Banking & Financial Services White Paper Data warehousing: Its time has come By Cyril Reif, Worldwide Banking Segment Manager Financial Services Industry, Sun Microsystems Using technology to attain a competitive edge has become the business phrase of the 90's. But what does that mean? And what are companies--and banks specifically--actually doing? Simply put, attaining a competitive edge means having the ability to not merely survive change or even manage change; it means thriving on change so you can succeed in today's and tomorrow's ever more volatile marketplace. It means embracing new operating models that deliver unprecedented levels of value to the customer. And it means treating information as a corporate asset that can be easily accessed and shared for the mutual advantage of the banks' own end-users and their customers. Much of the pressure for information that is usable, accessible and real-time is coming from banking customers, who are increasingly insisting on "anytime/anywhere" service. For example, what bank wouldn't want to resolve a customer dispute--say for the amount of a check or a deposit--by sending on-line an actual reproduction of the transaction in question to the customer? While we are not quite there yet, work is underway to combine document management and imaging capabilities into data warehousing applications where image archiving can add value to a range of business processes. Pressure is also mounting from within, as banks react to their own business-critical needs for better information that can truly support their crucial decision-making functions. How can banks satisfy this essential need for strategic information? Through data warehousing, one of the primary enabling technologies being implemented in the banking industry today. Simply put, data warehousing enables banking enterprises to gain access to "better" information and thus make the right product decisions to become more competitive and get closer to the customer. Not a new concept, data warehousing has been bandied about, in different forms, for a number of years and tried sporadically, with mixed results. This is primarily because data was simply replicated from operational systems, loaded into separate files and pronounced accessible--all within the constrained and typically non-user-friendly legacy environment. Open systems and data warehousing What has breathed new life into data warehousing? The advent of distributed, open client-server architectures and the willingness of banks to embrace them has caused data warehousing to emerge as a business-critical success factor. From our perspective at Sun, this emergence is quite logical. The beauty of an open systems client-server environment is that its connectivity, interoperability and scalability allow banks to develop new and more flexible systems to meet end-user needs, while simultaneously interfacing with existing legacy systems. And these attributes have strong implications for the concept of data warehousing. They allow a data warehouse to be implemented--more cost-effectively and more productively--adjacent to the legacy environment without disrupting or interfering with the bank's traditional operational systems. They also allow banks to utilize their existing technology for operational functions while implementing a new enabler such as data warehousing. And, because a key aspect of an open client-server-based data warehouse is its flexibility and scalability, these attributes allow banks to add servers as required, thus avoiding large upfront investments in unused capacity. How can this technology help banks attain that sought after competitive advantage with its customers? First, let's look at what a data warehouse is. Conceptually, it is a very broad-based capability that essentially transforms operational data into business information and helps banks address a number of different and complex business decision and service challenges. Technically, a data warehouse is a central repository made up of operational and transactional data that has been brought together from the different units within an enterprise, as well as external market data, and then is edited, normalized, balanced and reconciled. Focused specifically on financial analysis and decision support, a data warehouse facilitates access to customer, product, transaction, or market data information across any desired parameter, for any business unit, or the entire enterprise. This capability is in marked contrast to earlier methods that essentially locked up customer data in what have been called "data jailhouses"--databases that evolved as discrete and independent subsystems with no ability to supply a consolidated view of the customer or what services and products correlate across the customer base. Improving decision-support, customer management The ability of a data warehouse to consolidate and combine information from across the enterprise has created a virtual renaissance in decision-support and customer management initiatives. Banks now can get the data and analysis they need in such crucial areas as profitability, risk management and market analysis. For example, users can obtain an immediate and precise snapshot of their institution's position, understand the risks throughout their organization, ranging from individual transactions to an entire portfolio, and react quickly to market and regulatory demands. In addition, the benefits of data warehousing for customer management and marketing are enormous. By being able to look at all accounts and information associated with an individual, the bank finally has the capability to truly understand--and service--the customer better. In addition, the whole concept of gathering large amounts of information on everything there is to know about the customer will enable banks to spot when the customer is at certain life stages and provide what are sometimes called "anticipatory services." In other words, banks will be able to predict customer needs even before the customer recognizes that need. Banks will know that the customer's car is four years old so they should suggest an auto loan to help the customer get that next car faster. A newborn child gives the banks reason to suggest a higher education program. The more information available about a customer, the better the bank can predict the next potential transaction and provide more services through cross selling. This type of information is not going to come from an operational customer information file; only an open client server data warehousing environment which also includes additional external information, such as marketplace demographics and potential customers, can provide it. Process, not a product One crucial point that is often misunderstood about data warehousing is that it is not a static product but a dynamic and constantly changing process--a process that results in the building of the necessary infrastructure required for enterprise-wide information management. As opposed to a product that can be simply bought and installed, a successful data warehouse is really the overall process of transforming operational data into business-critical information. It requires that a bank analyze its information management needs, determine what operational data and external data sources are needed and then employ a rigorous methodology in bringing all the data together and transforming it into usable information. The data warehousing process is evolutionary. Its usefulness and relevancy comes, in great part, from the newness of its information. Thus, the bank will want to continually expand, refine and update it, driven by changing business priorities and market needs. Maintaining the competitive edge When banks ask themselves how to be more competitive--how they can deliver products better and faster to market? How they can service their customers better? How they can target their customer better?--more and more are looking to data warehousing for an answer. As the enabling technology for measuring profitability, managing and analyzing risk, conducting market analysis, and enhancing customer service and marketing initiatives, data warehousing has proven itself to be increasingly critical in supporting and managing the incredibly fast tempo of business change--and in attaining that competitive edge. Sun Microsystems Computer Company (SMCC) is a world leader in the design, manufacture and sale of network computing systems and is a division of Sun Microsystems, Inc. Mr. Reif has the world-wide business development responsibility for the banking segment within Sun's Financial Services Industry Group.
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