essential for banking Case Study Doubled STP rate and significantly improved client service BSI is ready to meet future challenges and to push ahead with its growth strategy. Stefano Coduri, CEO, BSI
Avaloq at BSI Outsourcing for the 21st Century BSI s decision to switch to a group-wide business process outsourcing solution based on the Avaloq Banking Suite for its core banking functions has given the Swiss private bank an advanced technology platform to support its ambitious strategy for international growth. BSI The Background History BSI started life in 1873 as the Banca della Svizzera Italiana, and took more than a century to extend its activities across the whole of Switzerland. But BSI SA, renamed for the new millennium, is now a vigorous, outward-looking bank, with thriving operations in many of the world s key private banking markets, including Hong Kong and Singapore, Nassau, Luxembourg and Monaco. The complexity of these activities is dictated by a number of interacting factors, including growing client demand for a wide portfolio of products and services, international framework issues and the different market conditions and regulatory requirements that apply in each territory. BSI has assets under management of more than CHF 90 billion. A Vision for the Future BSI is a private bank with a global vision. In the middle to late 1990s, it recognised the tremendous benefits that smaller, specialised banks could derive from outsourcing their routine backoffice services to a reliable, ultra-competent service provider. If the quality of the service was good enough and the right security safeguards were in place, this kind of business process outsourcing (BPO) provider could serve many different banks. It could take over much of the heavy lifting and free its clients to focus on the specialised areas of banking where they could add most value. Originally founded by BSI, B-Source s majority stake was acquired by Avaloq in 2011. B-Source is part of Avaloq s international BPO division, which has grown rapidly since the acquisition. By the end of 2013, it accounted for almost half of Avaloq's annual revenues. As a business model, it made a lot of sense. Economies of scale combined with highly developed expertise in back office services would allow this kind of shared BPO provider to drive down transaction costs. But when BSI looked around to see what was available in the marketplace, it found no suitable BPO companies that could offer this kind of service.
In the 1980s and 1990s, BSI developed its own complex and powerful IT system, known as The BOSS. In 1995, a spin-off was launched under the name BOSS Lab, providing ITO/ASP services, which was renamed B-Source in 2005. BSI provided the back office services itself when it merged with Banca del Gottardo in 2007. For some years, this arrangement worked well. But by 2008, the system was beginning to show its age. BSI s present chairman, Alfredo Gysi, was CEO of the bank and president of the B-Source board at the time, and he was becoming increasingly aware of the limitations and inflexibility of the old mainframe-based platform. Compliance with Basel II and other regulatory requirements was punishingly expensive, STP rates were below par, and integration with third party products depended on extensive hand coding. The costs of updates and maintenance were rising fast, making it hard for B-Source to show a profit on its external contracts. This also meant that BSI could not cut costs and improve its own cost/income ratio, and the platform offered little support for BSI s planned expansion in Asia and other international markets. Donato Panizzolo, who was Head of Operations in 2008, recalls the characteristics caused by the old platform. The BOSS platform, dating from the 1980s and 1990s, was no longer flexible enough to keep up with the times and support the growing sophistication of our product range an increasingly important differentiating factor for a banking group active in the main international markets. In short, The BOSS platform had become clunky, expensive to run, and slow to expand. It needed replacing. The Search for a Platform It became clear that the replacement platform must meet a demanding set of criteria. It would have to offer simpler, streamlined business processes, with less manual intervention and lower operational risks. It must provide agile, flexible IT that would allow BSI to standardise business models across its affiliates, enable new products to be introduced quickly, and cut the time and costs involved in setting up new branches. And it must allow BSI and B-Source to capture the efficiency gains that would follow from industrialising many non-core processes. Having ruled out re-engineering the old system or building the new one in-house, the bank began the hunt for a commercial solution. Initial evaluation studies showed that most of the possible candidate platforms had serious weaknesses from BSI s point of view. But three systems were shortlisted for closer study. Of these, the clear front runner was the Avaloq Banking Suite, which utilised advanced technologies and comprehensive functionality. Avaloq was selected for detailed assessment and analysis, which highlighted a number of important advantages. As a banking market leader, Avaloq offered a high level of integration and consistency, and the ability to handle multiple entities within a single instance the MESI architecture which could be a key asset in supporting BSI s international growth. It helped too that several comparable private banks with similar business models and geographic reach were already committed to Avaloq. By late 2008, BSI and B-Source were both confident they had found the system they needed and the bankers set to work with Avaloq to put together an overall back office service package and build a comprehensive model bank based on the Avaloq Banking Suite.
The Monaco Implementation With Avaloq s first three customer banks going live in 2010, BSI and B-Source set a date in January 2011 for the first phase of the Avaloq Banking Suite implementation for BSI itself. This would be in the bank s Monaco branch and would effectively be a working pilot. The key factors underlying the choice of Monaco as the pilot location for the new platform were its small size, its consolidated business model and its proximity to the parent company in Switzerland, says Donato Panizzolo. BSI s business in Monaco was relatively small, but it was also sophisticated and demanding. The project was to be managed by B-Source, with the support of Orbium, Avaloq s implementation partner, and was to be completed, start to finish, in 18 months. As the champagne corks popped in Monte Carlo to celebrate a successful going live on the first working day of 2011, BSI Monaco SAM became the first bank outside Switzerland to benefit from the reliable, cutting-edge banking solution built on the Avaloq Banking Suite. From the point of view of Alberto Mandelli, BSI s Head of Information Systems and Security, it was obviously important that the Monaco bank was ready on time and became fully operational immediately. But the successful migration had an additional significance as a step towards bigger things. In terms of the bigger picture, it helped prove that BSI s plans to extend the BPO approach based on the Avaloq Banking Suite were realistic and that a fast, simultaneous implementation across several different overseas branches was perfectly feasible, despite the added complications of time zones, local regulations, and differing product portfolios. This was crucial as the next stage of the master plan would involve a much more ambitious implementation, six months later, simultaneously migrating BSI Switzerland and the affiliates in Singapore, Luxembourg and Nassau to the new platform. BSI made the strategic choice to have the same system in all branches globally, says Alberto Mandelli. Being able to take advantage of a large integrated system, we recognised that we could benefit from considerable operational advantages. We decided to go for a big bang approach, simultaneously switching off all the old systems and going live with the new platform the same weekend. Armed with a full analysis of both the technical and human factors that had emerged from the Monaco migration, BSI was ready to face the biggest challenge in its 140-year history. For BSI, this represented an important milestone in the evolution of its information systems while improving the bank s business processes, he recalls.
The Biggest of Bangs Alberto Mandelli had been waiting and planning for this moment for a long time. The preparations had been meticulous, but the sheer complexity of the operation meant there was always the possibility that something might go wrong. Hundreds of staff from BSI, B-Source, Avaloq, and Orbium were involved and the timing was critical. With Singapore seven hours ahead of Switzerland and Luxembourg, and Nassau, in the Bahamas, five hours behind, everyone needed to perform exactly on cue. In the event, though, BSI scored a notable success. More than 2,000 users in the four countries were switched seamlessly across from the old BOSS system to the Avaloq Banking Suite with the minimum of fuss and drama. The challenge of the big bang was exciting pure adrenaline, said Mandelli afterwards. Doing the migration all at once in three different time zones was not easy, and there were nearly 500 people involved. There was still one more piece of BSI s international jigsaw to be fitted into place. BSI had been building up its Hong Kong operation, as part of its broader expansion in Asia, and BSI Hong Kong was granted a full banking license in December 2011 by the Hong Kong Monetary Authority. The newly-licensed bank was migrated onto the Avaloq Banking Suite in March 2012, making full use of the parameterisation and pre-sets in Avaloq s Model Bank Asia to reduce implementation time considerably. The Hong Kong implementation went live just 8 months after the big bang implementation in Europe, Asia and the Americas. With this implementation, BSI became the fifth bank in Hong Kong to operate its booking centre on the Avaloq Banking Suite. Filippo Bernasconi was quick to emphasise the importance of the solution in facilitating BSI s Asian growth. The challenge of the big bang was exciting pure adrenaline. Doing the migration all at once in three different time zones was not easy, and there were nearly 500 people involved. BPO has proven to be an effective solution over the long term that will help us easily implement the complex requirements involved in strengthening our footing in Asian financial markets, he said. The branch migrations of the past year have all yielded very positive results. Alberto Mandelli, Head of Information Systems and Security, BSI
A Broad Range of Benefits For BSI, taking on the challenge of switching the home banking operations and five foreign branches to the business process outsourcing model in quick succession was well worth the effort. Within 15 months, Switzerland, Singapore, Nassau, Luxembourg, and, finally, Hong Kong had all been successfully migrated, and BSI managers were able to identify many significant business benefits. Comprehensive client reporting, essential for multi-portfolio asset allocation, meant the bank was able to provide better and more flexible customer service. Integration of client data management platforms saved time and effort not least because clients details only needed to be entered once and minimised the chances of errors being introduced. Efficiency and quality were dramatically enhanced, reversal rates improved, and straight-through processing rates doubled, with more automation of back office processes and far less use of manual handling and paper forms. At the more strategic level, opening new branches and launching new products could both be handled more efficiently than before, while Avaloq s componentised functional architecture simplified the effort needed to adapt to new market demand. In short, BSI could congratulate itself on meeting the tough criteria set out in Alfredo Gysi s original vision. In just over four years, the bank had largely reinvented itself and created a position from which it could operate profitably and successfully, with every chance of accelerating its international expansion. The success of the switch to the new back office system was summed up, at the time, by the man who became Gysi s successor in the CEO role, Stefano Coduri. Groupwide implementation of the Avaloq Banking Suite represents a significant step forward for BSI, he said. The new IT platform will increase operational efficiency and cut time to market for new products and services. Thanks to the introduction of this advanced technology platform based on the Avaloq Banking Suite, BSI is ready to meet future challenges and continue to push ahead with its growth strategy. This future-proofing is key to BSI. By putting the bank s back office operations in the hands of the developer of the core banking software, BSI is ensuring the future relevance and viability of this crucial business platform. At the same time, through using its own software on a day-to-day basis, Avaloq is able to gain insights that can be incorporated in future development programmes. Groupwide implementation of the Avaloq Banking Suite represents a significant step forward for BSI. The new IT platform will increase operational efficiency and cut time to market for new products and services. Stefano Coduri, Chief Executive Officer, BSI
About BSI Established in Lugano (Switzerland) in 1873, BSI SA is one of the oldest banks in Switzerland and specialises in private wealth management. Since 1998, the Bank has been wholly owned by the Generali Group, one of the most significant participants in the global insurance and financial products market. The Bank places great emphasis on establishing and maintaining ongoing personal relationships with clients, while at the same time offering global asset management services with world-class products. BSI is present in the major financial markets worldwide, in Europe, Latin America, the Middle East and Asia. www.bsibank.com About Avaloq The Avaloq group develops and operates fully integrated front, middle and back office solutions, as well as online and mobile banking applications for retail, wealth management and universal banks. The company provides leading business process and IT outsourcing solutions in Switzerland (B-Source) and in Germany. The company, with its headquarters in Switzerland and branches in the most important financial centres worldwide, employs 1,400 highly qualified banking and IT specialists and has a customer base of more than 100 banks. For further information, please visit www.avaloq.com www.avaloq.com 01/2014 The Photo on page 7 was taken by Böhringer Friedrich.