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Banking Capabilities drive Application Portfolio Rationalization

Banking Capabilities

In this post, let’s review how banking capabilities drive application portfolio rationalization. Banking capabilities are the foundation of an effective business architecture. As banking business architecture practitioners know, the value of a business capability model extends beyond the core usage scenarios. One of the critical areas that a bank can use a banking capability model is application portfolio rationalization.

Banking is a business where companies have gone through a generational shift in technologies and systems, leaving a legacy environment that is complex. This complexity applies in particular to banks that have passed through a series of mergers and acquisitions over the years. Moreover, a patchwork of newer technologies, without a thorough clean up of legacy systems, has made the situation spiral out of control.

The approaches to application portfolio rationalization have always been a technology-driven approach. It typically involved an analysis of the state of the application on a variety of measures and then making a retire, re-architect, replace, maintain (or equivalent) decisions. While this is still a required step, what is lacking is how does a bank relate to the business and explain the rationale and present the conclusions in a manner that is not esoteric and arcane? So a pure top-down analysis of applications and a decision matrix for rationalization is not sufficient.

A business-centric Approach is centered around banking capabilities:

What is needed is a more business-centric approach, and viola enter the banking business capabilities model. A structurally sound and internally coherent banking business capabilities model will help in including the business or letting business drive the process of application portfolio rationalization.

Seven Steps for using banking business capabilities to drive application portfolio rationalization:

  1. Define a business capabilities model encompassing all of the banking functions
  2. Prioritize the banking business capabilities based on a set of assessment criteria. Typical capability assessment criteria may include strategic importance, underlying business process maturity, level of technology enablement and resource sufficient. Of course, you may customize the assessment parameters.
  3. While business is working on the banking business capabilities model definition and assessment, the technology team should compile an inventory of the applications/systems.
  4. Next, conduct the assessment of applications/systems. The evaluation criteria can span architecture conformance, technical stack, accumulated technical debt, cost of maintenance, and of course cost.
  5. Map the relationship between which application/system supports what capability and to what extent. This footprint (sometimes a toeprint) is a critical Mapping this footprint enables business executives to see the duplication, replication, redundancy, and reduced usage across the portfolio.
  6. The analysis will include a multi-factor weighted average assessment based on individual evaluation of capabilities and applications, the footprint, the technical details to come up with buckets where the applications belong.
  7. Once the application future is determined, the APR team could create a phased sequencing of the rationalization and optimization

Capstera offers a detailed and in-depth Bank Capability Map to help banks get a holistic perspective of what are the retail banking capabilities. The Bank capability map is a set of industry/sector specific capabilities models that Capstera offers.

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