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05:44 PM
Leslie Kramer
Leslie Kramer
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Riding the SOA Wave

Now that firms understand SOA, they are starting to build adaptable infrastructures that can meet today's changing business needs.

Less a trend and more the wave of the future, the adoption of service-oriented architecture (SOA) has been growing among financial services firms, with some far ahead on the adoption curve.

Often viewed as a methodology, SOA is the building of software applications to support a business in such a way that allows systems to reuse the applications, or services. The architecture can be leveraged across multiple projects - both internally and externally - eliminating the need to rebuild similar services for each project. "Once a firm has set its SOA strategy and vision, and determined the standards, governance models and policies it wants to enforce, then every individual project across the enterprise project will be able to conform to the SOA vision," explains Eric Marks, president and CEO for AgilePath, an SOA management consulting firm.

Several financial services firms already have taken the giant leap toward SOA, but many still are trying to identify and model their services to determine what enabling technologies they need to pursue SOA. "You'll hear people talk about business processes management, but it's still pretty far out for most organizations - they have a lot to do to get there," says Marks.

One firm at the forefront of SOA is Northern Trust, which serves both institutional and individual clients. "At their heart, these businesses share a lot of the same functions and are similar in nature, so this idea of having services that are built with the knowledge that they will serve multiple masters was the real genesis for a service-oriented architecture," says Peter Magrini, senior vice president, worldwide technology at Northern Trust.

The firm began looking at SOA as early as the mid-90s. Northern Trust created a blueprint of its business services, Magrini notes, and has been building services with planned expansion capabilities ever since. Most recently, it began applying SOA to its individual family-office business services.

"Not only did we have the services available, but we were able to connect them to meet the virtual family-office needs in a much quicker time frame than if we had to build them from scratch," Magrini relates. In this way, Northern Trust has been able to seamlessly combine services needed by the individual marketplace - such as private banking, tax reporting and partnership accounting - with the sophisticated investment services typically reserved for the largest institutions, such as risk and performance analytics and general ledger, he adds.

Northern Trust began using SOA with its investment management operations outsourcing business in the third quarter of 2004. "Investment managers are now starting to see that the costs of investing in their back offices are high and fraught with constant change, so they want to take some of that cost out of their operations, while still managing risk," explains Magrini. SOA allows Northern Trust to leverage its extensive investment in its asset servicing platform by adding incremental capabilities - such as real-time cash management and global custodian reconciliation - to its core platform to round out its offering to investment managers, he notes.

Clients who have been introduced to these platforms in 2005 include Julius Baer New York and Insight Investment Management in London, according to Magrini. "Lots of people start from scratch or have separate platforms, but we thought it would be more beneficial to us and our clients to take advantage of the services we already have available," he says. Northern Trust leverages the service orientation of its operations and technology to integrate the investment manager's back office into the Northern Trust environment, Magrini explains. "This allows us to achieve scale, more easily manage risk and bring the highest standard of service of any one element of our client base to our entire client base," he says.

SOA Spins Web Services

Northern Trust isn't the only company that recognized the advantages of SOA early on. The Vanguard Group spent a long time weighing how to best utilize SOA. "We wanted to understand what the operational impacts for development would be, as well as what tools would be appropriate and what the impact would be on the development staff, who would have to learn the new approach," says Carol Dow, principal in corporate technology services at The Vanguard Group.

The mutual fund company began by conducting pilots to identify which projects would benefit most from SOA and has implemented the approach through the development of Web services. The firm now is looking toward a more comprehensive implementation within its middle-office trading area. "The reason middle-office trading is a good candidate for this approach is because it will integrate multiple applications with external service providers and help with our straight-through processing," explains Dow, who notes that Web services will be employed for quite a few projects going into 2006.

Dow credits SOA and Web services with creating a more agile Vanguard Group. "It helps you to be responsive to business process changes and promotes a flexible, adaptable architecture geared toward reuse, which is cost-efficient and, from a quality standpoint, can be a key driver to more predictable results," she says.

Vendors Catch the Wave

Many vendors have jumped on the SOA bandwagon and now offer SOA-related products, such as enterprise service bus tools (ESB) or messaging solutions that help implement SOA technical architecture, as well as business process management tools (BPM). "But these are all products that you have to evaluate first to see how they fit into your strategy and how you will implement them," cautions Dow.

For its part, Northern Trust relies on BEA System's Web Logic to facilitate SOA, according to the firm's Magrini. The BEA software, coupled with utilities that Northern Trust developed in-house, provides the technical foundation upon which the majority of the firm's services are built, he relates, adding that Northern Trust also leverages Microsoft .NET as the development environment for client/server applications.

The SOA strategy, Magrini continues, provides a more flexible infrastructure. "New solutions, new ideas, new endeavors - those are the ones we think our service architecture allows us to jump on quicker," he says.

But before a firm can reap the benefits of SOA, it first must understand the nature of the services that it plans to employ, and then it can start to make decisions around technology, according to AgilePath's Marks. He explains that technology platforms exist that basically integrate all the applications and platforms together, using middleware solutions such as ESB tools or enterprise application integration (EAI). "On the other hand, many organizations start with Web services management platforms that implement a highly distributed intermediary-based architecture," Marks adds.

Still, the evolution of SOA isn't complete, particularly in the area of governance, Marks stresses. "Governance is a big buzzword right now, and rightfully so - without a way to manage the processes and conformance to SOA, you will have the wild, wild West," he warns.


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