If application integration were major league baseball, the financial services sector would be the equivalent of the bottom-dwelling Tampa Bay Devil Rays.
The industry has built its technical infrastructure from the ground up, including custom applications that perform one specific task. The best way for financial services companies to move up in the standings -- or in their case, integrate customer channels and coordinate customer information across product lines -- is to purchase packaged integration software, according to a Forrester Research report.
Financial companies have other weaknesses when it comes to software integration. They don't have a consistent view of the customer because of these separate applications, which create data silos. Integration is also difficult because it is often an uncoordinated project among departments and branches, said Simon Yates, a senior analyst at Forrester Research. These kinds of data stovepipes keep building, preventing integration.
Most are struggling to integrate all of their legacy applications to give customers a consistently positive experience, regardless of channel, he said. Forrester found that this is difficult given the different technology used for different purposes.
Packaged software is the best answer to financial firms' integration woes, mainly because software constantly changes. "By buying packaged applications, like WebMethods, it doesn't matter what happens to (the legacy applications)," Yates said. "You can plug and play."
It could be impossible to rebuild integration for each application, such as a portfolio risk manager, each time the software changes, he added.
Installing packaged integration software will benefit the bottom line of financial services firms, according to Yates.
"Companies will be able to introduce new financial products more easily," he said. "A bank isn't limited to banking anymore. It can go into insurance." Banks would also be able to form partnerships and integrate their software with their partners, he said.
Customers will also be more inclined to seek answers over the Web, which is cheaper than going to a branch office for the financial firm, he said.
There are two kinds of packaged integration software, and Yates recommended that companies invest in both. Integration servers from Tibco, SeeBeyond, Vitria and WebMethods are the underlying plumbing that connects applications together. Application servers such as IBM's WebSphere, as well as those from iPlanet, Silverstream and Sybase provide a common platform to run applications.
Forrester interviewed 50 IT executives in banking, brokerage and insurance firms. Only 16% of these firms spend more than $20 million each year on software integration, while 58% spend $1 million or less per year.
Overall, financial companies are doing a good job connecting the back end of their operations to the Web, a fair job connecting the back end to the call center and a miserable job connecting branches together, Yates said. These companies need significant investments in software integration applications to unite the channels. For example, a Fleet Boston customer cannot access Quick & Reilly information, even though Quick & Reilly services are offered through Fleet, Yates said.
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