome letter, ATM card requests, cheque book requests

and foreign check collection are examples.

• Enhanced information capture and ability to retrieve data:

The Bank is now closer to the 360 degree customer information ideal.

Reports are now more information dense and the error rate is lower. In

addition, certain features within Finacle offer better information retrieval.

As would be expected from a modern business application, the search

functionality is much more robust now.

?

searching for a new core banking system, aiming to develop acontemporary and flexible technology platform which would allow greater centralization, visibility, and flexibility.

?The Bank selects Finacle out of four contenders, partly on account of the solution’s strong alignment with functional requirements.

?The project is completed in 18 months, culminating in a big bang roll out in July 2010.

? By July 2011 numerous functional enhancements have been achieved and IT is ready to support new business initiatives.

? By July 2011, a single benefit source has saved the Bank millions of dollars through better control over the penal interest charging mechanism.

The Bank starts

T h e t i m e l i n e

10This case study is by Ovum, a part of the Datamonitor group, and is based entirely on their independent research in the relevant field

CASE STUDY

P r o j e c t s u m m a r y

CASE STUDY

For most banks, the argument in favor of core banking transformation is so

persuasive that a hard RoI argument is typically not necessary to make the

business case. When a RoI exercise is conducted post project completion,

there is some serendipity involved in finding sources of hard dollar benefits.

The Bank’s success (multiple banking applications deployed without major

incident in 18 months) can be linked to a system of governance and

leadership style that focused on defining objectives and requirements,

remaining focused on the original set of requirements, and monitoring

project progress closely. Core banking transformation projects have often

been compared to refueling a jet in mid-air. This was certainly true for

BankDhofar. Between mid-2009 and mid-2011, a time frame completely

overlapping with the project and the six month post-rollout stabilization

phase, the Bank grew the number of customers by nearly 25%, number of

accounts by over 12%, and the number of branches by close to 10%.

The most significant benefit is that IT is now ready to implement new

products and initiatives that the Bank might want to launch. At this stage,

there are a number of important initiatives that could be relevant to the Bank,

such as the launch of Islamic banking. There are many smaller initiatives that

are at various stages of being launched, such as the centralization of

processes. The list of processes that would be centralized includes account

opening, corporate loan disbursement, and consumer loan disbursement.

The launch of e-banking alongside the new core banking platform was one

of the major strategic priorities. The e-banking channel’s utilization is very

likely to grow by orders of magnitude, and naturally IT is ready to support this

very beneficial change in channel mix. Since the roll out, the Bank has added

a significant number of customers and at a future point the focus would be

on increasing the number of products per customer. That branch employee

time has now been freed up for high value customer conversions will

certainly help increase the cross-sell ratio.

To summarize, the Bank has a strong pipeline and IT is well positioned to

support strategic and operational initiatives.

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© 2012 Infosys Limited, Bangalore, India, Infosys believes the information in this publication is accurate as of its publication date; such information is subject to change without notice. Infosys acknowledges the proprietary rights of the trademarks and product names of other companies mentioned in this document.

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