Banking on Technology

How long does it take an international bank, established in 1921, with a

global presence in 30-odd countries, expert management and a sound technical

backing, to set up operations in India? Before you start thinking what a

cakewalk this is likely to be, here’s the catch.

The bank has to do it without touching the source code to the worldwide

mainframe system, which controls all its banking processes. So customizing the

legacy software to suit the Indian business environment is not possible.

This was the situation at American Express before it initiated retail

operations in India in 1997-87. Why? Primarily because customizing a legacy

system can be a cumbersome process. Besides, during that time, American Express

Technologies, the technology division of the American Express group, had the

more critical job of ensuring Y2K compliance. AET was responsible for providing

technical support to the other lines of business undertaken by AmEx.

"We knew we were already late in entering the Indian market," says

Anurag Gupta, who has been director of American Express Technologies since 1999.

Banking on the legacy system would have meant another three-year delay in

commencing operations in India, he explains. "That was just not acceptable.

We had to find a local vendor who would design and implement a sound banking

system and facilitate a quick entry into the Indian market," he says. The

banking system would have to be built around the legacy system without

interfering with it.

Getting started

It was at this point that AmEx was introduced to Nucleus Software Exports,

which designs products specifically for the banking and financial services

segment. "Though AET exists to technically enable the other lines of

business undertaken by AmEx, there are times when the priorities of the business

team do not match with those of the technology group. At that point of time, the

technology group was more focused on the Y2K compliance issue, but it was also

essential to launch operations in India," explains Vishnu Dusad, managing

director of Nucleus Software, which bagged the AmEx project.

On evaluating the previous projects Nucleus had handled for other banking

institutions–especially Citibank–American Express shortlisted this

Delhi-based company. "The people at Nucleus had worked closely with the

banking industry and this was one of the prime reasons that led us to signing

them on," says Gupta. However, just this factor was not considered

sufficient.

AmEx has a clear-cut vendor selection process in place. There are specified

benchmarks with regards to vendor location, revenues and budgets, the

enterprises where the application is working, the people backing it up, client

share and retention plan of the company. And for every business partner, there

is a detailed SLA. "More importantly, all vendors have to be certified by

our New York-based global procurement group," explains Gupta.

The need for RoI

But why did this global bank have to choose a vendor from India? "We

could have gone in for any international product in 1997, but we realized that

with the lower cost of doing it in India, the RoI is tremendously high,"

says Gupta. When evaluated on a cost-to-benefit analysis, AmEx saw high return

on investments. "It is not surprising that we were able to square up our

investments in two-and-a-half years flat," he adds.

"A smart businessperson should ensure that only 10% of the revenue is

invested in technology," avers Gupta. "Initially, the cost may be as

high as 40%, even 50%, but if you look at the five-year scenario, the figure

should not be more than 10%." Initially, AmEx planned an investment of

around $1.5 million on technology. But as the business grew, the investment grew

in tandem, jumping to nearly $2million. Ask Gupta if the stakes were too high

and pat comes the reply, "The higher the stakes, higher the returns. But

seriously, the rigorous vendor selection process that we have in place ensured

that there was no bad spending."

For every system that AmEx implements, there is a project definition program

(PDP) specifying the product that the company wants to launch and its

prerequisites. Once the PDP is understood, a project definition report is

prepared stating clearly how the company intends achieve the same, listing the

hardware and software requirements, what should be done by the vendor and the

deadline for completing the project. The next phase is business systems analysis

and design report, which maps the requirement of the business-to-system

specifics.

What was it that Nucleus could deliver to get AmEx up and running, especially

given the short turnaround time period? First, the Finness suite, which

comprises seamlessly integrated software modules that could also be deployed

independently for performance and cost optimization. Built on the scaleable

Oracle platform, Finness is a multi-branch, multi-currency and multi-product

suite that also supports multilingual implementation.

The idea was to have a set of products and modules which would provide

end-to-end solutions for Amex’s business. "Our business partners are

always considered to be a part of the Blue Box (AmEx), and it is only with their

support that we can conduct continuous and flawless transactions," says

Gupta.

The Finness suite also includes solutions for lending, collections, deposits

and finance against securities. Moreover, AmEx has implemented other products

like Requests, which captures, forward resolves and monitors customer requests

and queries.

"The idea was to have a system which would be dedicated solely

to the cause of expert customer care," he says.

AmEx has also enhanced the Finness backbone. "We have added variants to

the product that have helped tremendously in establishing our business and

spurred growth in such a short time-period," he says. The bank intends to

introduce Finesse in Bangladesh as well.

AET has an approved set of vendors who cater to the technical requirements of

the bank depending upon the country and the type of work. Similar to the Finness

solution in India, AmEx has a system called Ovations in Hong Kong and Globus in

Jakarta.

Web on the cards

From its offices in Delhi, Mumbai, Kolkata and Chennai, AmEx is focusing on

the retail business. One of the primary objectives is to enforce the retail

business on a high priority in India and the Asia-Pacific region. "India

has been rated as the number two priority in the retail banking business in this

region," adds Gupta.

All AmEx offices in India currently work out of a central database at Delhi.

The Finness system caters to all four branches, with about 60-65 users at each

location. For any technology to work effectively across four geographical

locations, what is needed is sound and robust infrastructure and good bandwidth

for connectivity. In view of this requirement, AmEx has increased its bandwidth

subscription to 2Mb at all locations.

The company has its hubs in Singapore, which connects the WAN to the

worldwide network. There are external gateways in Delhi and Mumbai, apart from

the 256Kbps external gateway in Chennai. AmEx also has a 512-Kb microwave link

in Gurgaon.

"We also have parallel 64-Kb contingent backup everywhere," says

Gupta. "Therefore, from the network point of view, we are very well

connected," he adds.

Next on the agenda is the Web-enabling of all applications by 2002, in order

to take the load off the network. "The idea is to provide a better banking

experience to our customers," says Gupta.

Operational in India since 1998, American Express recorded a net profit of Rs

28 crore in financial year 2000-01. Supported by a team of 40 technology

professionals from AET, American Express is poised to implement an on-line

presence for itself.

Does the adoption of home-grown banking software by a global bank mean

anything? "Sure, it does. To put it very plainly, this product has proved

to be not just cost-effective, but also stable. There have been times when we

have imposed unreasonables on Nucleus Software, but they have always been

met."

After leading the world in the services segment, Indian software products

seem to be coming of age. And Nucleus is just one in a growing list of Indian

companies coming up with world-class solutions. And the timing couldn’t have

been better.

Meghna Sharma in Chennai–Dataquest