Outsourcing enables a ‘bank in a box’

Private banks’ clients may be used to a full valet service, but now the bankers themselves may be able to hand off their operational pain points to a third party provider. Callatäy & Wouters and Clearstream Services, in collaboration with other partners have rolled out a ‘bank in a box,’ based around C&W’s Thaler banking platform to the Luxembourg-based Nord Europe Private Bank and Dresdner Bank in Belgium.

“Our goal is to have the banker come in in the morning, turn on his computer, just click on the icon to start working on Thaler, just doing his job. He doesn’t care where the servers are; we take care of that,” says Frédéric Stiérnon, country manager for Luxembourg at Callatäy & Wouters. “At the end of the day, when he stops doing his job, we start taking care of all of the end-of-day processes, making sure that for the next day the application will be up and running with all the calculations and processes running during the night.” Thaler is widely used in the Belgian wealth management market and is making inroads into other geographies, including Luxembourg. However, like many of the other core banking systems available for private banks, it is heavyweight and hardware intensive.

On demand model Mr Stiérnon became aware that enterprise IT has, in the wider market, begun to move towards the so-called ‘on-demand model’, where the software vendor becomes a service provider. A number of clients devolve a function to the vendor, which is able to reduce the overall cost by creating economies of scale – the standard outsourcing model. “I was trying to reach the same kind of model for our own platform,” Mr Stiérnon says. “At the same time, Clearstream Services, the IT division of Clearstream Banking were doing the same kind of exercise, saying that they have a strong power in hardware, they have a lot of places for disaster recovery centres, they are experts in databases, in application management, in operations and so on, but they were only working for Clearstream Banking, and they wanted to develop the number of customers they had,” he says. The two companies signed an agreement to co-manage a hosted version of Thaler, using Clearstream Services massive server farms and Callatäy & Wouters’ software.

A third partner, FRS, which provides legal reporting products, was integrated to create a full service. Mr Stiérnon says that Luxembourg, where he and Clearstream are based, was the best market to trial the product due to its high concentration of small and medium-sized banks with between 20 and 80 employees. Many of these companies will have small teams managing their IT, but, given their size and focus, this is inefficient, and non-core to their business.

“They don’t want to pay to have an employee or several employees working in IT, this is not their job,” he says. The first customer for Thaler as a service was Nord Europe Private Bank, a Luxembourg-based subsidiary of Credit Mutuel Nord Europe, which went live in November last year. NEPB was acquired in 2003, and ran on an outsourcing activity internal system. “The idea that we are trying to develop at the moment is to externalise from the bank all the jobs which are not exclusively linked with commercial development and contact with our customers,” says Bernard de Thomaz, CEO of Nord Europe.

“For the moment what we are externalising is principally the bookkeeping of the bank and all the activities directly related to that – official reporting, consolidation, analysis of the portfolios and things like that.” The next task, he adds, will be to outsource the back office through Clearstream and Callatäy & Wouters. The bank may also be looking for an outsourced provider for its CRM systems. Whereas previously there was an IT team responsible for the bank’s legacy system, there is now a three-person team dealing directly with Clearstream, and relaying the business’ needs to the outsourced provider. Other segments of NEPB’s parent, Credit Mutuel in France, outsourced its own IT to a single platform a while ago, and Mr de Thomaz could look to that experience when taking on the outsourcing exercise in Luxembourg.

“In fact,” he says, “when I was appointed here in Nord Europe, this was the first discussion I had with Eric Charpentier [director general of Credit Mutuel Nord Europe]. In some ways, what we are realising in Luxembourg today is the fruit of the experience they had.”

The next client for the Callatäy & Wouters partnership was in Thaler’s home market, in the Belgian operations of Dresdner Bank Luxembourg. Dresdner bought two Belgian wealth managers, Damien Courtens & Cie and Van Moer Santerre & Cie, last year. André Oly, CEO of the Belgian subsidiaries, says that, while the bank does intend to eventually bring all of its local operations onto a single platform, smaller markets, such as Belgium, will not be migrated for some years. The SaaS approach enabled rapid time-to-market and, without associated infrastructure costs, is an effective interim solution.

“We compared a number of existing products on the market against some internal Dresdner systems, and we chose Thaler, mainly because Thaler is the leading product in Belgium, and we thought it could guarantee us a rapid time to market, being completely Belgium-ready,” Mr Oly says. “This is all related to time to market. It wasn’t necessarily the cheapest solution we saw, but definitely one that could meet our expectations in terms of timing.”

The system used in the parent bank in Luxembourg could not be easily reconfigured and rolled out due to its relative complexity. “The business in Luxembourg is much more complex than what we have here in Belgium,” Mr Oly says. “The whole IT architecture is based on the idea that a number of business lines have to be supported on the same platform, which means that there is a central banking system, but for every business line there is a specific system put in place that is being interfaced with everything else, so we have a very complex overall architecture. That is not easy to roll out in other countries because you need to transform all the local aspects.”

“In Belgium, you have two languages to serve – French and Dutch. The Luxembourg systems are largely German We also looked at alternatives, for instance what we use in Dresdner Monaco might have been an alternative, which again was a French system, didn’t have any Dutch and wouldn’t have had the Belgian reporting. So, really,” he adds, “the choice was for the local hero in Belgium. “It’s a trade off between time to market and cost. Obviously it would have been cheaper to take something Dresdner already had, but we would have had to adapt it locally, translate it etc. Here we are talking eight months, whereas otherwise, you would be talking two years.” While interoperability between various local entities is a long term goal for the Dresdner group, it is not a short-term priority.

“The interaction [between entities] is not a business interaction, because in the area of private banking it is really a local business, so there is very little interaction other than standardised Swift exchange for payments. But that is handled in Dresdner on an internal Swift platform,” Mr Oly says. “So in other words, the synergies of using internal systems are only really IT cost synergies, and that is something that Dresdner is pursuing, but not at a pace that would have allowed us to use that in Belgium at this time.” The three largest geographies – Switzerland, UK and Luxembourg – are all moving to a common IT platform.

“The smaller entities such as Monaco, Holland and Belgium will follow,” Mr Oly says, “which means I have at least four or five years before I can rely on the central system.” Mr Oly has access to some Dresdner hardware for non-bank specific systems. “We are using that as far as network, the Microsoft applications, communication, internet presence – all the more standard stuff we use the [infrastructure] of Dresdner Luxembourg,” but once again, that resides in Luxembourg. “We have nothing in Belgium. Which means when we open one branch after another in Belgium – we want to be regionally present – it will all be served from Luxembourg.” Fortunately, with information flowing this direction, the operation does not fall foul of any banking secrecy laws. “It’s not a problem for the Belgian authorities, but it would be a problem for the Swiss or Luxembourg authorities to do it out of Switzerland or Luxembourg.”

Looking for growth

Callatäy & Wouters’ Mr Stiérnon hopes to add new partners to the solution, adding wider functionality or regional specialisations to the current product. “Because a lot of bankers are talking about this business models, we have launched some discussions and also some operations with Odyssey, which proposed with us their solution, mainly oriented to the front office, and Thaler will cover all the back office functionality.”

The two companies have performed a number of integrations in Belgium and Holland in the past, and will now look to create a SaaS version. In the future, he hopes that Thaler as a service will form a base for a number of partnerships, so that clients can pick best-of-breed products to enhance the offering. When this is complete, the solution may attract larger organisations.

“Some of them are proud of their big infrastructure and so on,” Mr Stiérnon says. “But in the end, you have somebody buying shares, selling shares, managing a portfolio, and he doesn’t care what is behind that. He just wants to know what is in the portfolio, what is the constraint of the portfolio, what is the name of the customer, and he will show results to the customer. He doesn’t care about the infrastructure. The application must be a business enabler, but as long as he as all the functionality required to do his job, then he is happy with that.”