INTERNATIONAL SUBSIDIARY BANKS DIVISION

Constellations project Ukraine Implementation of universal banking solution FLEXCUBE system international edition V.11 19th International conference Banking systems and security of informational technology Project Management Team Yalta, June 18th 2012 Reporter, Andrii Mykhalniuk, PMO PRAVEX-BANK PJSCCB

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AREA RESULTS

Migration — Lessons learned from previous migration (03/2012) put in place — Data migration nearly perfect

Applications activation (Flexcube, PM+,…)

— All applications working from day 1 — From day 2, number of transactions are at the same level

comparing to the old system

EOD & NBU reporting — EOD branch closure stabilized and optimization in progress (no

impact on opening of the day) — NBU reporting sent daily and (nearly) on-time

Training & Support

— All staff (branches, HO) trained and operating — Support properly staffed and effective (Core Team, Help Desk,

Reconciliation, Training team)

Infrastructure — Some initial tuning needed on 1st and 2nd days (May 21-22) — Infrastructure always stable and performing since Day 2nd

Highlight: May rollout successful !!!

The day after May rollout (May 21st, 2012) – An entire Information Systems has been changed

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How we did it? All the milestones have been fully accomplished following an innovative approach, sharing risks in three main steps

Milestone Plan Actual Objectives

Green Field 14-Nov-2011 14-Nov-2011 Functional test Test Coexistence

Pilot Region (20% bank) 12-Mar-2012 12-Mar-2012

Test Migration Large functional test Headquarter support Test Support/training

Rollout completion (80% bank) 21-May-2012 21-May-2012

System & organization Performance Full functional scope deployed

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Rollout starts 4 months BEFORE

Rollout finishes 5 months BEFORE

When we did it? 5 months ahead of original schedule !!! Only two months of coexistence – Business not blocked in 2012

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What we did ? Pravex completed successfully a complex IT systems renewal and business processes update… (1/2)

Timing

Budget

Scope

People Organization

Project completed 5 months ahead of original schedule agreed at start date (21 vs 26 months)

“In-line” with plan approved by Supervisory Board

Pravex Bank succeeded in the “plain vanilla” approach limiting system customizations (<40 gaps)

A new Data Center in Ukraine has been created from scratch for Pravex Bank Full renovation of TLC infrastructure from (frame relay to MPLS) Full renovation/refurbishment of all end users’ PCs Increased scope during the project, such as full integration to increase user efficiency (e.g.

Pravex Money+, Pravex Telegraph) Integration of Group systems (e.g. Norkom for AML) and potential ones (e.g. Deloitte Fineware).

Also analysis done for possible new functionalities (Internet Banking, loan origination CRIF)

Pravex employees “on-board” from day 1 (core team, IT,…) handling partially production Pravex managed a project involving more than 100 people from 11 different countries

Bank processes tailored to new system logics leveraging ISBD best practices Training execution and end users’ manual for more than 2.500 people

PRAVEX BANK MAJOR ACHIEVEMENTS

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… renewing entirely the core banking and accounting systems (2/2)

AS IT WAS Hetererogeneous platforms Outdated functionalities Redundants interfaces “Silos” oriented architecture High rate of manual activities

AS IT IS Centralized and rationalized platform Reduced Time to market Up to date functionalities Effective maintenance Reduction of interfaces Client oriented open architecture Process Automation oriented Scalable Reusable for other Foreign Banks

Centpay+ (utilities, money

transfer)

Transmaster

Pravex Money+

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How we did it ? Strong governance with regular ISBD Headquarter and Pravex Top Management involvement

KEY SUCCESS FACTORS & LESSONS LEARNED 1. GOVERNANCE: experienced project management team with deep involvement of ISBD

Headquarter top management, leveraging “hourly” activities tracking and issue “killing at the birth” approach

2. PRAVEX BANK FULL INVOLVEMENT: Pravex personnel inside all strategic streams (Operations, Core Team, interfaces, migration, business processes redesign,…)

3. SCOPE CONTROL: “Plain vanilla” approach applied since the beginning

4. RISK MANAGEMENT: rollout approach applied in Pravex is a good compromise between speed and risk (Green Field, 20% bank, 80% bank)

5. LOCAL CULTURE AND LANGUAGE KNOWLEDGE COUNTS: such a complex system implementation requires a deep knowledge of local behavior and rules

6. “QUICK-WINS” FROM FIRST ROLLOUT: concept applied Pravex Bank with Pravex Telegraph. Used from the start, it can increase dramatically the end users’ buy-in

7. METHODOLOGY: use Pravex’s experience to tune methodology (e.g. analysis)

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What can be reused for other Foreign Banks of IntesaSanpaolo? Pravex’s experience can be reused to adopt Constellations architecture in other bank, decreasing implementation costs, timeline and managing properly risks

LOCAL PROVIDERS -Accounting -Payment

routing -Regulatory

reporting

CORPORATE modules (Loan Origination, AML, CRM)

ARCHITECTURE ASSETS

1. Migration engine: leverage and reuse the standard components of migration machine

2. Interface gateway: reuse Pravex “Web Sphere Message Broker” approach to make a standard for FC integration inside ISBD

3. Accounting Engine: enable quick and secure transformation between Flexcube and local accounting system

4. Reporting architecture designed in Pravex 5. Group Asset integration capability (e.g.

Norkom, Finware)

Mes

sage

Bro

ker G

atew

ay

CIF (,GL)

CASA

TD

RL

RP

RT

PC FT

SI

EMS

Direct Banking

Acco

untin

g En

gine

EXIS

TIN

G A

PPLI

CA

TIO

NS

(e

x. M

oney

tras

nfer

, car

ds,…

)

: Local bank application

: Corporate ISBD modules

: Constellations Architecture

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Pravex Bank is starting the transition phase from implementation phase to application maintenance phase, with the following organization

How to run the new Constellations platform in Pravex ? from «Project» to «Application Maintenance Support»

Temporary Organization of Production Support (till end of July)

1. Core Team 2. Help Desk

3. Reconciliation team

4. Suppliers’ contribution and

support

Target Organization of Production Support (from August) 1. Core Team (business oriented) 2. Help Desk as a unique front end for

all Pravex employees 3. Reconciliation team as “business

as usual” activities, in Operations

4. Remote support and evolutive application management in action

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What can be next for Pravex ? from «Delivery» to «Value Extraction»

AREA VALUE ADDED BY CONSTELLATIONS

POSSIBLE INITIATIVES TIMELINE (months)

REVENUE

Reduced time to issue a new product New product offering enabled by new system (e.g. floating rate loan, bundle of products) Ability to integrate other applications (money transfer) Scability of architecture

Define a list of 5-10 new products to be created by end of 2012 Launch ASAP a first new product (ex. Overdraft for Corporate) External money transfer integrated Direct banking, loan origination, CRM

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CLIENT SATISFACTION

Centralized & reliable customer database, which can help to significantly improve data quality and support sales

Contact customers to enrich client data and propose new products Define campaign and next products for best clients

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EFFICIENCY

Some processes automated both for Branches and Headquarters (e.g. accrual of interest for Deposits, reporting,…) Support from 9 to 1 Core banking

Analysis undergoing to map and identify gaps between old and new operating processes (Back Office, Branches,…)

3-12

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Thank you!

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APPENDIXes

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Functional Gaps through ”Qualification Gates”

1st

Area owner level

End of workshop

WHO

WHEN

Real need assessment Possibile w/a

HOW

2nd

Project Management Team level

After workshop

Qualify Regulatory gaps Qualify Business

critical gaps

3rd

Operational Committee level

End of analysis

Qualify Regulatory gaps Qualify only Business

critical gaps w/o process impact

ORIGINAL SCOPE

4th

Project Management Team Level (+ Steering Committee)

Closure of analysis phase (functional / technical arch.)

Match updated vs expected gaps (cost) Balance additional vs

removed gaps

STATUS

GATE

355 requests 182 requests 100 requests 26 gaps

$$$

45 requests

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“Plain Vanilla approach” – Target Architecture uses proven standardized components Flexcube>Accounting Engine>ProFIX

Core Banking (FLEXCUBE)

Current and Saving

Accounts

Term Deposits Loans Metals and

coins

Payments and Fund Transfer

FRONT END (Branch & Headquarter)

Other Systems

Cards (As Is)

Direct channels

Product originati

on engine

Bad Debt

Management

(As Is)

CRM (As Is)

AML Norkom

Product engine and lifecycle management from account opening to closure

Integration Accounting (PROFIX)

NBU GL and reporting IFRS transformation GL and reporting

Payment routing (UAH payment management, SEP NBU interface for

UAH payment management)

Integration (ACCOUNTING ENGINE)

Trade finance automation

Treasury back-office

Automated nostro reconciliation

Internet Banking

Loan Origination

CURRENT systems/procedures

NEW architecture NEW

OLD

Corporate Solutions NEW

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“Plain Vanilla approach” – Business Processes definition using standard functionalities of new systems and leveraging on BIB (Banca Intesa Beograd, one of the 11 foreign banks of IntesaSanpaolo) experiences

Pravex

BIB Best Pratices

Flexcube

OBJECTIVE “Find the best combination between Flexcube standard features, Pravex’s Legal regulatory requirements and BIB best pratices”

APPROACH “Plain Vanilla” approach “in action”: after half review of processes such as C/A, Deposits, Debit cards, there are

NO new (additional) recorded GAPs between processes and Flexcube functionalities; some changes might be needed for payments area which is traditionally more complex in Ukraine/Russia area

Leverage of BIB experience and practice, change of some processes are initiated and agreed toward higher efficiency and client oriented business (ex. reducing checks, paper less,…)

Structured review using Corporate Business Processes Tool (ARIS), which will enable a structured business process redesign and an easier process management and maintenance

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Front-end Evolution for Branches

ODB BARS

Transmaster

Centpay

CRDT

PravexMoney

Pension Fund

Money transfer

Flexcube

PravexMoney+

Old branch applications

KIEV LEFT

May rollout

TODAY

Pravex Telegraph

Transmaster*

After May rollout

Transmaster

Centpay

Money transfer

Flexcube

PravexMoney+

Flexcube

PravexMoney+

* Primary access to Card operations front end through PM+; Transmaster remains in 2nd level / back end

Unified Centpay & Money transfer

Centpay

Money transfer

Transmaster*

UNDER PLANNING

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Migration strategy 1/3 – Customer Information File (CIF) CIF

OPER ACC&REP

AS IT IS

2 CIFs after decommission of Legacy Systems: Core Banking (Flexcube, PravexMoney+) Cards (Transmaster) “CIF master”, possible first step

of a future CRM system

2 CIF Master Files

CIF Master “Data Warehouse”

Flexcube CIF

Transmaster CIF

AS IT WAS

9 CIFs (1 for each legacy system) “CIF Master” custom developed,

which can operate also as a client data warehouse

9 CIF Master Files

CIF Master “Data Warehouse”

Legacy Systems (9 CIFs)

COEXISTENCE

10 CIFs = 9 Legacy Systems CIFs + 1 Flexcube CIF

“CIF master” data warehouse will be used as the client data source for migration

Flexcube CIF

10 CIF Master Files

CIF Master “Data Warehouse”

Legacy Systems (9CIFs)

New System (1CIF)

deduplication, cleansing,…

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Migration strategy 2/3 – Operational Systems CIF

OPER ACC&REP

AS IT WAS

Operations and processes are managed by different systems

9 Operational systems

COEXISTENCE

Operations and processes managed in both systems (legacy and new)

Incoming and Intrabank payments through enhanced routing component

10 Operational systems

Flexcube

Transmaster

migrated branches NOT migrated branches

Other Legacy

systems

Link between Cards and

Current Accounts

AS IT IS

Operations and processes are managed by Flexcube, except: Cards (Transmaster) Utilities payment, pension funds,

money transfer, under the front end named Pravex Money+

3 Operational systems

Flexcube

Transmaster

Other Legacy systems

Link between Cards and

Current Accounts

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Migration strategy 3/3 – Accounting & Reporting Systems

AS IT WAS

Current GL system (Core ABS)

Current GL system (Core ABS)

Old System

CIF OPER

ACC&REP

AS IT IS

New accounting system (Profix GL) becomes the master of Accounting for overall Bank

New accounting system (ProFIX GL)

Flexcube GL

Accounting Engine

Profix GL

New System

ACCOUNTING

REPORTING

COEXISTENCE

Migrated branch: Flexcube/AE/ProFIX Non migrated branch: Core ABS Overall Bank (master): Core ABS

Current GL system (Core ABS)

Core ABS GL

Flexcube GL

Accounting Engine

Profix GL

Old System New System

Core ABS GL

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International Portability of “Constellations Ukraine” framework

FlexCube base (CIF, GL)

CASA

TD

RL

LO

RP

RT

PC FT

SI

EMS

Direct Banking (retail and corporate)

Existing Applications •Cards •Utility •Money tran.

Lega

cy

Gat

eway

Acc

ount

ing

Eng

ine

General Ledger

Reporting to National

Bank Ukraine

SEP payments

•AML Norkom Corporate modules

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Existing Applications

Local GL and Reporting

Bank 3

Existing Applications

Local GL and Reporting

Bank 2

International Portability of “Constellations Ukraine” framework

Corporate modules

FlexCube

Existing Applications

Local GL and Reporting

Bank 1

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Infrastucture – the concept of dynamic services

Constellations Ukraine Steering Committee #002

Our ICT resources: overcapacity or scalability?

Conventional solution

Res

ourc

es

Months

Always designed to handle peak load

Idle resources

Actual demand

1 2

Too slow 3

Expected demand

Dynamic Services: use what you need, pay for what you use

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Dynamic services: who can provide for them?

Prerequisites of Dynamic Services They require competence and proven experience

They work better with many environments and more than 1 customer (resources sharing)

Can we satisfy this? We, Pravex, cannot do it directly, but we have two options:

internally, with ISP Group Services

externally, with a facility management provider like IBM, HP, Oracle/SUN

We have several environments (11), and potentially we are the first of several customers. If we do not develop these logics from the beginning, it will be hard to change in the future

Production Performance

2012

Traini ng Gold Develop.

2010

Parma

???

Ukraine

Integr. Migration Test 1 Test 2 UAT Migration

2011

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The Services’ stack

Middleware (dbms Oracle, web services, reporting) Infrastructure Outsourcing

CA/SA TD PC FT Profix Legacy AE Pravex Oracle Accenture

Application Management

Datacenter Implemented in Ukraine for Pravex needs with

facilities Management and SPOC (single point of contacts)

Empty shell (typical drivers sqm, power, cooling)

Rack and Cabling (typical drivers lan ports) Hosting DataGroup DeNovo

Hardware (CPU/Core, Storage/TB, DC Lan - firewall, Switches)

OS (Unix, Linus, Win) and System Management Facility Management

IBM, Oracle/SUN