IBM Software Group Banking on Demand Business

® IBM Software Group Banking on Demand Business Integration in the Financial Services Industry Markus Houben IBM Software Group Central Eastern Europe, Middle East Africa Bucharest, Oct 27, 2004 © 2004 IBM Corporation 1 © 2004 IBM Corporation

Agenda §Market Trends and Challenges §IBM Business Integration Capabilities and Qualities §Why IBM ?

Market Trends and Challenges 3 © 2004 IBM Corporation

Today’s Challenges CEO New technology alone won’t boost productivity. Productivity gains come from managerial innovation… Companies generate innovations, in fat years or lean, by deploying new technology along with improved processes and capabilities. —Mc. Kinsey & Company, Volume 2 - 2003 CFO Companies that linked business processes with trading partners show 70% higher profitability than those that do not. 　 CIO 42% of the almost 500 IT executives polled said their systems were more complex than necessary… and maintaining and managing that excess complexity cost them an average of 29% of their IT budgets. — Business Advisor Zone, 12/2/2002 — CIO Insight, 02/2003 　　 4 © 2004 IBM Corporation

Becoming an On Demand Business “An on demand business is an enterprise whose business processes — integrated end-to-end across the company and with key partners, suppliers and customers — can respond with speed to any customer demand, market es roc s. P sin es Bu Innovative Business business designs Design that sharpen focus and accelerate growth se s opportunity or external threat. ” Technology Infrastructure An IT operating environment optimized for flexibility and resilience Integrated, end-to-end business processes that are built to change 5 © 2004 IBM Corporation

The Banking Industry Business Challenges Exist Across All Processes Inability to introduce new products in response to market needs and enhance customer service Banking Industry Processes Product Dev’t Inability to present consistent functions and service at point of customer contact; aging branch infrastructure Processing Declining margins associated with costly, repetitive application function and inability to differentiate customer service 6 Distribution Lack of consolidated risk & compliance data and ineffective review processes Insight Risk Management Inability to execute effective, value-based marketing campaigns across all channels © 2004 IBM Corporation

Execution has been the issue with most Strategies, with horizontal integration being a major inhibitor. §The Plan: Seamlessly integrated operations, §The Reality: Disjointed operations, product development and delivery capabilities, cost effectively serving discrete customer segments. development, and delivery resulting in hit-or-miss efforts to serve target clients. Overlapping capabilities in the product silos drive an inefficient cost structure. Mass Retail Segment Product Specific Delivery Sub-Prime Segment Mass Retail Segment Wealth Mgmt Segment Mass Affluent Segment Ultra High Net Worth Segment Sub-Prime Segment Wealth Mgmt Segment Mass Affluent Segment Product Specific Delivery Marketing Sales & Distribution Product Manufacture Operations Shared Facilities Ultra High Net Worth Segment Shared Facilities Product Silo 1 Product Silo 2 Product Silo 3 "According to Gartner studies, 35% of the IT budget is spent after acquisition of a new technology in configuration and integration an existing IT environment--before any value is derived from the technology. " 7 © 2004 IBM Corporation

Scope of Integration: The Efficient and Flexible Combination of Resources to Optimize Operations Across

IBM Business Integration Capabilities and Qualities 9 © 2004 IBM Corporation

Business Integration Capabilities from IBM 10 © 2004 IBM Corporation

Credit Lyonnais implemented Straight-Through Processing and cut costs 20% Business Challenge Streamline a matrix of globally distributed trading systems and increase the efficiency and effectiveness of equity ticket processing to improve market responsiveness Solution A robust Straight Through Processing solution based on IBM Web. Sphere Business Integration “We literally transformed our organization from end to end into a more professional banking organization that is on the cutting edge of financial services. ” Dominique Ioos, Head of Operations, Equity Products, Credit Lyonnais 11 Business Benefits: § Near elimination of failed trades § 99% reconciliation with custodians § 20% reduction in administrative costs across the organization § Average number of pending trades reduced from 1, 700 to 100 Technology Benefits: § Adaptable and scalable global IT process § 20% IT cost savings © 2004 IBM Corporation

Core Systems Transformation Fortis Business Challenge § To more efficiently process credit applications, Fortis needed real-time access to external information resources as well as seamless integration among branch offices § Due to the introduction of a new law, the bank had to respond quickly to a change in the business rules for processing credit applications Solution § Fortis built an information exchange solution to interact with outside agencies and streamline procedures for processing customer loans § Web. Sphere Business Integration application integration capabilities link islands of processing and connect customers with the bank 12 Business Benefits § New workflow streamlined loan processes, reduced administrative costs and shortening approval cycles § Ability to respond to customers in realtime--and to share and distribute information among employees and outside sources--has increased earnings © 2004 IBM Corporation

ABN AMRO Teams with IBM to Transform Payments Processing Business Challenge: § Reduce cost of payments processing and increase ability to respond to customer needs § Transform ABN payments & EDI infrastructure to support wholesale clients’ B 2 B transactions § Allow ABN wholesale clients to directly interface with ABN & integrate their payments activities Solution: § This IBM Wholesale Payments solution includes Benefits: • Ease of integration with their customers, reducing new customer setup from 18 to 4 weeks a capability for ABN to communicate more directly and flexibly with customers. This capability implements a link from existing mainframe applications directly to ABN client (B 2 B) systems. • IBM showed a how to achieve a § The solution also provides a reliable and highly • Allows reuse of current systems scalable messaging infrastructure that enables ABN Amro to exploit current network technology investments 13 38. 5% decease in problem resolution costs – from $58 per transaction to $36 functionality © 2004 IBM Corporation

HVB Group: STP; integrated front, middle and back-office; Project pay-back in 12 months 14

Business Integration Qualities from IBM §Service Oriented Architecture (SOA) enablement §Simple, integrated development § Common tools platform § Re-use and unification of assets §Secure and scalable deployment § Common and flexible deployment environment § Flexible management and security infrastructure §Standards leadership § Interoperability § Investment protection § Freedom of choice §Proven experience § Augmented with best practices § Improved time to value § Risk mitigation 15 © 2004 IBM Corporation

IBM Business Integration Reference Architecture Services to Solve Complex Business Requirements Model, design, development, test tools Common Runtime Infrastructure Monitoring Services User Interaction Services Application Services Information Services Process Services Community Integration Services Enterprise Service Bus Application Access Services Enterprise applications 16 Data Access Services Enterprise data © 2004 IBM Corporation

IBM Business Integration Reference Architecture Services to Solve Complex Business Requirements Web. Sphere BI Modeler Model, design, development, test tools Web. Sphere Studio Common Runtime Infrastructure Monitoring Services User Interaction Services Web. Sphere Portal Server Application Services WBI Monitor Information Services Process Services Web. Sphere BI Server Web. Sphere Application Server IBM Information Integrator Web. Sphere BI Server Foundation Community Integration Services Web. Sphere BI Connect Enterprise Service Bus Web Services Gateway Web. Sphere MQ WBI Event/Message Broker Application Access Services Data Access Services Enterprise applications Enterprise data WBI Adapters 17 HATS IBM Information Integrator Classic © 2004 IBM Corporation

Integrated Development Platform Analyst Architect Developer Tester Deployer Model, simulate, assemble, and monitor business processes Model applications and data Visually construct, transform, integrate and generate code Design, create, and execute tests Provision, configure, tune and troubleshoot applications Project Manager § Follow a common process § Track project status § Manage requirements § Manage change and assets § Manage quality Development Platform 18 © 2004 IBM Corporation

IBM Open Standards Leadership 1980 s -1990 s 2000 / 2001 • Java and eb. XML • ISO STEP • OMG UML and XML • Open. GL • SQL • AIAG • IEEE • VRML • ANSI • Web Services and Tools 2002 • Web Services and Security Open 2003 • Web Services Management • Web Services Interoperability • Eclipse to Open • BPEL • UDDI • WS-TX • Common Base • SOAP • WS-TC • OASIS WSNotification • WSBPEL • Cloudscape to Open Events • W 3 C XML • OASIS WSDM • SOAP 4 J to • OASIS WS-Security Open • WS-I Basic Profile • Rosetta. Net Over 160 business integration technology patents 19 2004 First Web Services Gateway • 1, 000+ XML developers and 1, 500+ on Linux • 200+ products for Linux First integrated private UDDI directory © 2004 IBM Corporation

Financial Services Solutions IBM Middleware Solutions for Banking Branch Transformation Channel Empowerment Core Systems Transformation Risk and Compliance Foundation Wholesale Payments Processing IBM Middleware Solutions for Insurance IBM Middleware Solutions for Financial Markets Front Office Insight Trade & Order Management Financial Information Interchange Post Execution Integration Risk and Compliance Claims Management Underwriting Policy Management Channel Distribution Integration Customer Insight 21 © 2004 IBM Corporation

IBM: Helping Customers Succeed A History of Accomplishments in Financial Services 90% of all bank customer data is stored with IBM database and data management software 96 of the top 100 financial institutions in the world use Tivoli software 48 of the top 50 commercial and savings banks in the world use Web. Sphere software 95% of the largest 500 banks in the world run IBM e. Server 22 © 2004 IBM Corporation

IBM Commitment to Integration Nobody invests more Continued success § $1 billion annual investment in development § $5 billion investment in technology acquisition, including: § Modeling § Process Integration § Software Development § Over 7, 000 developers § 62, 000 Web. Sphere customers § 10, 000 customer sites rely on Web. Sphere MQ § 2, 000 customers rely on Web. Sphere Business Integration § 2, 000+ customers reply on Web. Sphere Portal since year 2000 introduction Market-leading Business Integration Environment Product of the Year – Web. Sphere Business Integration Server v 4. 2 —Business Integration Journal Awards, 2004 Best Java Messaging Tool – IBM Web. Sphere MQ —Java Pro Readers’ 2003 Choice Award IBM has top market share in 6 middleware markets IBM has widened its lead as the leading and most question-free vendor in commerce servers 23 —Gartner, August 2003 —Giga, August 2003 © 2004 IBM Corporation