analysis: system selection


IBS Journal November 2015


Define Needs 1


Define requirements that focus on key Islamic products and processes


• •


End-to-End Functional Requirements


Islamic Assets and Liabilities


• Criticality Assignment to Requirements


Determine Shortlist 2


Determine and shortlist vendors for deep dive evaluation


• Global and Regional Experience


• Initial Fitment to Needs


• Conventional/Islamic Compliance


Deep Dive Evaluation 3


Evaluate the vendor solution based on requirements


• Proof of Concepts •


Functional, Technical and Supplier Evaluation


• Resultant Ranking


Delve in the Details 4


Contractual commitment and TCO are key consideration areas


• Total Cost of Ownership • Contractual Flexibility •


Supplier Commitment


Each of the above scenarios bring dif-


ferent constraints and requirements, both from a functional architecture and co-exist- ence of multiple solutions, and the techni- cal implications where different platforms would need to interface, especially where the bank is having both a conventional and Islamic offering. In addition to the functional and technical qualifications, the initial short- list would need to be determined based on the kind of regional presence, successful ref- erences with similar banks and the overall comfort that the bank can draw.


3. Deep-dive evaluation


Invariably, one would find most of the RFP requirements are claimed to be met by each of the solutions in the market. Validating a vendor’s claim is both an art and a science. One has to be clear on what you want to see, or you would end up see-


About the author


ing what the vendor would like to show! Remember, demonstrating the solution features is the daily job of the pre-sales team of the supplier, but is almost a once- a-decade event for a bank! Typically, four to five day reviews per solution would be adequate for a reasonable understanding, and the degree of conformance to the claim made on feature availability. While evaluating the features on both asset and liability products are important, the focus and emphasis in a typical Islam- ic system evaluation tends to get more skewed on the construct of the asset prod- ucts, as they generally get to be more com- plex and bank specific, driven by respec- tive Shari’ah principles. Typical Islamic products functionality that are critical in an evaluation include murabaha, ijarah, istisnaa, musharaka, mudarabah, tawaruq and salem, among others. Islamic liability products including wakala, profit calcula- tion and distribution methods (pool / fund based) and Islamic trade finance and treas- ury features also have their unique attrib- utes that need to be evaluated. Another important validation would also include compliance to AAOFI (Accounting and Auditing Organisation for Islamic Financial Institutions) standards that are adopted by most Islamic banks. Just as the functionality of the solu-


tion is critical, it would also be important to validate the technology platform and the architecture of the solution carefully. Typical parameters for an evaluation would include system design, performance and scalability, flexibility for future product development, security, data integrity, inte- gration capabilities and user interface. Additionally, a good evaluation should


V Ramkumar is a Partner at Cedar Management Consulting International LLC. Ram has over 20 years of strategic and technology transformation experience. He can be reached at v.ramkumar@ cedar-consulting.com


also consider the supplier organisation and its financial strength, global and regional experience, implementation track record, kind of support provided and the overall long-term outlook as evidence of its track record. An evaluation ranking should be based on all the three considerations – func- tional, technical and supplier credentials.


44 © IBS Intelligence 2015 www.ibsintelligence.com


4. Delve into the details – contractual and commercial


The devil is always in the detail. While a techno-functional evaluation would help determine and rank the top two or three- best-fit vendors, the final fitment choice is best made based on the supplier who makes it to the better part of the following three-point checklist:


• Who is best positioned to deliver a smooth implementation? This is a func- tion of the quality of the project plan, the degree of customisation effort, and most importantly the relevant experience as evidenced by the team proposed. Having skilled professionals with deep Islamic banking understand- ing is a critical success factor.


• Who is willing to make the right con- tractual commitment? This is critical. Suppliers who are too rigid about their contractual terms and statement of work are equally challenging as those who may be too flexible and bend backwards!


• Who has the most effective ‘total cost of ownership’? The pricing of a core banking solution is generally not just about the licence, customisation or implementation cost. It is also about the maintenance over the next five years, the indirect costs of hardware and other third party solutions that need to be in place to use this solution.


Even after you have completed all of


the above, the one important factor that would help you make the final decision is the commitment and sponsorship at the senior most levels of the supplier organi- sation. At the end of the day, what matters to the management is what matters to the rest of the organisation. It’s important that the project is of high importance to the CEO of the supplier organisation – and that does matter!


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