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Bucking the economic trend, HSBC embarks on NetWeaver PI project

SOA-type projects aren't in too many budgets these days, but HSBC is pursuing one with SAP NetWeaver process integration (PI) that it hopes will improve the customer experience.

SOA-type projects aren't in too many IT budgets these days, but the HSBC Group is pursuing one that it hopes will...

improve its customers' experience with payment processes.

The London-based corporate bank is using SAP NetWeaver process integration (NetWeaver PI) -- SAP's integration tool for connecting various parts of NetWeaver and connecting it to external systems -- to link its corporate customers with its back-end system. Its goal is to automate and speed up payment processes by allowing users to access them all through one portal.

"The financials are the lifeblood of everything an organization does," said Marcus Treacher, head of e-commerce for global transaction banking at HSBC. "Whether good times or difficult times, they both lead to the same question organizations pose to the bank: 'How [do we use] you for better efficiency?' What we create with SAP, we're creating for the long term. We're not going to be too hung up by the short-term movement of the market."

For more on NetWeaver PI and SAP for banking
Read more about SAP's push into the banking industry

Read an All-in-One guide on NetWeaver PI/XI

HSBC's project is unique not only because it's the first of its kind. Most banks, like most companies reeling from the growing global financial crisis, don't have the budgets for large IT projects this year, analysts say. While banks like HSBC that have already started projects are likely to finish them, the majority will focus on simply planning application strategies for 2009, according to Jost Hoppermann, vice president and principal analyst with the Cambridge, Mass.-based Forrester Research.

"Right now, it's really about a stronger focus on planning. Banks don't have the budgets anymore to start anything new," Hoppermann said. "What we are seeing today is [that] the focus is on cost management."

Projects like virtualization are more popular, he said, as are those associated with liquidity management and enhancing procurement efficiencies for quick pay-off, according to SAP's Mike Russo.

"I think they'll look at any kinds of projects that really give them a pretty quick payment," said Russo, SAP's industry principal of banking. "I think they're passing on long-term, complex projects."

Banks may have been most in need of such projects. Hoppermann compared their IT landscapes to Baroque castles -- built and modified for centuries according to changing needs. Now, they're in a situation where they have to install a modern heating system, but the castle was never laid out for such a system, so it'll probably never be as efficient as it should be.

Some banks are even using competing systems in different parts of the world, testing them out until they feel safe deciding what to deploy at their headquarters, Hoppermann said. Oracle Financials and TEMENOS are the dominant banking platform vendors, but SAP is definitely gaining ground, winning a total of 31 banking platform deals in 2007, he said, compared with Oracle Financial Service's 44 and another 27 from Oracle Financial Services Global Business Unit. In the spring, Bank of America selected SAP over Oracle.

Banks now need to focus on enhancing the customer experience in a multi-channel environment, getting to a single view of the customer and building products that are better aligned with customers' needs, Hoppermann said.

That's HSBC's goal with NetWeaver PI. The bank chose the product because so many of its customers run on SAP, Treacher said. For non-SAP clients, when the client is connected to their bank's new channel, an instance of SAP Netweaver PI will be installed at their site too, to ensure communication with the bank's instance.

Right now, each type of banking service requires one service gateway, which in many cases is a standalone application. Where interfaces exist for services, files are manually exported, encrypted and uploaded in proprietary formats, Treacher said, making the processes slow and labor-intensive and presenting security risks.

HSBC wants to use NetWeaver PI to link clients into its worldwide banking network via a single entry point, simplifying communications for the bank's corporate services such as accounts payable, accounts receivable and reconciliations.

HSBC plans to launch the new system within the first quarter of 2009, and so far the project is right on track, Treacher said. Down the road, the bank is looking to enhance the system to enable users to key in more advanced instructions that create transactions that HSBC doesn't currently do, such as forecasting or tapping into analytical capabilities.

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