FLEXCUBE Implementation Case Study

FLEXCUBE Implementation Case Study April 15 – 16, 2008

Agenda • Benefits of FLEXCUBE introduction • Higher ROI, lower TCO • Program Organization Structure • Milestones and Phases • Summary • Overview of Bank • Reasons Allianz changed their core system • Problems Allianz faced previously • Preliminary Business Requirements • Scope of Implementation • Project Details • Transition Approach • Implementation • Business Model, Business Strategy • Infrastructure Management • Post Production Support • Banking community • Implementation Take-Away

Overview of Bank • Allianz bank is the tenth largest bank in Bulgaria, by assets, and sixth by number of locations. It has a large coverage nationwide and has attracted some of the largest corporate clients (Allianz Holding – the largest financial institution in Bulgaria) as well as over 150000 retail clients. • Size of bank • Asset Size – over 900 Mil Euro • Number of branches – 126 locations, 95 branches defined in FlexCube • Number of customers - 170 000 (of which 20 000 corporate & 150000 retail) • Number of accounts 200 000

Overview of Bank • Products offered by the bank • The full range of products for retail, corporate, treasury, private investors, etc. • A set of different channels for offering bank’s services & products in “real time” – Cards, VISA, MASTER, internet banking – retail & corporate, SMS/e-mail notifications, Mobile phone banking, Scoring, etc. • Reasons for the implementation • Migration from existing platform due to old legacy system being unable to support the banks rapid expansion (doubled, in asset size, in one year) • Existing platform did not support integration with new channels – internet banking, on-line card authorization, mobile phone payments, etc. • Need for a more robust platform and availability of resources for its support and further development. • Need for quicker time for market – fierce competition in a rapidly expanding financial services market. • The bank’s desire to change the bank’s business and operational model from de-centralized to centralized. • Historical Note The old bank system was OSBI, local Bulgarian system developed in the early 90s by a Bulgarian vendor. Allianz was the last bank to retire it.

Reasons Allianz changed their core system • The bank desired to modernize their business model and processes to provide efficient, less time and resource consuming, products and services. • The bank needed a standardized IT platform and infrastructure in line with Allianz Germany IT policies, procedures and requirements • Old legacy system, unable to integrate in real time with satellite systems, Cards, Internet banking, SMS, Mobile phone • Non-scalable solution, unable to handle the increase in usage • Lack of functionality desired, e.g. automatic provisioning, auto loans liquidation, etc • Very slow time to market – new products from 3 to 6 months minimum vs. 3 to 8 weeks currently. • No available resources for system upgrades (the only bank on that system)

Problems Allianz faced previously • Numerous problems, such as: • Inability to integrate with new electronic channels, scoring systems, etc. • Inability to introduce new competitive products to market, such as flexible mortgage, consumer loans, and various deposits • Inability to process in “Real time” card and internet banking transactions • Inability to produce in short time sophisticated reporting and analysis both for internal and external usage

Preliminary Business Requirements • Allianz bank started in early 2006. • Looking for: • Easy integration/interfaces • Depth and breadth of functionality • Quick time to market • Internationally recognized vendor/solution with local presence in BG • Historical Note • Started Oct. 2006 by introducing Online authorization module (developed by Sirma/i-flex, using FlexCube as a master authorization system)

Scope of Implementation Lines of business • Retail • Current Accounts • Savings Accounts • Term Deposits • Retail Loans • Structured Deposits • Cheques • National & International payments, SEPA compliance • Corporate • Trade Finance – LC, LG, Bills, Collections • Corporate Loans • Treasury – FX, MM

Project Details • Core Solution Stack implemented • Our Role • SI involved – Sirma Business Consulting • Partners involved (from i-flex side) – Sirma Business Consulting • Relationship between i-flex, SI, partners and bank – back to back or independent contract • bilateral contracts between Allianz bank and I-Flex, Sirma and I-Flex, and the bank with Sirma • Roles and Responsibilities of different parties • Sirma – system integrator and implementer • I-Flex – technical support and consultancy

Transition Approach • Implementation approach • Big Bang approach with extensive stress testing and three full mock conversions. • The bank was already running on one system and splitting into branches was difficult, splitting of national settlement, central bank reporting, reconciliation and consolidation would have been very difficult and resource hungry. • The same would have prolonged the time for implementation and contradict the bank’s desire for full conversion and re-organization within 12 months.

Implementation • High level time lines for different phases • PWT – 5 weeks – done by Sirma • GAP analysis – 6 weeks – done by Sirma • System initial set-up and parameterization – 14 weeks – done by Sirma • HW sizing and procurement (in parallel) – 13 weeks – done by Sirma and IBM • IT infrastructure and comm. lines upgrade and set-up (in parallel) – 22 weeks – done by Allianz bank • System’s parameter and products testing – 12 weeks – done by Sirma and Allianz bank • Additional set-up and parameterization – 2 weeks – done by Sirma & i-flex • Systems Integration testing (incl. parameters and products) – 6 weeks – done by Sirma, i-flex and Allianz bank • Train the trainers (in parallel) – 4 weeks – done by Sirma • Mock migrations and stress testing – 6 weeks – done by Sirma, i-flex and Allianz bank • End user training (in parallel) – 7 weeks – done by Allianz bank • Post Go-live support – 8 weeks – done by Sirma & i-flex

Implementation • For each phase • Deliverables of the phase – Documents and sign offs for each of the above phases • Resources (from i-flex as well as bank) involved – numbers, types (technical, functional, PM, testers, SME etc) • i-flex technical – 10 man months • Sirma technical – 60 man months • Sirma functional – 80 man months • Sirma PM – 12 man months • Allianz bank PM – 12 man months • Allianz bank full time project team – 36 man months • Allianz bank part time project team – 90 man months • Oversight management strategies used • Project sponsors (bank’s CEO and COO) introduced • Project Steering Committee meeting fortnightly • PRINCE II methodology followed • Any bank specific step • Compliance with Allianz AG, Germany standards • Allianz AG, Germany QA and supervision

Implementation Data Migration • High level steps involved – strategy, data mapping, utility preparation, extraction from legacy to flat file, file to FLEXCUBE, mock runs, testing, etc. • Data migration strategy developed by Sirma & i-flex, approved by Allianz bank • Data mapping conducted by Sirma and approved by Allianz bank • Data upload to FlexCube utilities developed by i-flex and Sirma • Extraction from legacy system executed by legacy system vendor, requirements prepared by Sirma • Data uploads to FlexCube conducted by i-flex and Sirma, verified and approved by Allianz bank • History data – migrated or not? • No migration of history data • Challenges faced – data enrichment, data cleansing etc • Extensive and constant data cleansing, verification and reconciliation conducted together with Sirma and Allianz bank • Large proportion of additional client, loan, collateral data was missing in the core system and had to be gathered for upload to FlexCube

Business Model, Business strategy Program Organization was set up in the bank with 30 sub-projects defined with project teams and responsible parties. Before implementation bank was totally decentralized- each branch was like a subsidiary bank- admin functions, IT, all separate. Defined a new business model and branch model, restructuring and centralizing important functions. Restructuring of all functions were going in parallel for 10-11 months.

Infrastructure Management High level production hardware layout • Type of machines used • IBM P70 series AIX OS, Oracle 10G for database – 6CPU (12 cores) for production, • IBM blade center for application, Windows Server 2003 OS, Flex Host – 2 blades 2CPU 4GB RAM each, Flex Branch – 3 blades 2CPU, 4GB RAM each • Location of different machines • All HW located in Allianz bank Production data center • Network details • An MPLS layer 3 network for all 126 locations connected to main data center with bandwidth ranging from 256Kbps to 1Mbps depending on number of users in each location • MS Active Directory present and MS Exchange throughout the whole bank

Infrastructure Management Responsibilities for infrastructure • Hardware • Sizing – Sirma and IBM • Procurement – Allianz bank and Stone Computers (an IBM authorized reseller) • Setup – IBM and Sirma • Maintenance - IBM • Support – IBM and Allianz bank • Third party software is maintained and supported by the respective software vendor in accordance with the Allianz bank internal rules and procedures • i-flex software (all in compliance with Allianz bank internal IT policy, rules and procedures) • Setup – Sirma • Maintenance - Sirma • Support - Sirma

Post Production Support • Type of Support • Local • Tools used • Help desk system is being used for issue tracking and resolution • Standard support methodology used • Support infrastructure • Temporary access to the Production Environment is granted only for applying patches and new functionalities • Permanent access to Test & Dev. Environments incl. at site and remote • Access to data – only access to Test & Dev environment data • Data patches – Sirma & i-flex were responsible; with temporary access being granted on a “need to have” basis

Post Production Support Methodology used for moving a fix to production – apply to pre-production, test and move A fix or new functionality is first applied in Dev. Environment and tested by us The fix or functionality is then applied in Test Environment by us and tested by the bank After bank’s approval a temporary access to production environment is granted to us for applying the fix/functionality

Banking community • Show cases and visits • Since “Go-live” there has been two site visits by Banc de Brazil, from Brazil and Bank Republic from Azerbaijan • Allianz bank and its management are quite happy with hosting such visits

Implementation Take-Away • What did we do right? • Close tracking • Preventing scope creep • Regular visibility to all stake holders • Daily discussion of issues • A wider consultancy on operational issues and processes and ways to optimize them • A wider support and consultancy for issues outside the project scope but relevant for the overall implementation – IT infrastructure, network set-up, IT processes and procedures • What could we have done differently? • Did not insist on the creation of full time dedicated bank implementation team from the start of the project. The subsequent hand-over of responsibility from us to the bank was longer than desired. • Following from the above, it also took longer for the bank personnel to get accustomed to the new processes and applications • A weak or non-existent marketing and awareness building of Allianz’s success, throughout the wider banking community locally and within the region

Benefits of FLEXCUBE introduction • SEPA compliance • Domestic and International Payments enabled staff reductions and faster and more reliable services to customers • An on-line and timely reporting enabled all levels of management for easy analysis and fast response to market trends and customer’s needs • A range of new products have been introduced and new customer growth rate increased, from 15% to 35%, on a yearly basis • A range of new services introduced such as on-line card authorization, internet banking, and reporting • Customer scoring system interfaced to FlexCube reduced the average time for decision making from 2.5 days to 6 Hours

Higher Return On Investment, Lower Total Cost of Ownership • The bank’s IT department head count was reduced by 42% • The bank’s back office operations department was completely centralized and head count reduced by over 50% • The bank’s front office personnel was relieved from back office duties and entirely focused on sales and customer services • Customer’s information gathered, stored and analyzed has increased by over 70% for retail customers and over 50% for corporate ones

Program Organization Structure Board of Directors Steering Committee Project Director Sirma PM COO Director Retail Director Corporate Director IT Investment Control CEO, ED Program Sponsor Project Management Office Program Director Chief System Integrator ERP Project Sirma Business Consulting Project Streams/Project Teams Other Functions / Governance Risk Management Business Strategy IT and Operations

Roles and Responsibilities Role Responsibilities Steering Committee • Approving and changing the scope of the Program according to the master plan and budget. • Reviewing the regular Program status reports and proposing solutions regarding tasks implementation required by the Director. • Tracking task implementation at the regular Steering Committee meeting where the Director presents the Program progress and the necessary solutions. (incl. proposing solutions) • Making final decision regarding the Program Program Director • Preparing implementation plan (with the Project managers if necessary) • Distributing tasks to the responsible persons • Tracking task implementation during the meetings of the Program • Coordinating different tasks with counterparties, consultants and other external resources • Coordinating obligations and responsibilities with Project Managers • Preparing the Program regular status reports for Steering Committee • Presenting Program status and informing Steering Committee for necessary solutions • Collecting budget status report from line management Project Managers • Preparing implementation plan (with Project team if necessary) • Distributing tasks to the responsible persons • Tracking Project task implementation • Presenting Project status report at the regular Program meetings • Responsible for the approval of all Project products • Presenting all requirements for project changes to the Program Office • Reporting all issues which could not be resolved within the Project • Informing Program Director about all delays of the initial plan deadlines

Roles and Responsibilities Role Responsibilities ProjectMembers • Proposing ideas and expert opinions • Working on tasks defined by Project Manager • Preparing the necessary documents and analysis connected with the Project products Project Management Office • Information Center for all questions regarding the Program • Archiving and renewing Program master plan • Managing processes for task solution, change requests, approval for Project products • Archiving and renewing central registers and documentation regarding issues, change requests, approvals of Project products • Preparing and renewing Project participation list • Reviewing project status reports and preparing Program status report • Organizing and taking minutes at Program and Steering Committee meeting • Providing on time accurate information for forthcoming changes for all employees of the Bank, organizing meetings and preparing newsletters Investment Control • Supporting Program Management with new ideas and proposals for issue solutions and problems • Controlling quality and professional preparation of all Program products • Reviewing the results and products of the Program and proposing approvals

Milestones and PhasesIntroduction of FlexCube

Milestones and PhasesDevelopment of interfaces to the basic bank system

Milestones and PhasesExploitation of Centralized report system Notes : * Sirma responsibility ** Allianz responsibility *** Joint responsibilityofforbothsidesunder the agreement

In Summary This was the first project of its kind, considering its scope and functionality covered. The implementation was almost entirely led and done by SBC, an I-Flex partner, and successfully completed within twelve months.

Contacts Velko Todorov E-mail: velko@sirma.bg Tsvetomir Doskov E-mail: doskov@sirma.bg Web: www.sirmabc.com

FLEXCUBE Implementation Case Study