HVB Cuts "Spaghetti" with WebSphere

MUNICH--German banking giant HVB Group is to implement a major middleware project this year, having just signed a deal to take IBM’s WebSphere middleware solution.

HVB’s German banking rival, Commerzbank, is also planning to use WebSphere software for its middleware solution, as part of a major outsourcing agreement currently in negotiation with IBM (TTW, Feb 24).

The bank signed the deal with IBM last Monday, March 10, and hopes to have significant parts of the project completed this year, according to Reinhard Eschbach, chief information officer (CIO) of HVB’s corporates and markets business. Eschbach says the bank and IBM are currently in the planning process, which will involve HVB’s architecture, development and data center groups, as well as IBM consultants.

The first stage--developing and testing the infrastructure--is to be completed by the end of April, when the bank will start moving systems to the new environment.

The aim is to replace a "spaghetti" architecture of point-to-point communications among different front-office, risk management, data, limits, accounting and back-office systems that has grown up as the firm’s trading operations have become more complex, officials say. This current architecture was developed by the bank’s IT department, which links different systems by programming each system’s API to all the other systems.

The problem with this, Eschbach says, is that "to make a change to any one system, you have to change the interfaces to all the other systems."

The in-house approach increases the bank’s maintenance costs in terms of people and time spent. Eschbach says that in this area alone, the bank can cut in half its maintenance costs with the new middleware. "Every new release, every change will be easier and cheaper [to implement]," he says.

HVB expects to save money within the first year of using the WebSphere Business Integration suite and the IBMCrossworlds toolset. Eschbach says several projects are already under way where the cost of implementing WebSphere will be less than it would have cost the bank to undertake the maintenance using its current method. These include making the bank’s in-house risk management system available to other locations, eliminating the need for individual connections to the system from each of the firm’s front-end trading applications--Reuters’ Kondor+, Murex and Front (Atlas) Arena--at each location, also reducing errors and exceptions.

HVB chose IBM for its experience, stability, and the ROI it offered, Eschbach says. The bank issued a request for proposal (RFP) last October, and by mid-February narrowed a field of 10 prospective providers to just two. Bank officials decline to name IBMrival.

IBM will provide the solution for HVB’s headquarters in Munich, where the bank’s 650 traders work in equities, foreign exchange (FX), money markets, bonds and derivatives. On top of the middleware layer, IBM will also implement a communication layer to connect the bank’s other locations worldwide.

The New York and Asia trading floors use middleware solutions from SeeBeyond, while London uses a separate, in-house-developed point-to-point system--both of which are expected to remain in place.

IBM officials did not return calls by press time.