IT decision makers in financial services — just like their counterparts in many other industries — find themselves caught in a dilemma that places their core processes at risk. They must respond, quickly and effectively, to a growing list of immediate functionality requirements; however, at the same time, they need to build capabilities that will enable them to seize future opportunities.

These two demands are equally mission-critical to the business — but they are often in conflict with one another. Financial services providers (FSPs) lack the time and resources to plan and build for the future because of urgent, all-consuming present needs. These urgent needs cannot be efficiently met because of a lack of planning and building at the enterprise level. The result is inadequate infrastructure — at the business and IT levels — making it necessary to build most new products and services from the ground up or patch and repatch monolithic or siloed systems. When IT operates in this reactive manner — instead of proactively planning for flexibility that enables it to respond to changes in the business — operational risks and project costs inevitably increase.

One example of this problem is the proliferation of application-specific, independent data marts that is characteristic of most large FSPs. Each of these data marts may once have represented the best answer to an immediate demand for decision support. Collectively, however, the profusion of data marts is far more expensive to maintain than an enterprise data warehouse, and presents ongoing problems with consistency, access and security risk. Even worse, the data marts cannot be readily leveraged to meet the data access demands of new applications — and this continues the same vicious circle.

Gartner clients in the financial services industry are increasingly re-examining their enterprise architectures to resolve this dilemma and find ways of meeting current demands and creating assets with future value. They are seeking ways to coordinate across multiple IT projects, and enterprise architecture promises to provide this capability. What is called for, however, is not the "old school" approach to architecture, which was largely founded on the creation of rigid “buy” lists. A new approach is required, one that is founded on an understanding of business strategies and processes and promotes flexibility and interoperability across the enterprise. This architectural approach must not only resolve the technical issues facing an FSP, but must also address the cultural, management and organizational-design problems that created and promoted fragmented architecture.

In this edition of the Gartner Financial Services Spotlight, we consider emerging trends in enterprise architecture from the unique perspective of the financial services industry. We begin by examining the need for flexibility in terms of how enterprise architecture itself is approached and in terms of how architectural requirements are specified and encouraged. In “Adopting a Flexible Approach to Enterprise Architecture,” Mary Knox discusses methods of achieving architectures that promote flexibility and growth. “Beyond Functionality: Architecture Success Factors,” also by Knox, presents a list of questions FSPs should ask when evaluating technology decisions to validate the prospective system's durability and its contribution to meeting enterprise requirements.

Next, we turn to a discussion of several approaches to technology implementation that, within an architectural framework, promote flexibility and interoperability. "SOA: A 'Must Have' for Core Banking," by Donald Free and Annemarie Earley, analyzes the trend toward service-oriented-architecture-based core processing solutions. This approach provides significant benefits in terms of reuse and consistency across the enterprise. Brad Adrian's “FSP Wireless Architectures: Plan Now for Future Flexibility” discusses the benefit of adapting the Gartner Adaptive Application Architecture (A3), not only for wireless delivery, but across the entire range of an FSP's delivery channels.

Finally, we present two case studies that show enterprise-class architectural solutions in real-world FSP applications. The first, "Enterprise Architecture: Success in Mexico," by Maria-Luisa Kun, describes how a major development bank in an emerging economy designed and implemented an enterprise architecture aligned with its business strategies and objectives that created shareable technology assets across its lines of business. The second, Avivah Litan's "Pharmaceuticals Re-engineering Leverages Identrus," shows how FSPs can enable their customers’ requirements for flexibility and leveragability by providing standards-based technology solutions. "Company X" now has an integrated enterprisewide system for contracting, payment and related information processes that works across global networks of investigators, pharmacies and other pharmaceutical vendors.

In addition to these financial-services-specific pieces, Gartner has assembled a significant body of research considering many other aspects of enterprise architecture. We strongly recommend that our financial services clients take advantage of the insights in these pieces of research as they consider ways to develop enterprise architecture practices that answer present needs and prepare for future demands.

Features

“Adopting a Flexible Approach to Enterprise Architecture" — Flexibility in enterprise architecture can translate into competitive advantage for FSPs. By Mary Knox

“Beyond Functionality: Architecture Success Factors” — Addressing near-term functionality demands is important, but the ability to respond to future changes is even more critical. By Mary Knox

"SOA: A 'Must Have' for Core Banking" — Banks cannot afford to ignore an architectural approach that enables them to respond — rapidly and cost-effectively — to changing customer and market demands. By Donald Free and Annemarie Earley

“FSP Wireless Architectures: Plan Now for Future Flexibility” — The wireless channel is not going away; FSP systems must be able to accommodate future deployments. By Brad Adrian

"Enterprise Architecture: Success in Mexico" — A major Latin American development bank shows the benefits of aligning IT and business demands through an enterprisewide architectural initiative. By Maria-Luisa Kun

"Pharmaceuticals Re-engineering Leverages Identrus" — A multinational drug manufacturer rationalizes its clinical trials systems and reduces the time to market for new medicines. By Avivah Litan