YES Bank Uses Cordys to Integrate and Automate Critical Customer- Centric Processes

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1 BUYER CASE STUDY YES Bank Uses Cordys to Integrate and Automate Critical Customer- Centric Processes Maureen Fleming Jeff Silverstein IDC OPINION Global Headquarters: 5 Speen Street Framingham, MA USA P F Fast growth is an indicator of market success. This Buyer Case Study outlines how two fast-growing businesses came together an emerging corporate bank in India and an emerging global BPM vendor based in the Netherlands to integrate and enhance the bank's core banking applications with a BPM platform and an SOA platform. While growth is one measure of success, this Buyer Case Study illustrates that there are multiple facets to success and that they don't always cleanly align with each other. In addition: YES Bank's purchase of Cordys' Business Operations Platform (BOP) started in India shortly after the bank was launched and was predicated on the bank's strategic decision to outsource most of its IT functions. Although it purchased core banking functionality from a large platform vendor, YES chose to integrate and enhance the core banking functionality with a BPM platform and an SOA architecture rather than purchase incremental applications from its original vendor. While favoring large, established platform vendors initially, YES chose Cordys because Cordys demonstrated a superior rapid development cycle in an onsite proof of concept. Cordys' implementation at YES succeeded in dramatically reducing the onboarding time and cost for commercial customers and sharply reducing the time and cost of enhancing core banking applications, but a significant shortage of professional services resources prevented YES from meeting its ambitious implementation schedule. IN THIS BUYER CASE STUDY This IDC Buyer Case Study looks at how YES Bank, a private bank based in Mumbai, India, selected Cordys' Business Operations Platform as the process management and application integration middleware layer for its SOA-based enterprise architecture. This IDC Buyer Case Study details YES Bank's strategic technology decision to implement Cordys in conjunction with an ongoing service-oriented architecture (SOA) initiative. It also details the bank's initial requirements, the vendor selection process, results, and lessons learned. Filing Information: March 2011, IDC #227356, Volume: 1 BuyerPulse Analysis: Business Process Management Software: Buyer Case Study

2 SITUATION OVERVIEW YES, founded in 2004, chose to outsource most of its information technology. Without the burden of a legacy infrastructure, YES Bank's IT organization had the challenge and the advantage, initially, of building the bank's enterprise architecture from the ground up. IT investments initially focused on core banking technology such as transaction processing and customer-facing applications. The bank outsourced all of its development and still has not hired a programmer. After four years, YES realized that it needed to start planning for the future. Maintaining infrastructural agility tweaking applications and mixing and matching disparate applications without hiring a full-service IT department was a major challenge. YES decided to embark on two initiatives: building an SOA framework and building a BPM platform solution. Table 1 provides a summary of issues and factors that led to YES Bank's decision to purchase Cordys' Business Operations Platform. TABLE 1 Buyer Case Study Capsule Category Vendor/product User organization Vertical Size Purchase trigger/need Key tech requirements Short list Key win factors Decision cycle time Implementation time Details Cordys/Business Operations Platform YES Bank Financial services Midsize BPM and integration middleware to link core systems to external functions and to extend functionality of core systems SOA interoperability, simple product architecture, rapid deployment IBM, TIBCO, Newgen, EMC, Cordys POC performance, strong customer references Nine months Seven processes in production in year one Source: IDC, March # IDC

3 Organization Overview YES Bank has grown quickly to be the fifth-largest private bank in India. It employs 3,000 people across 150 branches. The company's IT organization consists of 60 people, half of whom are in business analyst rather than technology-focused roles. For this Buyer Case Study, we interviewed Umesh Jain, president and CIO of YES Bank. Challenges and Solution YES Bank began to evaluate BPM products in YES Bank's intention in investing in BPM was to provide the bank's architecture with a process layer that would orchestrate workflow among employees, customers, and back-end systems. The selection team looked at vendors that other banks in India typically use. This group has a wide array of vendors including global technology leaders TIBCO, IBM, Oracle, and EMC; BPM pure plays, Lombardi and Cordys; and Newgen, a small content management and BPM software company based in India. An initial round of product demonstrations from each vendor helped evolve the selection team's thought process around its evaluation criteria. "As we went along, we realized that BPM and middleware are two parts of the same thing. To me, middleware helps you integrate and weave processes into the back end," according to Jain. "If I want to optimize process flow, various steps of the workflow will have to talk to back-end systems in every BPM process. If I don't have this kind of integration in place, I'll have a manual flow that may do the same things as an automated flow, but people will have to key data into the BPM front end and people will have to key in data to the back-end systems." Key Requirements: SOA-Based Interoperability, Simplicity, Rapid Deployment To maintain a focus on process optimization through automation, the team decided to change its selection paradigm. "We started thinking that we should not be looking at BPM and SOA as separate products. We should be acknowledging and looking at them as one and the same thing, even if we procure these products from separate vendors," Jain said. In addition to SOA compatibility for application interoperability, the team had two other key requirements. First, the team wanted a simple solution, one with a simple architecture. Second, the team wanted a rapid deployment life cycle. The team planned its first project around approximately 40 discrete processes. Because of this volume, the team wanted a vendor and a product that could take processes from development to production, and then rapidly reuse and produce new processes to deliver the entire project within two years IDC #

4 Product Selection Over the course of nine months, the selection team carried out vendor briefings, product demonstrations, and ad hoc proofs of concept with each vendor. The team eliminated Lombardi early in the selection process. At the time, which was prior to Lombardi's acquisition by IBM, the vendor's presence in India was too limited to suit the team's confidence in the vendor's ability to provide a robust support infrastructure. When the YES team presented TIBCO with its proof-of-concept (POC) scenario, the vendor decided to drop out of selection process. The vendors left EMC, IBM, Newgen, and Cordys built and presented proofs of concept to the team, with varying degrees of success. EMC positioned Documentum as both a BPM platform and a document management solution. Although YES later adopted Documentum to satisfy the latter purpose, YES' evaluation was that Documentum lacked integration capabilities sufficient to meet YES' needs for SOA-based, application integration middleware. Prior to the selection process, YES purchased and implemented Newgen's content management product to provide an imaging and workflow application customized for check processing. Newgen produced an adequate proof of concept by leveraging aspects of this prior implementation into the YES Bank test scenario. But YES also had concerns about Newgen's pricing flexibility, its long-term stability, and the maturity of its product road map. IBM presented its proof of concept after approximately one month of offsite development. The vendor's product portfolio, which at the time included FileNet, WebSphere, and several applications, would have entailed purchasing additional hardware and software components, thus failing to meet YES' simplicity objective. The team also felt more comfortable with the prospect of purchasing a seamlessly built, if less mature, BPM platform. Cordys developed and presented the POC scenario over the course of one week of onsite development. "Cordys actually installed its entire system while we watched. It took 18 minutes. Then, it took around three days to write the process. In another three days, it demonstrated the process to our satisfaction," said Jain. Despite Cordys' exceptional performance in the proof-of-concept phase of the decision cycle, YES wondered about the maturity of the vendor's market presence in the financial services vertical. "It had a few implementations in India in the insurance business. The customer references were outstanding, both formally and informally. It was very glad to demonstrate to us the processes it had implemented and the kind of speed it had achieved," said Jain. YES selected Cordys' Business Operations Platform for a variety of reasons. Cordys' solution met the selection team's key requirements of agility for SOA-based integration, minimizing the technology management load on the bank's IT department, and a rapid deployment life cycle. Cordys provided YES with persuasive customer references and priced its solution aggressively. 4 # IDC

5 "We were still apprehensive about the fact that Cordys was not an established player and that its solution was relatively new. We were looking for an enterprise strategy partner. A big question was, Can we put our money on a platform which has not yet proven itself?" "Because of the philosophy of our organization agility, keeping it simple, outsourcing to avoid getting into technology management, and focusing on the value that solutions can deliver for us we said Cordys is the right choice." Late in 2009, after an additional six months of cost-benefit analyses and internal approvals, YES and Cordys signed a five-year license agreement for eight CPU cores. YES signed a separate professional services agreement to cover the implementation process. Implementation YES' ambitious goal was to implement approximately 25 processes within a year and 50 processes within two years. Cordys began the implementation with 2 services people dedicated to YES and expanded that team to 10. YES may also hire a thirdparty support partner, Virtusa, which has a BPM practice and a strategic partnership with Cordys. One set of processes manages corporate touch points. BOP connects YES' core banking systems with a customer's enterprise resource planning (ERP) system to receive information, translate information to messages, and relay messages into YES' architecture. Once YES' core banking systems have processed the messages, BOP sends out appropriate payments and confirmations. As of March 2011, seven of YES Bank's customers were integrated into the platform. The second set of processes augments the features and capabilities of YES' core banking applications and are difficult to modify and customize natively. YES uses BOP to modify and add functionality to those core banking processes. YES has rolled out two applications in this category. One Cordys process manages the bank's end-to-end processes regarding paperbased interest/dividend warrant checks. BOP manages and tracks customer requests for paper-based checks, from customer request to printing to customer receipt. The second application manages a product YES developed to allow customers to take advantage of a new method of paying for shares of companies in the process of going public. Before the Securities Exchange Board of India (SEBI) launched the new process in 2008, an investor applying for shares of an IPO had to make an up-front payment for the entire amount of shares it wanted. If the investor originally requested 40,000 shares but in the end only received 10,000, the investor would have to wait two months to receive a refund check. SEBI's new subscription mechanism for IPO shares allows investors to receive refunds immediately. YES Bank uses Cordys to manage all of the processes related to the new refund process IDC #

6 The YES team overseeing BOP consists of four people an administrator from the IT side, primarily responsible for monitoring and managing the technology, works with an engineer and a programmer. In addition, a program manager from the line of business tends the platform's general architecture by laying out standard process guidelines and manages the bank's relationship with the vendor. Implementation Challenges "When we evaluated Cordys, we did consider the partner ecosystem. We spoke to Cognizant, we spoke to Wipro, and we spoke to Cordys. We were more or less convinced that they all have some expertise on the product, and we can take services from any of them. Our plans were very aggressive." "However, when we eventually started, there was frankly no expertise existing. What we did realize is that all the partners have everything on paper only." YES was forming a support partnership with Virtusa to fill the gap between what was available from Cordys and the aggressive YES project schedule. In the meantime, Cordys' support department continues to be YES' main services partner. "I must acknowledge that the guys in the management of Cordys have all been supportive. They never shied away from the fact that there are issues. So, they've actually been very engaged. But, they've not yet been fully able to get their act together. That's part of the risk that we took and part of growing up together." Results Late in 2010, YES' customer onboarding process took a quarter of the time at a quarter of the cost compared with the previous year because of the Cordys deployment. YES manages several other mission-critical processes through the platform and plans to expand the deployment continuously over the next several years. However, YES was able to implement only 7 of the 25 processes it had planned to put into production during the first year of implementation, not because of product issues but because of a shortage of professional services available from Cordys and its partners. Combined, they were unable to supply the volume of professional services YES needed to execute its process development plan without a major expansion of its IT staff. Benefits YES saw a return on its investment in Cordys' software well within a year of the initial purchase. The platform continues to add value to the bank by automating and managing both mission-critical and value-added processes. Customer Onboarding Prior to implementing Cordys, each time YES wanted to bring a new commercial customer into its system, the bank had to contact Oracle Financial Services, its core banking vendor. Each new onboarding took four months to complete and cost 6 # IDC

7 approximately $20,000. Although this cost and time frame were standard for the banking business, YES recognized an opportunity to gain a differentiating advantage by increasing the speed and efficiency of its onboarding process. YES rolled out its first customer on Cordys in three months. YES used this initial project to create a reusable process infrastructure for future projects. Now, YES onboards a customer in less than 10 days for approximately $2,000. Value-Added Application Development YES also uses the Cordys platform to enrich its architecture with value-added functionality without buying new, function-specific applications. For example, YES is migrating its accounts payable process to the Cordys BOP. This process will affect all of the bank's suppliers, regardless of whether they submit electronic or paper-based invoices. When a vendor submits an invoice, the document will go through the Cordys platform, into an approval cycle, and out to post in the bank's accounting systems. The process will have 4,000 end users, including 300 vendors and all of YES Bank's internal employees, by the spring of Cordys' business rules engine is a key part of the application. "Accounts payable uses a lot of rules in terms of who approves what amount, especially in large organizations where there are delegations. These are very definable properties. However, to code this would have been difficult and I think the rules engine came in handy as the back end," Jain said. YES could have bought a separate, out-of-box accounts payable application, but it was much less expensive to develop one using BOP. "If I were to buy this application and implement it, my initial capital investment would be around $75,000. Then the maintenance cost for everything would be about 20% of that something like $15,000 per year. If I do it on Cordys, however, it's a onetime development cost, with maintenance costs already subsumed into the platform," Jain said. Future Plans YES has budgeted substantial funds for process development during In addition to fully deploying the accounts payable process in the spring of 2011, YES planned to roll out an employee reimbursement process. Future development and expansion of the Cordys platform at YES is contingent on Cordys' ability to deliver services directly or through its partners. Jain said that internal demand for BPM deployment has increased much more quickly than his development team can deploy new processes. However, he anticipates new deployments will roll out more frequently as Cordys' partner ecosystem gains expertise and can provide the bank with development resources independent of Cordys' services team. YES has long-term plans to package and resell SOA-based middleware to other banks in India. These applications will be based on Cordys. "We want to build our process layers specific to banking and take it to market. Our plans are on Cordys. An account opening is an account opening. I think, by the time other large banks that are usually a little slow to react and a lot of small banks that are either 2011 IDC #

8 not able to visualize and execute on BPM, or they don't have the money to execute by the time other banks wake up to this, some core processes will be in production in our system, which we can then go and sell as a product offering," said Jain. Lessons Learned "I would say, on the product side, everyone needs to do their own due diligence. For small to medium-sized organizations," Jain said, "I think Cordys is a fantastic buy. I've not seen Cordys in extreme volumes, but if you're talking about processing extreme volumes you should do additional due diligence. But as a general BPM middleware platform, I think it's a fantastic tool." Purely from the product and platform perspective, Jain is impressed with Cordys' responsiveness. Jain recommended Cordys to peers with less ambitious projects, and they reported good results. But YES laid out aggressive plans for its Cordys deployment that proved to be far more demanding than the combined internal and external resources of YES, Cordys, and professional services companies could handle. One lesson is to be sure that the scope and the timing of your rollout plan can be supported by available skills. Several peer customers also advised YES to use its own project managers to ensure delivery of results. YES followed this advice and recommends others do the same. "Have your project managers manage the projects," said Jain. Finally, successful process development requires a standards-based development mindset. Systematized development guidelines are important in large, complicated implementations such as the one at YES, particularly since the company's IT department consists primarily of business analysts. Relentless execution against this mindset is the key to avoiding costly complexities when it comes to change management and scaling. "You can't have a volatile shop in a large development. Working out of a complete project management and program framework is key," said Jain. E SSENTIAL GUIDANCE Success in business can be measured in a variety of ways. Return on investment is a common measure of investment success. By this measure alone, the Cordys implementation was a significant success. Another goal for YES during product selection was to find a product that could deliver quick results. Cordys not only helped YES achieve and surpass an ROI on its product investment;it helped YES deliver quick value. But YES' definition of success was demanding and multifaceted. It wasn't just about ROI and quick time to value. It was about a series of processes and a schedule. And there, the professional services gap left YES short of its goals. YES' ability to learn and evolve an understanding of what was critical to the bank's success led YES ultimately to the right kind of product. YES took time to understand its architectural requirements, placing a greater emphasis on product competency 8 # IDC

9 around SOA, when it realized the success of the effort would be highly dependent on integration. While enterprise application interoperability may not be critical in a particular selection process, strong interoperability with user applications, portal infrastructure, or content assets may be important. We continue to find that enterprises with rigorous procurement processes sometimes miss the architectural alignment step of their purchasing decision and base their decisions on word-of-mouth or best-first impressions or other relationship-centric scenarios. A big point of failure or cost escalation in projects is the failure to correctly identify the way in which the product handles interoperability. But YES still fell short of its specific goals. The results YES was able to achieve over a relatively brief period were impressive. And frequently, a fast success leads to the next success and creates its own momentum within a company. But in this case, the "success" built momentum that couldn't be supported by Cordys and its partners. The gap between the availability of support for specific BPM products and processes and demand is not peculiar to Cordys. It is an industrywide gap. Prospective BPM buyers need to understand that BPM is still considered an emerging area of technology by platform vendors and professional services firms. The professional services companies may see limited volume from a market that, while growing, is still relatively small and divided among a more than a dozen significant vendors. Prospective buyers need to heed the often expressed advice of the customers that we have done case studies with previously start BPM with small, simple projects. And develop internal expertise with the product that will allow you to properly oversee additional development projects. The initial projects are almost as much about learning and skills transfer as they are about ROI and the rapid delivery of business value. LEARN MORE Related Research Life Insurer Uses Pegasystems for Call Center Transformation (IDC #226363, January 2011) AmerisourceBergen Uses Metastorm to Automate Processes, Integrate with and Augment New ERP (IDC #225877, December 2010) Fast-Growing ecommerce Company Picks Progress for Visibility, Process Standardization (IDC #225831, December 2010) Localiza Selects TIBCO BPM and SOA Platforms for Legacy Upgrade (IDC #225762, November 2010) pshealth Selects Appian for Quick Health Apps Development Using BPM- Centric PaaS (IDC #225244, October 2010) 2011 IDC #

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