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SAP targets financial services sector

The financial services sector is getting unprecedented attention from business software provider SAP AG, with SAPPHIRE ’04 featuring the annual event’s first ever presentation theatre dedicated to reaching this industry’s participants.

In fact, SAP has invested more in their financial services suite of software since 1998 than in the development of the original R/3, said Ron Frankenfield, senior vice-president and general manager for SAP’s North American Financial Services Group.

SAP has as yet a comparatively low share of the North American financial institutions market. And, although Canadian firms number among SAP’s 1,000+ customers in this sector, none were evident among the 8,000 attendees at the event in May in New Orleans.

Robert Courteau, SAP Canada president and managing director, said these financial companies are “the focus of our energy now.”

SAP is promoting to banking prospects its ERP, CRM, MySAP, enterprise management and, for contract and transaction services, a so-called Core Banking application. The company also claims to have a complete portfolio of solutions for insurance companies.

In the past 24 months, implementations of insurance specific applications have nearly tripled.

One of the customer presentations at SAPPHIRE was by Kevin O’Hara, assistant vice-president at The MONY Group. With member companies that include life insurance and capital markets, the company implemented Strategic Enterprise Management (SEM) and business warehouse (BW) which “made data real for managers,” he said.

O’Hara noted that legacy data and a general ledger that was treated as a proxy data warehouse meant they could look only at transactions, as opposed to planning and forecasting. Data from cost centres was manually entered into the company’s SAP R/3 software modules via Excel spreadsheets. Their annual planning process started in July and finished in January, he said. “It was a logistics nightmare.”

Now, they can “see all the components together in one centralized place. Multi-dimension reporting gives us power to access information to prove decisions.”

The MONY Group now has an 18-month rolling forecast. “We’ve gone from an annual event to a non-stop process that makes sense,” O’Hara stressed. “Now we just keep updating. We see trends, identify capital resources in place, measure productivity and agent profitability.”

LONG-TERM FLEXIBILITY

In the financial services industry, a decision about software is a decision about your core infrastructure and any decision about business has immediate IT impact, stressed Thomas Balgheim, senior vice-president for SAP’s Financial Services Sector. He pointed out that IT systems have been running about 10 years in this environment, so SAP is promoting a component-based application architecture which applies a layered or stepped re-engineering approach to maximize flexibility — and get an earlier ROI.

“The financial service industry normally started always reengineering an IT system with a technology project,” Balgheim explained. “The issue of a technology project is that the return of an investment comes at the very very end. With the high competitiveness and with the cost pressure in our industry it is difficult to argue such an investment. We support our clients to start with a functional area and then through replacing some functionalities, bring the technology layer stepwise underneath automatically. This is the way we think the banking industry and the insurance industry should engineer over time and reengineer their application environment.”

Balgheim added that when “enriched with industry content,” NetWeaver — SAP’s open integration and application technology platform — integrates these components within the framework.

NetWeaver runs through all the SAP offerings and can integrate different content, normalizing product and vendor codes. More than 14,000 component installations at customer sites worldwide demonstrate NetWeaver’s strong customer adoption since its launch last year.

MONOLITH TO ENTERPRISE

NetWeaver represents growth and flexibility, stressed Shai Agassi, member of the SAP executive board. “NetWeaver enables the ability to move from closed to open, from monolith to enterprise.” Courteau said NetWeaver helps customers innovate.

James Edwards, strategic direction consultant for UMB Bank in Kansas City, Mo., seemed to agree. He said he regarded NetWeaver as a business process re-engineering tool that offers the advantage of making businesses run efficiently outside the screen of information with data flowing to the end point.

“NetWeaver fits right in [to their IT strategy],” he said, noting that he hoped it would be easy to implement even though new skill sets will be needed for this new concept.

Robert Hunt, an analyst with TowerGroup, described SAP NetWeaver as “an attractive tool” as banks move from old to new systems. “It’s a really good way for banks to retool to new processes. Technology is an enabler but it takes a big undertaking and managing a way through [implementation],” he commented.

OBSOLESCENT SYSTEMS

Hunt added that Canadian banks are more electronic than U.S. banks, but he questioned if they are meeting business needs since some systems date back to the early 80s.

Among the many exhibitors at SAPPHIRE ’04 was Germany-based VoiceObjects who cited the telephone banking system at Postbank as a successful application of its voice technology. Postbank, Germany’s largest private retail bank, is said to be relaunching their voice portal service to improve service and optimize call centre capacity. The bank’s tele-phone banking system receives about 100,000 callers per day.

Holger Stoltze, director of professional services in North America for Voice Objects, pointed out that off-the-shelf telephone banking solutions are not flexible enough to replicate business processes which differ from bank to bank. VoiceObjects claims its reusable modules of code can be ported easily to other applications.

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