The date: November 16, 2002. That's the deadline for financial services, banking and securities institutions worldwide to migrate the first set of Society of Worldwide Interbank Financial Telecommunications (SWIFT) message types from the International Standards Organization (ISO) 7775 messaging standard to the new ISO 15022 standard. As this deadline rapidly approaches, many organizations, regardless of size, are questioning how the new standard will unfold and be compatible with not only current information technology (IT) infrastructures, but more importantly, future technology standards such as XML and Web Services.
Why the SWIFT Change?
ISO 15022 is an international standard associated with communication among banking, securities and financial services organizations. This new standard, set forth by the ISO, represents the convergence of multiple standards used by the SWIFT and FIX organizations, to reflect the requirement for increased standardization as these industries move from traditional settlement processes to increasingly automated electronic exchanges.
SWIFT (www.swift.com), the industry-owned cooperative supplying secure messaging services and interface software to financial institutions, is the first to announce their ISO 15022 conformance for organizations leveraging the SWIFT network. On November 16, 2002, SWIFT will cease conducting business with existing ISO 7775 Message Type 5xx (MT5xx) messages and replace them with 38 new ISO 15022 message types, including corporate events, trading, depository receipts, settlement confirmations, settlement instructions and settlement status. Such standards are expected to provide the pathway for increased Straight Through Processing (STP) and Straight Through Exception Processing (STEP) rates within the securities industry. Soon to follow SWIFT's lead are FIX, GSTPA, ISITC, Thomson/DTCC, Omgeo, and DTCC/MBSCC.
SWIFT Technology Changes
Technology is ever evolving and growing, and with certainty will take the ISO 15022 standard to further levels of advanced development. Ultimately, the SWIFT 15022 message format will be superceded by the emerging ISO extensible markup language (XML) standards, and by 2005, SWIFT Standard XML (swiftML) is expected to replace the SWIFT 15022 message formats.
With the ISO 15022 migration having the potential to impact virtually every business in the securities industry, and the necessary insight to realize the changing compliance issues associated with ISO XML and XML Web Service standards, it is in the IT manager's best interest to employ a technology that is readily supportive of the new standards, requirements and platforms, as well as resilient enough to adapt to upcoming future standards. Keeping this key issue in mind, it is imperative for IT managers to take advantage of solutions that provide a one-stop package, fully supportive of XML mapping conditions, to save their organizations on future system rewrites from 7775 MT, 15022 MT, and XML standards.
To achieve business goals - banking, securities and financial services executives need to allocate resources effectively while avoiding integration mistakes. To circumvent common integration mishaps, there are intelligent solutions available to assist in the successful migration from ISO 7775 to ISO 15022 message types, as well as prepare for the development of an advanced Web services strategy.
The "Haves" vs. The "Have-Nots" - Where The "Have-Nots" Win Out
The financial services, banking and securities sectors are all involved in highly critical and extremely confidential data. To manage this information they have extensive networks of critical back-office applications, systems and processes that were designed using the ISO 7775 standard. As the change to the new standard occurs, these organizations must continue to support their current standard, while adopting measures to reach ISO conformity by manipulating existing messages and data formats.
Most organizations have adopted tactical compliance solutions, using a practice as termed by industry analysts, as "hack, map, and wrap." Gartner Group studies from March 2002, reported that 69% of financial institutions are hard-coding the mappings between existing ISO 7775 applications and new ISO 15022 message types - thereby representing the majority or "Haves."
Figure 1 - Application architecture before the conversion, with individual modules emitting and receiving ISO 7775 messages.
Figure 2 - Application architecture after a "hack, map, and wrap". Note the amount of custom integration code needed to use the new messaging types.
The "Have-Nots," comprising of a small 23%, have not implemented the "hack, map, and wrap" approach but rather plan on taking a dictionary-driven approach. Looking at the long-term impacts on organizations implementing the "hack, map, and wrap" methodology, Gartner pointed out in a March 2002 report that "firms adopting a tactical approach to SWIFT standards migration will experience a three times higher total cost of ownership for these and downstream applications, compared to firms adopting a flexible approach incorporating an internal data dictionary."
Figure 3 - The Data Dictionary-driven approach accepts ISO 7775 messages from any application, converts them to ISO 15022 messages, and submits them to the SWIFT network. Incoming ISO 15022 documents are handled in the same way. Code is not modified on a module-by-module basis.
Therefore, implementing a tactical, hard-coded approach will solve impending ISO 15022 compliance issues, but will not support the eventual migration to ISO XML standards. Hence, leaving firms with hard-coded 15022 standards in existing applications to be forced to adopt a strategic direction that includes data dictionary-based mapping.
The 23% of "Have-Nots" cited by Gartner are the true winners in their deployment of a flexible adapter solution - allowing their organization to support a mix of ISO 15022, ISO 7775 and ISO XML message types with long-term benefits. These benefits are seen in direct applicability for straight-through processing, shorter settlement cycles, improved customer service, reduced manual repair costs, reduced application development and maintenance costs and reduced risk.
"Adapting" to XML and Web Services
How did the "Have-Nots" win out? Simple: A transformation engine and appropriate adapters.
Whether built by hand or bought off the shelf, the transformation engine is the most important aspect of this type of solution. It provides message maps that convert information from one message type to another - in other words; it acts as the data dictionary. The transformation engine receives and emits messages using adapters that parse, validate, and convert each message type into an intermediate format such as XML or a Java object.
Commercial products provide pre-defined message maps and code-free adapters, while custom solutions naturally contain whatever code is necessary to define the mappings and form the adapters. With commercial solutions available at reasonable prices, there is little reason to write any code; but regardless of the means taken to get there, the resulting transformation engine isolates existing ISO 7775-based applications from the new ISO 15022 standard. It is essentially an integration hub specialized to manage one specific type of problem.
The integration capabilities of this hub are important because converting from one message type to another isn't always a simple matter of moving information from one field in the input to one field on the output. Some fields exist in one type of document that does not exist in others; therefore, the transformation engine must be able to access information in other applications to fill in the missing pieces.
But when put in these terms, it becomes obvious that this transformation engine, with its ability to access other information assets while isolating message transformation from existing ISO 7775-based applications, is useful for more than single-document conversions. It can become extremely important as organizations adapt the transformation infrastructure to new integration challenges, including ISO 15022 XML, Web Services, and Straight-through Processing (STP).
By recognizing the value that this piece of software provides, IT managers are able to use it in ways that they would otherwise never have dreamed of. For example, if there is a strategy for integrating other applications into the mix - adapters, Web services, Java, and data access methods like ODBC are possibilities - then the transformation engine can update legacy CICS transactions when it receives a SWIFT message. Platform-agnostic Java code can be written in order to provide deployment options including Windows NT/2000 servers, Unix platforms, Linux, IBM iSeries (formerly AS/400), and mainframe servers.
To manage future compliance issues with XML and Web service standards, the transformation engine and must be flexible enough to support a variety of implementation environments, including real-time messaging systems, application servers, XML document exchanges and Web services. In addition to the support factor, these adapters must also be integrated with an XML transformation capacity, where XML is the intermediary message format, allowing for deployment across varying platforms
SWIFT Adaptation to the Web Services Survival Game
The Web services hype cycle is still moving at full steam, promising business users the ability to obtain easy access to information and services, as well as connect remote resources over wide-area networks such as the Internet. Web services will probably never be used for all application interactions, but they are well-positioned for dominance with business-to-business connections. Eventually, therefore, even technologically conservative financial services, banking and securities organizations will need to comply with Web service standards - especially in the areas where they are currently using ISO 7775 and ISO 15022 message formats. As standards change and conducting business moves toward electronic processing, implementing a solution with forward-thinking initiatives will be prove to be vital to business survival. This point brings us back to the "Haves," who by implementing the "hack, map, and wrap" approach, are now left to become the "True Have-Nots" - thereby undergoing further technology expenditures to meet next generation standards.
The chosen solution for ISO 15022 integration should help businesses rapidly create Web services out of existing SWIFT and back-office applications without the need to write custom code - thereby allowing rapid deployment through simple assembly and configuration.
The chosen solution's approach should show the following benefits:
* Reduced Time To Market: ISO 15022 message mappings can be implemented as Web services by reusing existing applications and databases. The Web services support the ability to send XML, ISO 7775, and ISO 15022 messages between applications.
* Reduced Risk: An organization that needs to acquire new language skills, develop new code, or modify existing applications to publish Web services places itself at IT infrastructure risk. Organizations can reduce risk by deploying adapters that are non-intrusive, provide standard Web services interfaces, and support COBOL, C, C++, CORBA, C#, Java, SQL, and non-relational databases.
* Simpler Maintainability: Since no new code needs to be maintained, developers can devote their energies to supporting native applications and business systems with existing tools. Support for future standards such as swiftML and ISO XML will come from adapters, not the programmers.
* Platform Agnosticism: The adapter solution must be agnostic to the firm's strategic platform direction, whether it Windows 2000, mainframe, Linux, or Unix; C# or Java; .NET or J2EE; Microsoft, IBM, Oracle, BEA, or Sun. Web services created with the chosen adapter solution MUST work across all environments, and can indeed bridge these environments to achieve interoperability and protection of IT assets.
For the last six months, there was not a computer trade journal or a Wall Street Journal issue that did not mention "Web services" somewhere in its pages. Recognizing the impact that Web services will have on the way organizations will conduct future business can help companies incorporate current SWIFT messaging mechanisms into a sensible Web services strategy. This will prove vital not only to the organization's bottom-line, but also in developing partner and collaborator relationships, as well as positioning the organization as an innovator within the market sector.
By looking to flexible solutions, such as transformation engine and adapter technologies for conversion to new standards -whether ISO-based or in a completely different vertical markets such as manufacturing - organizations that are willing to be the "Have-Nots," will in actuality spend less money on technology overhauls, be more prepared to meet future standard compliance issues and will ultimately "Have" the better business strategy in order to gain optimal market share.