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