1

Global Core Banking Solutions

for Large Banks
P R O F I L E : S A P F O R B A N KI N G

This authorized reprint contains material excerpted from the Celent report:
Global Core Banking Solutions for Large Banks: The Heart of a Bank (May 2006)

The full report is 62 pages long and contains an overview and profiles of ten vendor solutions,
including SAP. This report was not sponsored by SAP in any way. This reprint was prepared
specifically for SAP, but the analysis presented has not been changed in any way from that pre-
sented in the full report.

www.celent.com
MAY 2006

Bart Narter
bnarter@celent.com TABLE OF CONTENTS

EXECUTIVE SUMMARY .................. 3

INTRODUCTION ........................... 4

CELENT’S ABCD ANALYSIS ........... 7

S A P F O R B A N K I N G . . . . . . . . . . . . . . . . . . . . . 12

Celent O B J E C T I V I T Y A N D M E T H O D O L O G Y 16
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Boston, Massachusetts 02116
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Fax: +1.617.262.3121
Email: info@celent.com

www.celent.com

© 2006, Celent, LLC. Any reproduction of this report by any means is strictly prohibited.
Excerpted from Core Banking Solutions for Large Banks MAY 2006
3

EXECUTIVE SUMMARY

Core banking systems are the heart of a bank. All transactions must move through these
systems, which, at an absolute minimum, must remain up and responsive during business
hours. Increasingly, these systems are being asked to be running 24x7 to support Internet
banking, global operations, and real time transactions via ATM, Internet, phone, and debit
card. If the heart stops, the bank is out of business.

Many core systems are old and suffering from the equivalent of high cholesterol, with
communications between the core and other systems clogging with lots of old technology.
Some of the older solutions are going for an “angioplasty,” such as an SOA wrapper. Others
are investing less, hoping the heart attack never comes. All of the older solutions are
benefiting from the fact that no one wants a “heart transplant” unless absolutely necessary.

Modern systems are promising the flexibility and agility that come with youth. In this report,
Celent examines the solutions for large banks, looking at some old solutions and some new
ones.

While many of the largest banks are running homegrown solutions, they are taking another
look at solutions from vendors as their old systems show the strain of many years of
maintenance rather than replacement. We look at these various solutions using Celent’s
ABCD Analysis. Celent also compares benchmark figures across vendors. Not surprisingly,
the vendors that score highest on advanced technology also have the highest benchmarks. Of
note is the fact that the majority of the top solutions come from outside the US.

The majority of the report consists of more detailed examinations of each vendor solution
with statistics and comments on each vendor’s strengths and weaknesses. This report is the
second in a series on core banking. The first report was Overcoming the Fear Factor: Migrating
Core Banking Systems, April 2006.

Subsequent reports in this series will include:

• Core Banking Solutions for Midsize Banks

• Core Banking Solutions for Small Banks

• Core Banking: A Global Perspective

• Core Lending Systems

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Excerpted from Core Banking Solutions for Large Banks MAY 2006
4

INTRODUCTION

S I Z E C A T E G O R I E S O F S O L U T I O N S

Celent has broken the core banking market into three segments. As with any market
segmentation, stark divisions are necessary, but the reality is a gradient. We have defined core
banking solutions for large banks as those where more than 20% of the banks using the
solution have more than US$20 billion in assets. These platforms are typically running on a
mainframe or Unix, are extremely customizable, and are designed first and foremost for
scalability. They will be best of breed for their silo and may have a family of best of breed
solutions. A number of vendors have relatively few bank clients in this category, but these
banks represent a large proportion of their total revenue. Since bank count is much easier to
verify than revenue, Celent has decided to use the former metric. Please note that a vendor
with only 10% of its customers in the largest category may have 50% of its revenue in this
category. Nevertheless, a vendor with 40% of its customers in this category clearly has a
stronger focus on the largest banks.

Core banking solutions for small banks are those solutions where more than 80% of the
banks using them have less than US$1 billion in assets. On an in-house product, these
solutions will tend to be based on Windows, Unix, or the iSeries, and will be covering virtually
all the activities of a bank as a universal banking solution. Application service providers
serving this market may run on mainframes.

Solutions for midsize banks tend to run on Unix or mainframe. As all of these solutions
become more mature and platforms become more powerful, the solutions tend to move
upmarket, growing with their customers. Solutions for small banks are selling into banks of
over US$1 billion, and solutions for midsize banks are selling into banks of over $20 billion.

SP E N D I N G F O R E C A S TS

Celent estimates the external spending on packaged software for the top 200 banks in the
world to be approximately US$2.2 billion in 2006, with increases to US$2.6 billion by 2008, as
shown in Figure 1. Europe leads spending here. European banks tend to have stronger IT
organizations that can drive for and budget infrastructure projects without the full
sponsorship of the lines of business. There are about twice as many Western European banks
among the top 200 global banks as there are North American or Asia Pacific banks. This is
reflected in the larger size of European bank spending. Western European banks are moving
into Eastern Europe and are consolidating and upgrading IT infrastructure, which is
generating incrementally more spending in this area, as shown in the increases in spending
over time.

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Excerpted from Core Banking Solutions for Large Banks MAY 2006
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In Asia Pacific, Celent sees local banks upgrading from legacy systems in order to compete
against either foreign entrants or aggressive domestic banks. The strong growth in many of
these economies (India and China) is driving investment in modern banking systems.

Figure 1: External Spending on Core Deposit Systems Is Gently Increasing

$3,000

$2,500

$2,000
US$ millions

Other
APAC
$1,500
Europe
North America

$1,000

$500

$0
2006 2007 2008

Source: Vendors, Customer interviews, Celent analysis

North America remains stagnant in core banking migrations, and Celent expects this trend to
continue for at least the next few years. The real driver of increased external spending in this
category is core migrations, as shown in Table 2 on page 6. The migration generates license
fees, which are typically five times the maintenance fees, as well as implementation fees,
customization fees, and migration fees.

Celent believes that many banks that have not previously considered external solutions will
begin to do so. When that occurs, external spending on outside core solutions will increase
dramatically. In the meantime, large banks continue to spend huge sums to maintain and
enhance internally developed systems with internal resources. These sums are not reflected in
these spending estimates.

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Excerpted from Core Banking Solutions for Large Banks MAY 2006
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Figure 2: External Spending on Core Deposit Systems Is Driven by New Projects

$3,000

$2,500

$2,000
US$ millions

Maintenance
$1,500
New Project

$1,000

$500

$0
2006 2007 2008

Source: Vendors, Customer interviews, Celent analysis

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Excerpted from Core Banking Solutions for Large Banks MAY 2006
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CELENT’S ABCD ANALYSIS

Celent has developed a framework for evaluating vendors called the Celent ABCD Analysis.
This is a standard representation of a vendor marketplace designed to show at a glance the
relative positions of each vendor in four categories: Advanced technology, Breadth of
functionality, Customer base, and Depth of integration. The factors used to evaluate each
vendor in this report are listed in Table 1.

Table 1: Factors for the ABCD Analysis of Core Banking Solutions

Category Factors Included

Advanced Technology Hardware Platforms

Operating Systems
Databases
Programming Language
Architecture

Breadth of Functionality Teller

Sales Platform
CRM
Internet
IVR
Mobile Phone

Customer base Estimated total assets of banks using

system

Depth of Integration capabilities APIs

XML
SOA

Source: Celent

Table 3 on page 8 positions each vendor on a Cartesian grid, with the horizontal axis
displaying the relative level of advanced technology and the vertical axis displaying the relative
breadth of functionality. The size of the vendor’s customer base is calculated based upon
vendor-reported customer counts in bank asset classes. This is represented by the size of the
bubble, while depth of integration capabilities is represented by color density of the bubble.

The Four Categories. Advanced technology is based on the architecture of the system.
Can it abstract out a given operating system or database? Was the system written in a modern

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Excerpted from Core Banking Solutions for Large Banks MAY 2006
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object-oriented language? Can it be easily modified and then upgraded? As a rule, the

Figure 3: Celent’s ABCD Analysis

BANCS SAP
Kordoba Alnova (inner) (outer)

Customer Base =
Profile Size of bubble
Breadth of Functionality

Depth of
Systematics Fiserv CBS Integration
Capability
Top Quartile
2nd Quartile
3rd Quartile
TietoEnator CBS 4th Quartile
Hogan

Infopoint

Advanced Technology

Source: Vendors, customer interviews, Celent analysis

products that were built more recently have a better score on advanced technology and depth
of integration. Systems that are built on mainframes using COBOL are typically much more
difficult to port to other operating systems, databases, etc. Hogan Systems scored relatively
well here based on its umbrella architecture.

Breadth of functionality looked at the various front end systems that were pre-integrated with
the system. Does the solution go from back to front, or are customers required to integrate
their own best of breed front ends?

Customer base was estimated based on the number of customers served as well as the
breakdown of customers by assets. A vendor that has 20 banks with US$2 billion in assets
isn’t as large as a vendor who has 20 banks with US$20 billion in assets. Celent estimated an
average asset size for each asset bucket in the vendor questionnaire and estimated total assets
of customers using the core system.

Depth of integration capability is another metric that tends to correlate with the age of the
system. Mainframe systems written in COBOL using CICS are generally designed to be batch
number crunchers, not real time communicators. Fidelity National Information Services (FIS)

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Excerpted from Core Banking Solutions for Large Banks MAY 2006
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Systematics scored relatively well here due to the fact that the company has tied FIS Xpress
Interrogation Solutions Suite to Systematics and effectively deployed it at a large bank. Please
see the Celent report Overcoming the Fear Factor: Migrating Core Banking Systems, April 2006.
Fiserv CBS also scored relatively well given that it is running on iSeries platform due to the
fact that both Fiserv Communicator and Fiserv Aperio provide integration to its core.

How to Value the Categories. Different customers will value the different attributes
with varying weights. Some may want best of breed front ends and not value breadth of
functionality. For others that live by the motto, “One hand to shake, one arm to break,” this
metric is valuable.

Some banks may prefer to work with a smaller company to get more attention, and not value
size of customer base. Others may want a company with a very large installed base to
guarantee viability of the platform. The conclusion is that there is no single solution that is
best for every bank. Banks must examine their priorities against Celent’s evaluation criteria.

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Excerpted from Core Banking Solutions for Large Banks MAY 2006
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Table 2 summarizes which hardware platforms and which databases are supported by each
system. The pattern of dots tells a story. In the VSAM (Virtual Storage Access Method)
column, we find the oldest systems: Hogan, Systematics, and Infopoint. Hogan and Infopoint
have moved to support DB2 as well, but don’t find many customers moving in this direction.
KORDOBA also fits in this category, except it runs on Siemens mainframes with a Siemens
SESAM database.

On the other hand, one finds the more modern (or modernized) systems that have been
abstracted away from the operating system and database: Alnova, SAP and BANCS. These
systems support multiple operating systems and databases. The two remaining systems are
CBS and Profile. Profile offers customers a choice of various flavors of Unix, including
Linux. For those who require a mainframe platform, FIS can offer other solutions apart from
Profile. Fiserv CBS is built upon the iSeries, which has a strong following among midtier
banks.

Table 2: Hardware Platforms and Databases of Solutions

Hardware Platform Supported Databases Supported
Core
Banking
Systems Win- SQL Propri
Mainframe Unix VSAM DB2 Oracle
dows Server -etary

Alnova „ „ „ „ „

Hogan „ „ „

KORDOBA Siemens „

Profile „ „ „

Systematics „ „

CBS iSeries „

SAP „ „ „ „ „ „ „

BANCS „ „ „ „ „ „

TietoEnator „ „ „ „

Infopoint „ „ „

Source: Vendors

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Excerpted from Core Banking Solutions for Large Banks MAY 2006
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One of the greatest concerns of the largest banks is scalability. No one wants to be forced to
undertake the costly migration of a core system because they have outgrown their old one. In
Table 3, we see that these systems can handle massive volume, with all but the slowest system
benchmarking at over 1,000 transactions per second (TPS). It is interesting to note that
although we did not take TPS into account for the Advanced technology portion of the
ABCD analysis, there is a strong correlation. SAP and BANCS dominate this contest with
2,700 TPS on 50 million accounts and 2,500 TPS on 200 million accounts, respectively.
Profile and Alnova are next in line with 2,000 TPS on 1 million accounts and 1,957 TPS,
respectively. Celent has resisted the urge to chart out these TPS metrics because they are not
pure apples to apples, differing across number of accounts, hardware environment, etc. For
more details, please see the next section, which discusses each solution in depth.

Table 3: Most of These Systems Handle Thousands of TPS.

Core Benchmarks
Banking
Systems

Alnova 1,957 “business” TPS on zSeries; 250 on .NET

Hogan >1,500 TPS on 25 million accounts in production

KORDOBA 5.5 million customers and 5.8 million accounts in production

Profile 2,000 TPS and 8,000 batch TPS on 1 million accounts

16 million accounts in production

Systematics 1,392 TPS on 32 million accounts

ICBS 1,195 TPS on 7.7 million accounts

SAP 2,700 TPS on 50 million accounts

BANCS 2,500 TPS on 200 million accounts

17 million transactions per day on 60 million accounts in production

TietoEnator 350 TPS on Sysplex system

Source: Vendors

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Excerpted from Core Banking Solutions for Large Banks MAY 2006
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SAP FOR BANKING

SAP has won key customers in Europe and Asia with its SAP for Banking product. It has a
modern componentized architecture with four tiers: database, application, Web services, and
presentation layers built on the SAP NetWeaver platform. The product is SOA-compliant
through the SAP Enterprise Services Architecture (ESA).

Table 4: SAP for Banking Functional Information

SAP for Banking

Product Name(s) SAP for Banking, Transactional Banking

Current Release October 2005

Next Release October 2006

Hardware Supported IBM pSeries, iSeries, zSeries, Sunfire, HP Unix, Dell,

Fujitsu and Compaq Unix servers, Windows servers

Operating Systems Supported IBM AIX, OS/400, z/OS; HP-UX, Solaris, Linux,
Compaq Tru 64, Windows Server 2000 and 2003

Databases Supported Oracle up to 10g, DB2 for z/OS and OS/400,

Microsoft SQL Server, Informix, SAP database

Middleware Supported SAP NetWeaver, IBM WebSphere, WebSphere MQ,

Tibco, BEA WebLogic, Web Methods, J2EE, .NET.

ASP vs. On-Premise 10% ASP (with Accenture, CSC, IBM) vs. 90% on
premise

Retail vs. Wholesale (may sum > 100%) 80% vs. 40% (20% both)

Multi-Lingual Yes

Multi-Currency Yes

Languages Supported Out of the Box English, Spanish, French, German, Chinese and 23
other languages

CRM Functionality Customer Oriented Banking, Account Origination

Teller Alnova AMTA, Hartter JKassa

Sales Platform SAP Banking Advisory Portal, Meridea

Internet Meridea

IVR Alcatel

Mobile Phone Meridea

Interface to Core Windows thick clients, Browser Clients, Smart Cli-

ents, Java clients, API

Source: SAP

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Excerpted from Core Banking Solutions for Large Banks MAY 2006
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Table 4: SAP for Banking Functional Information

SAP for Banking

Batch + Memo Post vs. Real Time Transactions Both

Benchmarking 2,700 TPS on 50 million accounts.

Largest bank US$1,350 billion (UBS)

Source: SAP

As befits a company as large as SAP, the systems integrators are from the A list: Accenture,
IBM, CapGemini, CSC, Atos Origin. The company also has an A list of technology partners:
IBM, HP, Microsoft, and Unisys. SAP and Accenture have announced a joint go-to-market
strategy, which is discussed in the Accenture portion of this report (see page 12). Software
partners include TXS (syndication securitization), Hartter (teller), Streamserve (customer
information presentment), and Meridea (sales platform, Internet banking).

Table 5: SAP for Banking Customer-Related Information

SAP for Banking

Number of Financial Institutions Using Globally Over 100 in 28 countries

Three Largest Banks Using Solution UBS $1,800 billion in assets

Other Reference Customers UBS, Züricher Kantonalbank (ZKB), Standard Bank

(South Africa), ABSA (South Africa), Fortis
(Benelux), Itau (Brazil), UkrSib, HSH Nordbank,
Deutsche Postbank, Minsheng Bank (China)

Key Wins in Past 18 Months Standard Bank, World Bank, Minsheng Bank, Fortis
Lease, Toyota Financial Services

Pricing Based Upon

Typical Implementation Fees Varies from 28% to 66% of license fee

Typical Time Frame for Implementations

— $5 to $20 billion in assets 6 to 12 months

— $20 to $100 billion in assets 9 to 15 months (regional / global rollout)

— Over $100 billion in assets 12 to 18 months (regional / global rollout)

Maintenance Fees as a Percentage of License Fees 17%

Source: SAP

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Excerpted from Core Banking Solutions for Large Banks MAY 2006
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While SAP has deployed across a whole spectrum of banks, it has the vast majority of its
revenue in the largest banks. It runs on the SAP NetWeaver infrastructure, which is included

Figure 4: SAP for Banking Is Installed Across the Full Range of Bank Sizes

30

25

20
Percent of banks

15

10

0
<$1 $1-5 $5-20 $20-100 >$100
Assets US$ billions

Source: SAP

in the SAP for Banking offering. Making the decision to deploy an SAP infrastructure is not a
trivial one if the institution is already committed to another vendor for technology
infrastructure. While some claim that the German market is unique and must have its own
core systems, SAP has disproved that theory by developing a solution for Deutsche Postbank
that is being deployed in many other countries.

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Excerpted from Core Banking Solutions for Large Banks MAY 2006
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SAP is typically on the short list of most large deals coming across the pike in Europe, as
shown in Figure 5. The company has yet to achieve such top of mind share in the North
American market.

Figure 5: SAP Is Strongest in Europe, Where It Is Based

Other North America

APAC

Europe

Source: SAP

Summary. SAP for Banking has been designed over the past 10 years, with an appropriately
modern architecture. SAP has been aggressively building out its functionality and is benefiting
from the strong brand recognition in Europe. The company can claim many key wins in this
market.

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Excerpted from Core Banking Solutions for Large Banks MAY 2006
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OBJECTIVITY AND METHODOLOGY

Objectivity. Celent is an independent, privately owned research and consulting firm that
provides technology and business strategy advice to the financial services industry. Celent
provides unbiased insight into industry trends, competitors in the market, and market sizes.
Celent’s research reports are written by in-house analysts with extensive experience at a
variety of top global financial services firms, technology vendors, and consultancies.

Celent’s research clients include financial institutions, vendors, and consulting firms.
Occasionally, our reports evaluate clients who are solution providers, along with providers
with whom Celent does not have a relationship. Celent evaluates all vendors using the same
criteria, whether or not they use our research and advisory services. Vendors and financial
institutions profiled in our reports are given the opportunity to correct factual errors prior to
publication, but cannot influence Celent’s analysis or opinions of the products, solutions, or
strategies we are evaluating. Firms may not purchase or influence positive exposure.

Methodology. The findings and analyses in Celent’s reports reflect our analysts’ considered
opinions and research of market trends, sizes, and participants. Celent analysts use the
research methodology detailed below.

Research Phase Production Phase

Research Phase Production Phase
• Analyst • Regulatory • Vendor • Verification • Market • Publication
experience studies demos & of data analysis of report
• Client • Academic briefings • Follow-up • Vendor • Client
feedback studies • Interviews interviews evaluations feedback
• Conferences • Industry with financial • Analysis of • Spending • Continual
organization institutions survey data analysis coverage and
studies • Interviews • Case studies updating
• Third-party with other
commercial contacts, e.g.,
information regulators,
sources academics
• Surveys

Topic
Topic Secondary
Secondary Primary
Primary Report
Report Feedback
Feedback
Synthesis
Synthesis
Identification
Identification Research
Research Research
Research Generation
Generation &
& Updates
Updates

When citing third-party data or opinions, Celent provides source information. When citing
formal survey results, Celent provides as much information as possible about survey
methodology and participants, within the limits of confidentiality. All other material
appearing in Celent’s reports is created by the analysts and is derived from the sources listed
above and from Celent’s experience. Figures and charts based on this analysis cite Celent as
their source.

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Excerpted from Core Banking Solutions for Large Banks MAY 2006
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ABOUT CELENT

Celent is a research and advisory firm dedicated to helping financial institutions formulate
comprehensive business and technology strategies. Celent publishes reports identifying trends
and best practices in financial services technology, and conducts consulting engagements for
financial institutions looking to use technology to enhance existing business processes or
launch new business strategies. With a team of internationally experienced analysts, Celent is
uniquely positioned to offer strategic advice and market insights on a global basis.

Celent’s research services cover the following six sectors of financial services: Retail Banking,
Wholesale Banking, Retail Securities and Investments, Institutional Securities and
Investments, Life/Health Insurance, and Property/Casualty Insurance.

For inquiries, please visit www.celent.com, email info@celent.com, or contact:

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