Strategic Benefits

Shinsei Bank came into being in 2000 when the Long Term Credit Bank of Japan, which was nationalized by the Government, was sold to a consortium of investors led by Ripplewood. It was renamed Shinsei Bank, which means "new birth". Shinsei's CEO, Masamoto Yashiro put together an ambitious plan which in addition to revamping the commercial banking operations would also focus on introducing new investment banking products and services and a new Retail Bank.

The challenge for Chairman Yashiro was to get the organization ready with the tools to execute his vision for its future. He had set very aggressive timelines for this work to be completed. Moreover since this was a bank with limited financial resources, the work had to be done at a very low cost.

In 2000 Dhananjaya ("Jay") Dvivedi joined Shinsei Bank as their new CIO. Chairman Yashiro assigned him the task to transform the entire foundation of the bank and build the new capability needed. This was a daunting challenge. Jay's task was compounded by the fact that as a bank, Shinsei was subject to tight banking regulations. Moreover it was an operating "live" bank with customers and daily operations. He had to devise an approach that would preserve the 50-year history of the bank and ensure that while all the work was being done there was no impact on the customers or staff. To accomplish this Jay brought a new innovative approach to IT.

In this approach Jay focused on breaking the problem down into parts and applied standard off-the-shelf components to each part. All components used became a part of the "kit of parts" and he focused on reusing them again and again. If for any part there was no available component in the kit, then and only then could a new element be chosen. The criterion was the same; it should be off the shelf and built to standards. His focus was to ensure that everything was built using a few clear standards. All transport of data, voice or video was done using the public Internet. Shinsei connects all its locations, ATMs etc. only using the public Internet; it uses no dedicated or point-to-point network connections. This greatly simplified execution and speeded it up removing the need to wait for dedicated connections to be setup. He assumed that anything the team did would fail and he worked to identify the many ways a component could fail and built in strategies to mitigate the failure

The Business Benefits

Lower Investments Needed
In 2000, when Shinsei Bank was making its choices an option it had was to follow the conventional approach and the offer from a leading global supplier was a cost of US$ 400 mm. This did not include all the investments needed; it covered only the software costs. The actual investment would have been much higher, moreover there was no displacement of any of the existing costs, the new was an additional layer. In contrast, following these unique methods the total cost was only US$ 60 mm and much of this was funded out of current costs that were eliminated

Dramatically Lower operating costs
The approach also results in dramatically lower operating costs. Conventional systems with their higher initial investment require 20% or more in annual recurring maintenance expense. In the money needed to just maintain a conventional system this approach can deliver annual platform refreshes and new capability. People with skill sets to support standard off the shelf components and small sized machines are available widely and the cost of supporting the systems is dramatically lower as compared to conventional mainframe-based machines. Cost of technology refresh is cost of components like Dell and not a new mainframe machine.

Saves time, gives flexibility
Use of standard components reduces the time needed for deployment. Since these are readily available they can be deployed rapidly. The ability to reuse components means that only specific gaps need to be built for and this too reduces the time needed to deliver specific capability. In Shinsei's case the time specified by suppliers to deploy a conventional solution was four years. By following the methodology they used, the entire transformation of IT was completed in less than one year. New product introductions can be done in 3-4 months as compared to 1- 2 years needed by conventional methods and can be done repeatedly

IT Empowers Businesses
Enterprises can get the flexibility & ability to respond to market/business needs rapidly. It can scale up support needed more rapidly as compared to conventional systems that require specialists. By following this methodology changes needed are made easily and rapidly giving business the ability to introduce new products much faster as compared to competition

Businesses get pricing power: low cost and speed to market gives business a unique pricing power and the ability to set the rules in the market place

Benefits for customers
Shinsei offers its customers a unique experience delivering high levels of customer satisfaction. It altered the customer's expectation from banks in Japan helping to raise overall standards. Market firsts like free ATM usage and funds transfers have become the standard

Benefits for staff
Systems are designed to present the work and guide people on what work is to be done. This allows staff to work independently with minimal supervision with work being done under machine control. In built control features allow error free operations and high levels of staff confidence.

Operations do not need any specialized staff and this gives the Bank greater flexibility and scalability.

Better Manageability & Control
IT design has embedded controls that allow for error-free operations, removing the need for supervision. Control over all elements including documentation is in-built into the design. Machine-driven bookkeeping with rigorous proofing ensures accurate and up-to-date financial statements. Controls needed for compliance with legal requirements like SOX or Basel II can be embedded eliminating the need for a separate layer to be introduced, which is the common practice. Low staff training time and ability to leverage people with general skills remove the need for specialists. In-built controls allow for rapid scale up on demand without accidents.