SOA: At Your Service

As a business-driven approach to technology, service-oriented architecture (SOA) allows companies to innovate by ensuring that their IT systems can adapt quickly, easily and economically to support rapidly changing business needs. While the SOA concept is not new, the software that supports it is becoming more robust, enabling financial services firms to boost their customer-centric capabilities.

Carol Dow, principal in corporate technology services at The Vanguard Group, says SOA supports the customer-centric strategy that permeates the entire culture at her firm. "Being consistently better than competitors on investment returns, understanding and providing services that our clients desire, and being easy to deal with all ties into our SOA philosophy," she relates.

According to Dow, SOA enables Vanguard's customer-centric approach because it encourages the use of technology to automate services that are based on business processes. "It streamlines the customer service experience," she says. "With SOA, instead of focusing on the department, you're focusing on the end-to-end process."

SOA also helps speed to market while reducing costs through the promotion of reusable services, adds Dow. Further, reusing familiar IT tools boosts quality because it provides more-predictable results. "You're not redeveloping it five times," she explains.

By reusing existing technologies through SOA, companies such as The Vanguard Group mitigate a tremendous amount of IT risk, according to Chip Gore, senior sales engineer for database and integration software provider InterSystems Corp. "SOA allows you to slide your technology forward without having to flip a switch to make a big change."

While Vanguard's Dow declines to name the technology firms with which her company has partnered for its SOA needs, she says Web services and XML are key technologies currently being utilized at the firm. "This is not a new concept," Dow notes. "But what has changed is the technology. Web services, XML, more common standards - that's what enables IT to adopt the approach that always makes sense."

Buying in to SOA

According to Adam Honore, senior analyst with Aite Group, until recently, buy-side firms have underfunded their own technology efforts and relied heavily on the bundled services of their broker-dealers. Now, however, buy-side firms - and financial services firms in general - are investing in SOA to gain competitive advantage, he says.

"To be able to provide an SOA architecture so that you can throw any trading system in front of it, any reporting system in front of it - it really gives financial institutions an advantage in helping to facilitate communications with their customers," says Honore.

At the end of the day, Honore adds, a customer-centric approach really means aligning IT with core business strategies, thus treating IT like a service organization. "It keeps monolithic projects under control and makes sure business requirements are being met," he says. "It also makes sure IT is working on the right strategies." And as firms have increased their focus on aligning IT with business goals, SOA has become a major part of the equation because of its ability to reuse information and business processes, Honore notes.

"The same principles are applying externally now - the IT organizations on the sell side are looking at themselves as services to help acquire and retain business from the buy side," Honore continues. "They are aligning themselves with business goals and creating services in front of their business processing to facilitate that communication" between the buy and sell sides.

SOA also streamlines cumbersome legacy processing systems that still permeate the capital markets arena, according to Honore. Because there is not an urgent road map for people to replace this legacy technology, service layers are providing the inner business logic to access the technology, he explains. And while this accessibility has been around for a while, it hasn't been presented to the customer side, Honore says. "The biggest problem from a tech perspective between the buy and sell sides is communication between systems," he asserts. "SOA makes messaging between buy- and sell-side firms much easier and consistent to employ."

Keeping the Basics Top of Mind

There are basic cornerstones that financial services firms should heed in order to become truly customer-centric, according to David B. Holtzman, managing director, financial service advisory, PricewaterhouseCoopers. "It entails providing the capability to understand your customers' financial service needs across product lines and meet those needs with enough consistency and precision to create long-term loyalty and trust with the customer," he says. "A true customer-centric organization will be able to provide more-effective sales and service with a reduction of risks and costs. If a financial institution really knows their customers, they can then proactively manage and grow that customer relationship, which will drive top-line and bottom-line growth."

Holtzman says that a sound SOA strategy helps financial firms become more customer-centric because SOA automates and optimizes complex business workflows, which helps avoid customer issues across lines of business and multiple products. "And by using SOA, customer data consolidation and business analytics, financial firms are able to predict in real time the selling of the next best products to its existing customers."

Bharath Rangarajan, director of product marketing for GemStone, a distributed operational data infrastructure provider, also sees the relationship between SOA, customer centricity and top-line growth. "A customer-centric strategy serves as a means to the end goal of top-line growth and overall corporate success," Rangarajan says. "SOA brings about an IT lifestyle change and necessitates a new way of thinking about technology systems, business processes and the relationship between the two. The benefits of SOA impact not only top-line growth, but also impact the bottom line and, more specifically, cost of ownership."

Giacomo Lorenzin, president and CEO of HiT Software, a provider of middleware data access and data replication products, says many tech vendors, including his own, offer some type of SOA capabilities. "Everyone is trying to use it, although I am not sure if too many companies are actually deploying it," he says. Lorenzin notes that SOA solutions primarily are being utilized by larger financial services firms. "Smaller firms obviously don't have the same amount of resources as the larger firms. However, they are definitely making SOA a near-future initiative," he says.