SBI had undertaken a massive computerization
effort in the 1990s to automate all of its branches, implementing a highly
customized version of Kindle Banking Systems' Bankmaster core banking system
(now owned by Misys). However, because of the bank's historic use of local
processing and the lack of reliable telecommunications in some areas, it
deployed a distributed system with operations located at each branch.
Although the computerization improved the
efficiency and accuracy of the branches, the local implementation restricted
customers' use to their local branches and inhibited the introduction of new
banking products and centralization of operations functions. The local
implementation prevented the bank from easily gaining a single view of
corporate accounts, and management lacked readily available information needed
for decision making and strategic planning.
The advantages in products and efficiency of
the private-sector banks became increasing evident in the late 1990s as SBI
(and India's other public-sector banks) lost existing customers and could not
attract the rapidly growing middle market in India. In fact, this technology-savvy
market segment viewed the public-sector banks as technology laggards that could
not meet their banking needs. As a result, the Indian government sought to have
the public-sector banks modernize their core banking systems. In response to the
competitive threats and entreaties from the government, SBI engaged KPMG Peat
Marwick (KPMG) in 2000 to develop a technology strategy and a modernization
road map for the bank.
In 2002, bank management approved the
KPMG-recommended strategy for a new IT environment that included the
implementation of a new centralized core banking system. This effort would
encompass the largest 3,300 branches of the bank that were located in city and
suburban areas.
The State Bank of India's objectives for its
project to modernize core systems included:
• The delivery of new product capabilities to
all customers, including those in rural areas
• The unification of processes across the bank
to realize operational efficiencies and improve customer service
• Provision of a single customer view of all
accounts
• The ability to merge the affiliate banks
into SBI
• Support for all SBI existing products
• Reduced customer wait times in branches
• Reversal of the customer attrition trend
Challenges for the Bank
The
bank faced several extraordinary challenges in implementing a centralized core
processing system. These challenges included finding a new core system that
could process approximately 75 million accounts daily — a number greater than
any bank in the world was processing on a centralized basis. Moreover, the bank
lacked experience in implementing centralized systems, and its large employee
base took great pride in executing complex transactions on local in-branch
systems. This practice led some people to doubt that the employees would
effectively use the new system.
Another challenge was meeting SBI's unique
product requirements that would require the bank to make extensive
modifications to a new core banking system. The products include gold deposits
(by weight), savings accounts with overdraft privileges, and an extraordinary
number of passbook savings accounts.
Initial SBI Core Systems Modernization Project
The contract
with TCS Group for the initial project was completed in May 2002; 3,300
branches were to be converted by mid-2007. The TCS group included
Hewlett-Packard, Australia based Financial Network Services (FNS), and China
Systems (for trade finance). TCS immediately began a six-month gap analysis
effort to determine the required software changes to the BaNCS system. The
changes included installing required interfaces with more than 50 other systems
as well as making enhancements to support the bank's product requirements.
These product requirements were separated by customer segment to allow the
vendor and bank to begin conversions before all the needed modifications were
implemented. They placed a priority on the needed changes that would allow
branches with high-net-worth individuals and then corporate accounts to be
converted as soon as possible. Before the first conversion in August 2003, TCS
and HP created the data processing environment for SBI. The primary data center
was established on the outskirts of Mumbai and a backup center was established
approximately 1,000 miles to the east in Chennai. The centers were equipped
with HP Superdome servers and XP storage systems in a failover configuration
utilizing HP's UNIX operating platform.
Initial Conversion Project
The conversion effort began in
August 2003, when SBI converted three pilot branches to the BaNCS System. The
successful conversion and operation of the pilot branches was followed by the
conversion of 350 retail branches with high-net-worth customers between August
2003 and September 2004. At this point, the bank intentionally halted the
conversions to analyze and resolve reported problems. They analyzed,
categorized, and prioritized these problems by type of resolution (e.g.,
software, procedural, training) and severity. TCS managed software revisions
for the critical software changes while the branch personnel managed the needed
training and procedural changes.
After the software and procedural changes were
implemented, SBI converted an additional 800 branches between December 2004 and
March 2005. Unlike in the previous conversions, this group of branches included
predominantly commercially oriented offices. The conversion effort then
refocused on retail branches until November 2005, when the bank paused again to
resolve problems that came up during this second group of conversions. After
the second round of changes, the system and processes were functioning smoothly,
and management believed the branch conversion could be accelerated. An assembly
line approach was then employed in April 2006 to speed the branch conversion
process:
• Branch personnel were responsible for data
scrubbing and cleaning of their customer information on the existing system.
• Branches were notified three months prior to
their conversion date to begin "mock," or test, conversions using a
specially created test version of the BaNCS system.
• Branches performed several test conversions to
ensure the actual conversion went smoothly.
As the new core banking system was rolled out
across the SBI branches nationwide, a special process was introduced in the
nightly batch window to add the new branches. The process increased batch
processing time approximately 20 minutes and typically included adding branches
in groups of 50. This additional process, of course, was unnecessary upon
completion of the rollout and has since been removed from the nightly batch
window. TCS and local area branch managers oversaw the conversions, and the
bank's circle (regional) heads formally reported the status to the chairman's
office. By employing the assembly line approach for branch conversions, SBI was
able to convert 1,200 branches in April and May 2006, completing the initial
3,300-branch conversion two months ahead of the original schedule. The
milestones for the initial core systems implementation project are included in
the SBI and affiliate banks core systems modernization time line in Exhibit 2.
Affiliate Banks' Conversion
As the rollout plans for State Bank of India
were being finalized, the bank decided to extend the scope of the core banking
implementation to include its (then) eight affiliate banks. TCS created a
separate processing environment within the Mumbai data center used to support
SBI.
The conversion effort for each of the
affiliate banks spanned 18 to 24 months; the first six months were used for
planning, training, and establishing the processing environment for the banks.
The branch conversions overlapped among the banks, allowing all the affiliate
banks to be converted in
30 months. The project was begun in July 2003
for the State Bank of Patiala and in 2004 for the other affiliate banks. The
entire affiliate bank branches were converted to the BaNCS system by the end of
2005
State Bank of India Full Branch Conversion
The success of the initial 3,300-branch
conversion for SBI demonstrated that:
• TCS had the technical capabilities to
support the bank's IT initiative and scale of operations.
• Bank personnel had the skills to adopt new
processes and support the conversions.
• The Indian customer base would react to new
technology by adopting new electronic services and demanding new, more
sophisticated banking products.
• An assembly line approach could be used
effectively to support large-scale branch conversions.
Given the success of the initial project and
SBI's desire to offer new products to all of its customers, a new IT plan was
created that would encompass all branches. TCS and the bank would have to
demonstrate the capability to process 100 million accounts in a single
processing environment. TCS and HP then conducted another scalability test in
September 2006 to determine if the system could process SBI's entire base of
100 million accounts (excluding the affiliate banks, which use a separate
processing environment) with sustained peak online throughput of 1,500
transactions per second. They conducted the test at HP Labs in Cupertino,
California, using two 32 CPU HP 9000 Superdome application servers and two
32-processor Itanium Core HP Integrity servers for the database. The test
achieved a sustained peak real-time transaction rate of more than 1,575
transactions per second, meeting the projected processing demands of SBI.
Additionally, batch tests were run for both deposits and loan account
processing. The month-end batch process for loans required 1 hour and 5
minutes, and deposit processing was completed in 2 hours and 27 minutes.
Based on the successful scalability test, SBI
decided to convert the approximately 6,700 remaining
SBI branches to the BaNCS system. The
conversion of the remaining branches began in June 2006, with the stated goal
of completing the conversion by year-end 2008. Utilizing the assembly line
conversion approach established in the initial phase, the bank converted 1,400
of these branches by March 2007.
Because the conversion methodology and BaNCS
system were thoroughly proven and stable, the assembly line conversion approach
allowed the bank to complete the conversion ahead of schedule. Between April
2007 and March 2008 (the bank's fiscal year end), SBI converted 4,600 branches
to the new system. The remaining branches were converted between April and July
2008.
Critical Success Factors
Large-scale core systems implementations are
typically the most costly and risky IT projects undertaken by banks. Failures
of core systems projects are not uncommon at large banks and result in both
financial impact and lost business opportunities. Further, failed projects lead
other banks to delay needed core systems replacements because they measure the
risk of failure against the potential benefits of a new system.
TowerGroup believes that several critical
factors contributed to the success of the SBI core implementation effort:
• Senior management commitment. The project
was driven by the chairman of SBI, who met every month with the information
technology (IT) and the business sector heads. The chairman monitored the
overall status and ensured that sufficient resources were allocated to the
project. TCS senior managers were thoroughly committed to the project as well
and periodically met with the SBI chairman to review the project status.
• Staffing and empowerment of project team.
The core banking team consisted of the bank's managing director of IT acting as
team head and 75 business and IT people selected by the bank. TCS also staffed
the project with approximately 300 IT professionals trained on the BaNCS
system. Importantly, the SBI business people were viewed not just as
contributors to a key project but as future bank leaders. This team reported to
the SBI chairman and was empowered with all decision-making authority.
• Ownership by business heads. The regional
business line heads were responsible for the success of conversion of their
respective branches and reported the status to the chairman.
Thus, the business heads' objectives were
aligned with those of the project team.
• Focus on training. SBI used its network of
58 training centers across India to train employees on the new system. TCS
personnel first educated approximately 100 SBI professional trainers, who then
trained 100,000 SBI employees at the centers; the remaining employees trained
at their respective job sites.
Benefits of New Core Systems Implementation
The new core system has resulted in benefits
throughout the bank for both the customers and the employees of SBI. For
example, the new core banking system has allowed the bank to redesign
processes. It established 400 regional processing centers for all metro and
urban branches that have assumed functions previously performed in the
individual branches. The bank recently reported that business per employee
increased by 250% over the last five years.
The bank has achieved its goal of offering its
full range of products and services to its rural branches. It delivers economic
growth to the rural areas and offers financial inclusion for all of India's citizens. Implementation of the TCS
BaNCS system has provided the bank with the ability to consolidate the affiliate
banks into SBI. In fact, the bank recently completed the consolidation of State
Bank of Saurashtra into SBI. The bank has reversed the trend of customer
attrition and is now gaining new market share. Completion of the core
conversion project has also allowed the bank to undertake several new
initiatives to further improve service and support future growth. These
initiatives include the deployment of more than 3,000 rural sales staff,
redesign of over 2,200 branches in the last fiscal year, opening of more than
1,000 new branches, establishment of a call center, and an active plan to
migrate customers to electronic delivery channels.
Source: tcs.com
