FLEXCUBE Implementation Case Study

April 15 16, 2008

Agenda
Overview of Bank Reasons Allianz changed their core system Problems Allianz faced previously Preliminary Business Requirements Scope of Implementation Project Details Transition Approach Implementation Business Model, Business Strategy Infrastructure Management Post Production Support Banking community Implementation Take-Away

Benefits of FLEXCUBE introduction

Higher ROI, lower TCO Program Organization Structure Milestones and Phases

Summary

Overview of Bank
Allianz bank is the tenth largest bank in Bulgaria, by assets, and sixth by number of locations. It has a large coverage nationwide and has attracted some of the largest corporate clients (Allianz Holding the largest financial institution in Bulgaria) as well as over 150000 retail clients. Size of bank Asset Size over 900 Mil Euro Number of branches 126 locations, 95 branches defined in FlexCube Number of customers - 170 000 (of which 20 000 corporate & 150000 retail) Number of accounts 200 000

Overview of Bank
Products offered by the bank
The full range of products for retail, corporate, treasury, private investors, etc. A set of different channels for offering banks services & products in real time Cards, VISA, MASTER, internet banking retail & corporate, SMS/email notifications, Mobile phone banking, Scoring, etc.

Reasons for the implementation

Migration from existing platform due to old legacy system being unable to support the banks rapid expansion (doubled, in asset size, in one year) Existing platform did not support integration with new channels internet banking, on-line card authorization, mobile phone payments, etc. Need for a more robust platform and availability of resources for its support and further development. Need for quicker time for market fierce competition in a rapidly expanding financial services market. The banks desire to change the banks business and operational model from de-centralized to centralized.

Historical Note
The old bank system was OSBI, local Bulgarian system developed in the early 90s by a Bulgarian vendor. Allianz was the last bank to retire it.

Reasons Allianz changed their core system

The bank desired to modernize their business model and processes to provide efficient, less time and resource consuming, products and services. The bank needed a standardized IT platform and infrastructure in line with Allianz Germany IT policies, procedures and requirements Old legacy system, unable to integrate in real time with satellite systems, Cards, Internet banking, SMS, Mobile phone Non-scalable solution, unable to handle the increase in usage Lack of functionality desired, e.g. automatic provisioning, auto loans liquidation, etc Very slow time to market new products from 3 to 6 months minimum vs. 3 to 8 weeks currently. No available resources for system upgrades (the only bank on that system)

Problems Allianz faced previously

Numerous problems, such as:

Inability to integrate with new electronic channels, scoring systems, etc. Inability to introduce new competitive products to market, such as flexible mortgage, consumer loans, and various deposits Inability to process in Real time card and internet banking transactions Inability to produce in short time sophisticated reporting and analysis both for internal and external usage

Preliminary Business Requirements

Allianz bank started in early 2006. Looking for: Easy integration/interfaces Depth and breadth of functionality Quick time to market Internationally recognized vendor/solution with local presence in BG Historical Note Started Oct. 2006 by introducing Online authorization module (developed by Sirma/i-flex, using FlexCube as a master authorization system)

Scope of Implementation
Lines of business
Retail Current Accounts Savings Accounts Term Deposits Retail Loans Structured Deposits Cheques National & International payments, SEPA compliance

Corporate
Trade Finance LC, LG, Bills, Collections Corporate Loans Treasury FX, MM

Project Details
Core Solution Stack implemented Our Role SI involved Sirma Business Consulting Partners involved (from i-flex side) Sirma Business Consulting Relationship between i-flex, SI, partners and bank back to back or independent contract bilateral contracts between Allianz bank and I-Flex, Sirma and I-Flex, and the bank with Sirma Roles and Responsibilities of different parties Sirma system integrator and implementer I-Flex technical support and consultancy

Transition Approach
Implementation approach
Big Bang approach with extensive stress testing and three full mock conversions. The bank was already running on one system and splitting into branches was difficult, splitting of national settlement, central bank reporting, reconciliation and consolidation would have been very difficult and resource hungry. The same would have prolonged the time for implementation and contradict the banks desire for full conversion and reorganization within 12 months.

Implementation
High level time lines for different phases
PWT 5 weeks done by Sirma GAP analysis 6 weeks done by Sirma System initial set-up and parameterization 14 weeks done by Sirma HW sizing and procurement (in parallel) 13 weeks done by Sirma and IBM IT infrastructure and comm. lines upgrade and set-up (in parallel) 22 weeks done by Allianz bank Systems parameter and products testing 12 weeks done by Sirma and Allianz bank Additional set-up and parameterization 2 weeks done by Sirma & i-flex Systems Integration testing (incl. parameters and products) 6 weeks done by Sirma, i-flex and Allianz bank Train the trainers (in parallel) 4 weeks done by Sirma Mock migrations and stress testing 6 weeks done by Sirma, i-flex and Allianz bank End user training (in parallel) 7 weeks done by Allianz bank Post Go-live support 8 weeks done by Sirma & i-flex

Implementation
For each phase
Deliverables of the phase Documents and sign offs for each of the above phases Resources (from i-flex as well as bank) involved numbers, types (technical, functional, PM, testers, SME etc) i-flex technical 10 man months Sirma technical 60 man months Sirma functional 80 man months Sirma PM 12 man months Allianz bank PM 12 man months Allianz bank full time project team 36 man months Allianz bank part time project team 90 man months

Oversight management strategies used

Project sponsors (banks CEO and COO) introduced Project Steering Committee meeting fortnightly PRINCE II methodology followed

Any bank specific step

Compliance with Allianz AG, Germany standards Allianz AG, Germany QA and supervision

Implementation
Data Migration High level steps involved strategy, data mapping, utility preparation, extraction from legacy to flat file, file to FLEXCUBE, mock runs, testing, etc.
Data migration strategy developed by Sirma & i-flex, approved by Allianz bank Data mapping conducted by Sirma and approved by Allianz bank Data upload to FlexCube utilities developed by i-flex and Sirma Extraction from legacy system executed by legacy system vendor, requirements prepared by Sirma Data uploads to FlexCube conducted by i-flex and Sirma, verified and approved by Allianz bank

History data migrated or not?

No migration of history data

Challenges faced data enrichment, data cleansing etc

Extensive and constant data cleansing, verification and reconciliation conducted together with Sirma and Allianz bank Large proportion of additional client, loan, collateral data was missing in the core system and had to be gathered for upload to FlexCube

Business Model, Business strategy

Program Organization was set up in the bank with 30 sub-projects defined with project teams and responsible parties. Before implementation bank was totally decentralized- each branch was like a subsidiary bank- admin functions, IT, all separate. Defined a new business model and branch model, restructuring and centralizing important functions. Restructuring of all functions were going in parallel for 10-11 months.

Infrastructure Management
High level production hardware layout
Type of machines used IBM P70 series AIX OS, Oracle 10G for database 6CPU (12 cores) for production, IBM blade center for application, Windows Server 2003 OS, Flex Host 2 blades 2CPU 4GB RAM each, Flex Branch 3 blades 2CPU, 4GB RAM each Location of different machines All HW located in Allianz bank Production data center Network details An MPLS layer 3 network for all 126 locations connected to main data center with bandwidth ranging from 256Kbps to 1Mbps depending on number of users in each location MS Active Directory present and MS Exchange throughout the whole bank

Infrastructure Management
Responsibilities for infrastructure
Hardware Sizing Sirma and IBM Procurement Allianz bank and Stone Computers (an IBM authorized reseller) Setup IBM and Sirma Maintenance - IBM Support IBM and Allianz bank Third party software is maintained and supported by the respective software vendor in accordance with the Allianz bank internal rules and procedures i-flex software (all in compliance with Allianz bank internal IT policy, rules and procedures) Setup Sirma Maintenance - Sirma Support - Sirma

Post Production Support

Type of Support Local Tools used Help desk system is being used for issue tracking and resolution Standard support methodology used Support infrastructure Temporary access to the Production Environment is granted only for applying patches and new functionalities Permanent access to Test & Dev. Environments incl. at site and remote Access to data only access to Test & Dev environment data Data patches Sirma & i-flex were responsible; with temporary access being granted on a need to have basis

Post Production Support

Methodology used for moving a fix to production apply to pre-production, test and move
A fix or new functionality is first applied in Dev. Environment and tested by us The fix or functionality is then applied in Test Environment by us and tested by the bank After banks approval a temporary access to production environment is granted to us for applying the fix/functionality

Banking community
Show cases and visits
Since Go-live there has been two site visits by Banc de Brazil, from Brazil and Bank Republic from Azerbaijan

Allianz bank and its management are quite happy with hosting such visits

Implementation Take-Away
What did we do right?
Close tracking Preventing scope creep Regular visibility to all stake holders Daily discussion of issues A wider consultancy on operational issues and processes and ways to optimize them A wider support and consultancy for issues outside the project scope but relevant for the overall implementation IT infrastructure, network set-up, IT processes and procedures

What could we have done differently?

Did not insist on the creation of full time dedicated bank implementation team from the start of the project. The subsequent hand-over of responsibility from us to the bank was longer than desired. Following from the above, it also took longer for the bank personnel to get accustomed to the new processes and applications A weak or non-existent marketing and awareness building of Allianzs success, throughout the wider banking community locally and within the region

Benefits of FLEXCUBE introduction

SEPA compliance Domestic and International Payments enabled staff reductions and faster and more reliable services to customers An on-line and timely reporting enabled all levels of management for easy analysis and fast response to market trends and customers needs A range of new products have been introduced and new customer growth rate increased, from 15% to 35%, on a yearly basis A range of new services introduced such as on-line card authorization, internet banking, and reporting Customer scoring system interfaced to FlexCube reduced the average time for decision making from 2.5 days to 6 Hours

Higher Return On Investment, Lower Total Cost of Ownership

The banks IT department head count was reduced by 42% The banks back office operations department was completely centralized and head count reduced by over 50% The banks front office personnel was relieved from back office duties and entirely focused on sales and customer services Customers information gathered, stored and analyzed has increased by over 70% for retail customers and over 50% for corporate ones

Program Organization Structure

Board of Directors Steering Committee
COO Project Director Sirma PM Director Retail Director Corporate Director IT

Investment Control
CEO, ED

Project Management Office

Program Director

Program Sponsor

ERP Project

Chief System Integrator

Sirma Business Consulting

Project Streams/Project Teams

Business Strategy IT and Operations Risk Management Other Functions / Governance

Roles and Responsibilities

Role Responsibilities
Approving and changing the scope of the Program according to the master plan and budget. Reviewing the regular Program status reports and proposing solutions regarding tasks implementation required by the Director. Tracking task implementation at the regular Steering Committee meeting where the Director presents the Program progress and the necessary solutions. (incl. proposing solutions) Making final decision regarding the Program

Steering Committee

Program Director

Preparing implementation plan (with the Project managers if necessary) Distributing tasks to the responsible persons Tracking task implementation during the meetings of the Program Coordinating different tasks with counterparties, consultants and other external resources Coordinating obligations and responsibilities with Project Managers Preparing the Program regular status reports for Steering Committee Presenting Program status and informing Steering Committee for necessary solutions Collecting budget status report from line management

Project Managers

Preparing implementation plan (with Project team if necessary) Distributing tasks to the responsible persons Tracking Project task implementation Presenting Project status report at the regular Program meetings Responsible for the approval of all Project products Presenting all requirements for project changes to the Program Office Reporting all issues which could not be resolved within the Project Informing Program Director about all delays of the initial plan deadlines

Roles and Responsibilities

Role
Responsibilities
Proposing ideas and expert opinions Working on tasks defined by Project Manager Preparing the necessary documents and analysis connected with the Project products

Project Members

Project Management Office

Information Center for all questions regarding the Program Archiving and renewing Program master plan Managing processes for task solution, change requests, approval for Project products Archiving and renewing central registers and documentation regarding issues, change requests, approvals of Project products Preparing and renewing Project participation list Reviewing project status reports and preparing Program status report Organizing and taking minutes at Program and Steering Committee meeting Providing on time accurate information for forthcoming changes for all employees of the Bank, organizing meetings and preparing newsletters

Investment Control

Supporting Program Management with new ideas and proposals for issue solutions and problems Controlling quality and professional preparation of all Program products Reviewing the results and products of the Program and proposing approvals

Milestones and Phases

Introduction of FlexCube
Milestones Planning of deliverables connected with introduction of bank- information platform of TB Allianz Bulgaria. Developing detail plans of the project plans for tests, migration, training and adoption. Deliverable A plan for PWT *** A plan for key users training* Start
09.10.2006

End
10.11.2006

(PWT) The banks team is introduced to the basic functionalities and the architecture of FlexCube
Analysis of the existing bank products and defining their place in the functionality of the bankinformation platform (product fitment). Parameterization and Product set-up of FlexCube

A protocol for completion approved by the leader of the team

A product catalog of the present products in Allianz** A product catalog of the future products in FlexCube* A protocol for completed parameterization of the products from the Product catalog A protocol for completed installation of the data base and FlexCube application Making up test scripts*** A protocol for correctness of the test scripts results

13.11.2006

12.01.2007

15.01.2007

02.03.2007

05.03.2007

30.04.2007

Preparing data base for System Integration and User Acceptance tests User Acceptance test - plan, preparation and accomplishment

01.05.2007

01.06.2007

04.06.2007

03.08.2007

Milestones and Phases

Introduction of FlexCube
Milestones Preparing the formats for data migration Data migration from the existing systems in FlexCube. System Integration test plan, preparation and accomplishment Trial conversion and stress testing Train the trainers Go-live big bang Deliverable Making up tables for data migration* A protocol for correctness/ faithfulness of the migrated data A plan for System Integration test* A protocol for correctly completed System Integration test A protocol for trial conversion A protocol for completed training the important/key users A protocol for successful putting into operation for every single branch Start
16.03.2007

End
01.06.2007

01.06.2007

03.08.2007

03.08.2007

31.08.2007

16.07.2007 02.07.2007

27.08.2007 31.07.2007

06.09.2007

10.09.2007

Support and optimization (tuning).

26.09.2007

30.11.2007

Milestones and Phases

Development of interfaces to the basic bank system

Milestones Analysis of the requirements to the interfaces Design, functional specification of the design and architecture Development and introduction System Integration test plan, preparation and implementation/ fulfillment Documentation

Deliverable Interface Requirement Specification Document** Interface Functional Specification Document* A protocol for introducing the interfaces A system integration test plan* A protocol for correctly completed system integration test Technical, System and Architecture interface documentation*

Start
23.10.2006

End
28.02.2007

27.11.2006

28.02.2007

11.12.2006

29.06.2007

02.07.2007

05.08.2007

28.02.2007

05.08.2007

Milestones and Phases

Exploitation of Centralized report system

Milestones Analysis of the requirements to the Centralized report system Design, functional specification of the design and architecture Development and introduction System Integration test plan, preparation and fulfillment/ accomplishment

Deliverable Application Requirement Specification Document** Application Functional Specification Document* A protocol for introducing the application/system/product System integration test plan* A protocol for correctly completed system integration test

Start
02.12.2006

End
30.03.2007

05.03.2007

30.03.2007

05.03.2007

01.06.2007

02.07.2007

05.08.2007

Documentation

Technical, System and Architecture interface documentation of the application/system/product*

----------------

28.02.2007

05.08.2007

Support and tuning

Notes : * Sirma responsibility ** Allianz responsibility *** Joint responsibility of for both sides under the agreement

03.09.2007

30.10.2007

In Summary
This was the first project of its kind, considering its scope and functionality covered. The implementation was almost entirely led and done by SBC, an I-Flex partner, and successfully completed within twelve months.

Contacts Velko Todorov E-mail: velko@sirma.bg Tsvetomir Doskov E-mail: doskov@sirma.bg Web: www.sirmabc.com