The Cloud is the future – REALLY ????

Working in the technology industry for more than 15 years I’m used to different trends coming and going which represents attempts of all sorts of entities with different interests to enter or penetrate a specific domain to make more money. What I find always “funny” is how fast you can generate a “community” of people becoming followers and believers in the new trend just because it is new, “someone said”, or just because “everyone does that and this is where the industry goes”. In principle one could argue what’s wrong with that? And I would say nothing if it is not disrupting your day to day job , and provides value.

Well I believe that the “cloud” is one of these examples where someone created a buzz word, and suddenly it became “the most important thing in the software industry” and I ask REALLY????

I waited with this blog for quite some time as I also wanted to make sure I see the full picture before I make any decisive statements, however going deeper over and over again I’m sorry I don’t see the big promise in the “cloud”. It might be that I am inside the cloud and don’t see due to the fog inside :-) , or is it the case of the Emperor’s new clothes that no one really see anything but plays along with the game as he is afraid to look like a fool???

From my discussion with many people around the world working in the business I feel this is the case. In private discussions I have with people from different companies (software vendors, big global banks, small/medium SI’s) , line of business and roles (sales, developers, consultants, and more) I always hear “yes you are right we also not sure what’s new in the cloud and whether this is really the future” however as soon as the discussion comes to official streams and in the headlights every one clapping their hands and say “yes”…..


What is this “Cloud”? well I always love to use the Wikipedia as a source to check different terms, usually it provides a very good definition and if not it shows you the fact that this topic is quite vague or so specific no one care about it enough to write…. In our case here is the definition which I find quite interesting:

Cloud computing is a colloquial expression used to describe a variety of different types of computing concepts that involve a large number of computers that are connected through a real-time communication network (typically the Internet).[1] Cloud computing is a jargon term without a commonly accepted non-ambiguous scientific or technical definition. In science, cloud computing is a synonym for distributed computing over a network and means the ability to run a program on many connected computers at the same time. The popularity of the term can be attributed to its use in marketing to sell hosted services in the sense of application service provisioning that run client server software on a remote location.

The way they describe it articulates my point in this blog which is “cloud computing is a jargon term without a commonly accepted non-ambiguous scientific or technical definition” meaning, people in our industry talks about the cloud like they all know what they are referring too however most of the people are not really sure what it means….

In most of the cases when people refer to the cloud in the IT industry they mainly talk about two main things:

  1. Hosting – this is the capability to provide hardware resources to companies that prefer to lease their servers instead of buying and maintaining the actual hardware. The hosting started from the web hosting for web apps and grow to providing a server capabilities for any purpose, especially with the evolution of the virtualization technologies thanks to VMware that enables servers to be virtualized over a unified hardware and AMAZON that found a nice cost effective model to provide servers for any kind of usage.
  2. ASP/SaaS – Application Service Provider also called “on demand software” and SaaS meaning software as a service which basically means providing specific software application in a hosted manner without the need to install it on the customer servers and use it in subscription model of some sort. in this case you should ensure the software has multi tenant capability if you want to be attractive.

Both of the above (Hosting and ASP/SaaS) are very old concepts running for years, so what is so new?? What is the innovation everybody is talking about? When I look at most of the claim to be “cloud based solutions” out there I do not see anything that provides any revolution or even evolution from just the old way of providing hosting services (maybe chipper with AMAZON but that’s it) or ASP/SaaS based applications like kind of solutions.

Some people confuse the “cloud” with the different concept called the “Grid” which was introduces also many years ago to represent a way to run software over different computers in an on demand manner, meaning a specific software could exploit the memory and CPU power of different computers in which you can plug and play dynamically without being installed on these machines. The Grid promise was that you can make use of computing power available like use the people PC’s when they don’t use it that could enable running high power processes in a low cost model making use of existing capacity. This is definitely not “cloud” and one should not confuse (or let others confuse him) about it.

So if “Cloud” is just a nice name for hosting/ASP/SaaS, Is it really the future? Is it really so “game changing” for us as individuals or as companies? Of course it would save some money in the short term on hosting but what is there more? Where is the vision?

In my personal view “the cloud” trend is actually very disrupting to serious work needs to be done in the IT business (across industries).The fact that such minor topic with no real value gets so much attention from customers, leading software vendors, analysts and the fact that it is sold as the solution to everything even though it does not, takes the focus and energy/resources from working on the real challenges that require attention.

It also introduce so many problems and challenges you need to deal with (security, privacy ,technical issues, and more) due to the fact you must become “cloud” because this is what the industry is saying…

When people ask me “don’t you believe in the cloud?” I usually say there is nothing to believe in, it is just a nice term for hosting and cloud based apps are just nice term for SaaS/ASP both exists and valid for the kind of usages they always enabled which are non-core fairly simplistic applications for individual and businesses.

Do I see the need to transform on premise solutions to “cloud” ? my answer here also would be a big NO, as I believe that IT capabilities in today’s world which will be greater in tomorrow’s world is a competitive advantage in any industry therefore should be close as much as possible. Do I believe developing, managing and maintaining software should be easier, faster and chipper? big YES but you don’t need cloud for that.

I would love to hear your point of view and maybe you could show me aspects I missed.

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8 steps to support banks in moving to packaged software – Part 2

In my previous post I started to point some actions SI’s should/could take in order to help banks move faster to packaged solutions Vs home made, this part will close the list with 4 more important points:

# 5 : Sell certainty vs. potential – in my experience taking part in many different sales cycles in the global banking world, I witness that the argument “you can potentially do anything you want” and “there is no one way or things you can do it depends on what you want” do not give the customer confidence, the sales people saying that usually means that the software could be very flexible and the SI can implement it in the way you want it, however the message customers get is quite the opposite. For them the fact you can’t show them what can be done and how it should be done during the early stages of engagement perceived as some kind of attempt to avoid something. The tough thing here is the inherent contradiction in the way the customer talks to you, on one hand if you limit him, he might challenge you and say “but it does not fit my needs”, or “but I do it differently”, on the other hand if you say “all options possible it’s up to you” he might say “but I expect you as the expert to bring your best practices and save me time and risk”. Most of the sale people I met (from different companies) will be very reluctant to say “this is how you do things” as they want to make a sale however you must be able to sell the customer certainty, reduce the amount of “options” so he can take clear decision and gain the confidence that you will know how to do it for/with him. The way to do this is by having a point of view as an expert SI on how things should be done with the ability to both show it and defend it. You should always keep the option of “we can change it” however if you do this after you gave a good alternative there are good chances the customer will take your approach, if not he will be willing to pay for the extra time/risk. If I don’t do that I lose the whole a point in selling a packaged solution.

 # 6: Aim for a volume of “small” deals Vs. few huge deals – Another insight I have from viewing the way SI’s/software vendor’s sales teams think in banking, is to “always focus on the huge transformation budget” which is very understandable ($$$), meaning if there is a 100 Million USD deal you want to take it and prefer to invest your time there rather than putting your efforts on 10 deals of 10M or 100 of 1M, however looking at these huge opportunities it is often very long (years), chaotic and in most cases do not succeed (the web is full with blogs and articles about why huge programs fail) and you don’t really win the 100M but invest a lot of time and money chasing it. However assuming you followed my advice and established clear expertise, assets and approaches based on focused business domains and software package the ability to win smaller deals will be increased significantly. It would be much easier to convince a CIO/CEO to make gradual decisions with less risk and less cost vs. the huge decisions everybody afraid off. The confidant message of “don’t commit for 100M, let’s start with 10M we are certain you will pick us for the next after we prove our success) can be a true differentiation. I see the talks in this industry, people are starting to be aware of the fact the huge transformations are not the right way, the first SI that will provide an alternative might get the lead.

 # 7: Adopt lean culture vs. lean methodology – “lean” is a very common word these days or more accurate buzz word to almost any organization today that wants to say/prove/show he is making the transition to become more efficient. However in many cases we witness organizations that call themselves compliant with lean methodology (whatever that means….) however operate like an elephant in a china shop. It is extremely obvious in most of the global SI companies operating in the banking business (the smaller ones are leaner but just because they play in niche). The thing is that it is not about lean methodology but about adopting a lean culture that would bring the company to think faster, simpler and as a result deliver faster results to its customers. At the end this should bring this SI to an advantage in their perception in the market. Now I am not Naïve and I am well aware of the fact this is business and as mentioned above many of the SI companies are in the “head count” business making their revenue from selling time of their “resources” however I believe this has to change assuming the goal is to do thing different, changing the game taking over the market. From pragmatic point of view the lean culture would mean working in leaner relations with the customer right from the sales cycle (or even sooner) to the implementation and handover. Encourage and guide your staff to shorten the interaction time with customers, coming with answers before the questions are asked, convincing the customer to see and evaluate without the need to follow long RFI/RFP’s for every single things he needs could make the difference. If you truly adopt a packaged software attitude it enables you to be leaner by definition.

# 8: Focus on fast delivery Vs “Robust Methodology – The SI game of the past was about implementation methodology, this is why almost every global SI came up with his own project implementation methodology which served the following purposes:

    1. Provide collaterals that could justify why the customer should choose this specific SI over the competition, enabling the customer to “feel” the collaterals and really see something.
    2. Provide proof point for experience, the methodology used to send the message “we are not just providing resources, we have proven methodology”.
    3. Used as an enablement for resources coming and going , something you can train them to make them your own.

Now don’t get me wrong, methodology is important and required however in today’s world of fast results and quick wins the waterfall methodologies which as more steps you have the more “serious” it is, does not bring the value anymore. Customers witnessing the long lasting projects, they see the methodology is no longer guarantee to anything, it is actually a problem. in the world of packaged solution you could of course stick to the methodology approach (most of the SI does) however to make the game changing step one should look at other alternatives to bring to customers something else, faster something that you can see results right from day one, and instead of spending 50% of the time on planning and defining use it to evaluate, experience and refine existing capabilities the standard software can provide.

I can probably find more points for thought in the same direction however the message is clear, to accelerate the adoption of packaged software in the banking business the SI’s must do more in order to help banks make this transition faster with less concerns. The SI’s playing in the banking industry needs to choose whether they want to continue in their current model which is the consulting business, selling resources to staff projects or they want to adopt a true “Packaged Solution” attitude, culture and capabilities seizing the opportunity this industry is going through and lead the way.

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8 steps to support banks in moving to packaged software – Part 1

In my previous posts (10 reasons why… ,… Adoption Barrier.., Make or Buy…)   I shared my insights on the barriers preventing or prolonging the decision of moving to packaged software within the banking industry, as I mentioned, there is no one reason therefore there is no magic word you say and change the situation, however I do believe there are several steps could be taken to accelerate the adoption of packaged software for core banking business.

In my opinion the key players that could make a difference are actually what we call the System Integrator type companies (assuming the software vendor is not doing the system integration on his own of course) as they are the ones that can make the experience of deciding/implementing a software package to be a good one or something to avoid in the future.


So In this post I would like to offer some practical points for action, an SI company could take to help accelerate such decision and win a great business as a result of that:

#1 : Make a Strategic Decision - I think the first step is to decide whether you (SI) are interested in leading your banking customers through the change of moving from a “homemade” software development to “packaged software” philosophy. this is not trivial step, as many SI’s are in the business of “consulting” in terms of “tell me what you need and I will provide the resources and charge for it” way of work. This is not a bad thing if made as a strategy however in my view in order to truly support banks in this significant mind shift the SI has to be committed to such approach and make a change in the way he looks at his role. The SI cannot just provide T&M resources and expect it would be enough, the banks require someone that gives them the confidence in making such move. Most of the SI’s I encountered in my career did not make such strategic decision, most of them work on “all options are on the table” kind of approach , dealing with each opportunity on a case by case basis trying to support all kind of projects. If the customer wants a homemade solution? We will say yes, if he wants some kind of a packaged solution? We will try to say yes as well. this situation is one of the key reasons why banks are moving slowly as they don’t have a true partner that can guarantee their success. So once the SI really believes that the software package approach is the future for banking, wants to lead that approach and willing to change the way he handles this business we can continue to the next steps.

#2 : Focus on one software vendor - as I mention in the first step it’s all about commitment and confidence in the approach so it has to have also commitment and confidence in the software package offered. An SI that truly wants to convince his customers that:

  1. They should move to the software package approach as a strategy
  2. Choose him as the strategic implementation partner to escort him in this transition

He must pick one software vendor he believes has the best package and stick to it. when a bank encounter the same SI offering different packages sporadically / opportunistic it has hard time in believing that this partner can take him through the challenging journey even if this is a big global SI. By picking one software vendor, putting investments on it and building the skills of its implementation forces around it the SI sends a clear message “we believe in this package vendor and you can trust that we will deliver successfully”. This action is very complicated as you need to have both certainty that the package has the proper capabilities and of course that this vendor is trustworthy so you can build your company future on it, however in such complicated industry you must (in my opinion) deal with this challenge if you want to be dominant player.

#3 : Focus on concrete business domains - The banking business is huge and built from many different business domains, each can have a lot of complexity from both technical and functional aspects, the lending business is much different than the clearing house payments or investment banking, trying to be an expert on all of them is very challenging. a wise approach could be picking several domains (1,2 3 depends on the size of the SI and ability to invest) and deepen the company assets and expertise around them in order to come to the customer with real deep expertise giving him the confidence that you know what he needs and how to take him there. It is not an easy decision as in most cases SI’s react to business opportunities as they come and reluctant to be proactive as a nature, they usually see such act as some sort of gamble which they prefer to avoid, however this is exactly the strategic decision I spoke about in step #1 that would make the ability to move forward and change.

#4 : Invest in content vs. resources - This one is actually very critical and important specifically in the packaged software area, however strangely enough (at least to me) I still did not encounter an SI that actually do this (and I work with all the best SI companies in the world). In order to convince a bank to make a move to packaged software with you as his strategic partner for implementation it, is not enough to come with the vendor on one hand providing “feature function” pitch and on the other hand you with “professional resources”, why ? because everybody does that and every bank knows that the human resources (the consultants) of one company could be very good however they are not really owned by that company, meaning they can leave any day leaving the SI without his “expertise” and it is not something you can rely on in a long term basis. This is why it is important for the SI to develop real content assets relevant to such implementation based on the software package (and I am not talking about “methodologies” which any SI claims to have), real content that could prove to the customer that this SI has real assets related to the software package he choose and to what he is trying to implement. The content is important also internally for the SI if he wants to reduce his TCI (Total Cost of Implementation) to drive more revenue over time and have the ability to up skill new resources faster and chipper.  As you can see in order to do this you must follow step #1, 2, 3 as you won’t make such investments if you didn’t make the strategic decision and you definitely cannot invest in different vendors/business domains so you have to be more precise.

in my next post I will provide more points to explain my point of view regarding the role SI should plan in helping banks transition to software package approach.

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Trusted Advisor in Banking Software Industry – what does it mean?

The desire to be this “trusted advisor” is clear to any company that wants to be able to influence its potential customers to the direction of the company strength point have it be service or software which could lead to great business.
I recently came across a very well written post called Using the Power of Certainty to Drive Sales Success which I found very logical when it comes to the first part which explains what it means to be a trusted advisor and why it make sense, however the second part which is the “4 steps to get there” felt to me the exact common mistake many sales people/managers are having when it comes to their perception (which drive their actions) on how to become one.

The term “order taking sales people” was mentioned and I liked it very much, it comes to describe the common “behavior” of sales people thinking the customer already knows why they need the product and they just need to take the order or sometime called “close the commercial details”, however in almost any industry a sales person must do much more if he wants to succeed.

In the banking software business such “order taking behavior” in which sales people just present the customer with the company profile,the software/service portfolio and some high level customer references and ask “what do you need/want we will price it for” doesn’t cut it, actually in this industry to make a sale you need to work hard and show your customers how they could and should use your software/service in order for them to buy in.

it’s also quite clear that in order to be able to get to the sales engagement you first need to make sure the customers knows you and approach you soon enough so you could pitch your capabilities. In this industry the perception of a company is crucial and decision process is long, however if you are not there at the beginning it is very hard to influence the customer decision at the end.

So being a trusted advisor is definitely something a sales person needs to be if he wants his banking customers to buy whatever he is selling and to approach him soon enough in the thinking process so he could still influence and make a sale.

Now the above is not new actually this is common knowledge (including in the article I mentioned above) and most of the companies has indeed set this as an objective, However the way of becoming a trusted advisor this is what makes the difference.

TrustmeIs it really about networking? Knowing the right people in the right places? Well it is definitely important and could help for sure however this is not the way to become a trusted advisor or trusted in general, So is it about knowing the art of talking/presenting? Many people/companies are focusing on the “masters of words” to gain this sales capabilities or making the “perfect slides”, Will that make you the trusted advisor? Of course not, trust is something deeper than knowing to say the right words, or using the right slide decks. So what is it then? Maybe it is having the right demos so we can show customers exactly what they want to see, we will shape it nicely and have our sales team do it in each meeting, ahh will even equip our sales people with an iPad and have all our demos run on it…. Well this also would not bring you to become a trusted advisor.

All of the above and much more (actually there are many more examples but I did not want to make this post so long as I think the point is clear) are the common way of thinking I encountered at many different companies (big and small) in their efforts to become this trusted advisor for their customers, investing so much on such “skills & capabilities” even though its clearly won’t get them there.

The answer on how to become this trusted advisor is actually very simple (at least to say) and it is probably true to every industry, any kind of product or service you want to sell, and it is: “to master the product & service and first and foremost be an expert”, of course you need to have all the skills required to be able to present an idea and have a nice conversation with a customer (especially in a global world where you need to know the different culture nuances) however you have to know your product & service deep enough if you truly want to become a trusted advisor Vs an “order taking sales person”. The “Trusted” will come from the fact the customer will find someone that speaks out of real knowledge and experience with real passion to its product/industry, the “Advisor” will come from the self-confidence the sales person will gain out of his personal knowledge and experience to advise customer not just to buy but how to best use it and why.

If your company is in the services business you need your sales people to know it on a detailed level, it is not enough to know what kind of services you offer and the high level approach and costs , you need your sales person to come from such service delivery background, one that could talk to the customer’s staff in their language.

If your company is in the software business you need your sales people know how to work with the software they are selling. Do they need to be the #1 experts ? No but they have to know enough hands on “tricks” to be able to bring the message across to the customer team.

We sometimes think that sales people (account executives, account managers) they just need to speak with higher management but actually the trusted advisor approach means you talk to the execution level as good as you speak to management. At the end if the people on the ground send a green light the management will be more confident to make a decision , however if the team on the ground are sending red flags mmmm no way the management will go for it.

What is your take on that? How much detailed knowledge do you think a sales person should have on its product/service he is selling to become a trusted advisor ?

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10 reasons why banks reluctant to adopt packaged software for their core

10 ReasonsIn my previous post I started to touch on the reasons why we see much slower adoption of core banking software packages Vs ERP and CRM. in this post i would like to go even deeper and share my insights regarding the 10 reasons why banks are still reluctant to adopt packages software in their core business :

  1. “Developer Nature of Banks” – The nature of the banking industry of developing bespoke solutions by themselves , yes bank’s around the world are huge software development organizations in some cases banks has more developers than the some of the biggest software vendors for the banking industry. this fact makes it harder for the banks to make a decision of buying software Vs develop it on their own. The challenges are from both the technical aspect of “we know best how to develop our software” and the political aspect of “so you want to fire all of our development organization??”.
  2. Core Process Sensitivity – The processes these core banking systems deal perceived as very sensitive as they are touching directly the most important asset a man has which is money. These processes must be accurate and are being audit by many different external parties (the customers, government, private companies, etc) therefore changing the systems for such processes is not something you easily do not to say trust third party company when they say “our packaged software will do it the best”.
  3. Current implementation differentiation – anyone with vast global, regional and local banking industry experience knows, that even-though banks believe they are different most of them are doing things the same way. however the way their bespoke solutions were developed over the years caused situation that there are differentiation on how these processes are done in terms of technologies and solutions. this fact makes it sometime hard to identify and map the current way of doing a process in one bank to the way the packaged solution does it. it also in many cases requires the bank do the exact same a bit different and this is something that is very hard for most banks to accept.
  4. Industry Complexity – The banking business is a very IT driven and is quite complex many aspects like the business complexity, the technology complexity,  volumes , regulations and more all much more than ERP processes for example. this fact causes the reality of expensive implementation. I meet a lot of people that tries to compare the banking industry with some other industries and do not understand why banking solutions must be so complex, well they are complex and expecting the banking packaged solutions to be like FI or HR or even CRM is just not realistic.
  5. The Integration Challenge – Banks existing solutions are built from hundreds of software solutions built over years, with different technologies , by different people, using different approaches.The different solutions within the bank are tightly integrated to each other so anywhere you touch you need to take into account that you will influence and be influenced by several other solutions. as in  most cases you will not replace all of the bank IT solutions with one package solution at once, this challenge makes the implementation project quite complex and scary.
  6. Legacy Stability – Even though the existing legacy is quite old, fixed and quite expensive to operate mainly due to the constant changes in regulation and new business models , in most banks “it does the job” and it does the job well so many people within the bank ask themselves do we really need this? does it worth the cost? are we 100% sure that the new system will be at least as good and stable?
  7. Bank Operational Model – The banks are used to their legacy systems they know how to operate it, how to extend it and how to fix the day to day problems that coms with it. during the many years of existence they have built organizations around it with all the functions they need to run smooth operations. now introducing a new core system, that in many cases comes with different technology and way of work you need to replace the your operation organizational structure, skills and processes, such replacement would mean a huge revolution within the bank.
  8. The Internal Knowledge – In most banks (definitely the big/medium ones) the knowledge of which systems the banks has, what each one does and how exactly they work is very limited and in many of them actually lost. this causes a very problematic situation when you come to replace something or even try to interact with it. in many cases (even if the wont admit) banks avoid the replacement with a package as they prefer not to deal with that fact.
  9. Up front Implementation Cost – Implementation costs seems very high to most banks , this has several reasons one of them is that the cost of a software package is known from the start (at least the license part + ball park for implementation), some would say it is a benefit however in reality the “do it yourself” that seems cheaper at the beginning makes it easy to the decision maker, the fact that in the long run the cost is usually higher and that the solution will not meet 50% of its functionality will be known late in the process so at the decision point the software package seems more expensive.
  10. Lack of SI Packages – The fact that system integrator (IBM, Accenture, InfoSys, Capgemini and more) are still offering such software packages in the “do it yourself” attitude is also not helping banks to buy in. when you look at the way most SI’s offering such projects you see that they still do it on Time and Material without the ability to predict or commit on the exact time and required materials which makes it still intimidating for many banks. they prefer to trust their own dev organization rather than loose control to software package and SI.

All of the above indeed provides some of the main reasons to the challenges bank are facing when they need to make a decision towards the software package. some of the reasons related to organizational behavior (or what we call “political reasons”) however I believe that these behaviors will change as soon as banking leaders (CIO’s, CTO’s and CEO’s) will gain confidence that this is indeed the right and more important possible way.

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Packaged Software Adoption Barrier in Banking Industry

In this post I would like to touch on the difference between the packaged software adoption in areas like ERP and CRM Vs the slower adoption in the banking industry to cover the core banking domain. When I’m referring to packaged software I’m referring to business solutions being developed by software vendors (like SAP, Oracle, Microsoft , Temenos, Misys,and many more) and provides “off the shelf” software product. Examples for such products would be ERP solutions, CRM Solutions, core banking solutions, e-banking solutions, and more.  It is quite interesting to see the way banks are treating differently when it comes to their core systems even banks that are using the packaged solutions successfully in the ERP & CRM side.


In the ERP domain today it is quite common (almost a must) that you don’t develop your own solution but buy it from one of the vendors which could be a local one, global one, small vendor or big one. In most cases the main functions of these solutions are clear to all, pretty much standardized both locally and globally. As i’m working for the biggest ERP & CRM player in the global market (SAP) which is also one of the strongest core banking solutions vendor I encounter some interesting conversations regarding this topic. some “ERP veterans”  ask the banking people how come things are so different and complicated compared to what they know from the early ERP days?

My answer to them is that there are mainly three reasons for that major difference:

  1. Zero in house Development starting point – The ERP packages evolved for more than 40 years and started from almost zero “in- house” development, meaning when the first solutions that were developed by software vendors (SAP) came to the market, organizations did not have their own bespoke solutions but had no computerized solutions at all, so it was easier to go with the packaged solution..
  2. Non Computerized Organizations – Many of the processes in the ERP space started first in the business solutions meaning organizations did not have such processes therefore there was no need to adapt but just a adopt. In this domain (ERP) the software vendors led the change and computerized the way organizations manage their business, it could be finance, procurement or HR and over the years other organizations just benefit from the first pioneers
  3. “straight forward Processes” – The processes covered by the traditional ERP (HR, Purchasing, accounting , etc) are quite standard and similar inside the countries and over the years even globally, and did not touch the core capabilities of the organization therefore it was easier to provide out of the box functionality coming from one vendor that fits many customers.

In the banking industry we see a bit more challenging situations when trying to apply what we call “packaged software” and we can say that even though packaged banking solutions are on the market for many years now, only in the past 5 years we see major desire of banks around the world to adopt such packaged solutions as a way of life, including for their core processes. Going with the 3 reasons above that made ERP easy to start with can explain the reasons for the complexity in the banking industry:

  1. banks already have their banking solutions which they developed over years, banks has huge IT organizations (some of them are bigger than any software vendor) and to them buy package is not the natural way of work.
  2. banks are highly computerized organizations , actually almost every banking activity is done using a computer system, it makes it very difficult to come with software package as it means replacing existing solution and integrating with others.
  3. The core banking processes are very complicated , unlike the ERP ones they deal with the core business, highly sophisticated , deals with sensitive data (from both privacy and accuracy ) and usually handles huge volumes.

So even though in the past 5 years we definitely see major shift in the desire of banks to standardize their core banking solutions and  adopt software packages it is still a slow process with many challenges, it is very different from the ERP & CRM solutions however I do believe that the process of regulating the core banking solutions, reducing the bank’s development forces and adopting software packages has started.

would be happy to hear your thoughts and experiences around this topic.

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Make or Buy – The Usual Dilemma

make or buy

I remember when I first bought a house, me and my wife wanted the perfect house for the perfect price without the need to compromise on any of our dreams. We wanted it to be big enough, beautiful from the outside and of course perfect from the inside with nice garden and parking space. Like anyone we had two options to choose from, option 1 would be to look for an already made house in the area we wanted to live or option 2 which would be to look for land and buy it ourselves.

So we started evaluating both options with option 1 we jumped from one house to another and we found several candidates that could do the job, they all were available, clear price and it was easy for us to see what we are getting, however none of them were perfect, one we did not like its external decoration, another we found a bit strange looking from the inside, one was nice however we would need to completely re-decorate it, and so on and so forth. On the other hand with option two we found a land in the size we wanted and we went to 2-3 constructions companies to get an offer to build our dream house. It was amazing, the architects came with some many good ideas and showed us great decorations and simulations on how things would look, the constructor explained that they have the best reputation and experience, how they work with the best materials, the best tools and the best team of experts, and he committed that they could do it on budget and on time as we wanted.

So of course we went for option 2, yes it might take a bit longer but we could fulfill all our dreams, and there we go to one of the longest processes we ever experienced, as we started to go into the details with the architect we found that the simulation he showed us is possible but…. It might be too complicated or expensive so we had to change here and there to make it work, the constructor had an unpredictable problem in one of the other projects and he had to delay the start of our work, and in between there was a Labor strike and many of his workforce was not available. So to cut a long story short , we had to spend much more than we initially planned (and much more than buying an existing house and completely re-decorate it), the project end extended 3 times and almost doubled its original estimation and the most important fact we suffered during the process instead of enjoying our house. When it ended we said “never again! Next time we buy something that someone else suffered for” and we definitely will go and recommend buying an existing house even if it means making some compromises.

Similar dilemma I see in our banking industry when banks evaluating their options for renewing their core systems or introduce new ones . Working for a software vendor that comes with already made software which covers substantial parts of the overall banking requirements, I witness the same behavior when approaching IT people in banks all over the world. When they need to choose for their path to re-new or replace their existing core systems they seem to go through the same thinking process, they also have the main  2 options:

  1. Looking into the software vendors offering “off the shelf” banking solutions , in this process they also looking for their dream system and very fast they start to be “disappointed” when they find things look a bit different then the way they envision it. Yes it does the work exactly as needed, yes it is within the budget however it is not perfect in the sense that it is not exactly as the specific IT/business team think they would have done it themselves. Another “problem” with this approach is that it has the license and support price clearly quoted up front, of course logically this is good, however reality shows that psychologically it seems more expensive and harder to for the decision makers that needs to write the cheque.
  2. Going to the big SI’s offering them custom built solutions using the best technology & tools the industry could offer, showing them all sorts of business models how the bank would be , what kind of engines it requires and how you can design your own sophisticated and sexy look and feel and do the process exactly how you see fit. They of course tell the bank it would fit the time and budget and everything would be pink & roses. here there is a price however as you are not buying licenses for business software but just for tools and man power , it feels like it is cheaper (at least at the initial decision point) and easier to control.


However in our case the experience shows that in most of the cases options 2 would end in great pain, disappointment and of course cost a lot of money. Most of the core banking projects I know globally when banks decided to do it themselves ended totally off the original plans. And in many of them it generated islands of “new legacy” solutions, instead of the big dream of new flexible and modern platform for the bank’s future. the problem with this approach is that you know where you start but not where you end, a very common situation is that it is very hard to identify when to stop and cut your losses, as you discover the issues gradually each time you say “we got so far lets try a bit more”  until you have a huge failure on your hand and you need to stop.

Unlike with houses in business software (especially in banking) you can get lost also if you buy “off the shelf” software and there are many different reasons why this could happen, I would be the last person that will try to sell you the perfect story when using “packaged software”. The core banking world is complex and due to its way of work, business/technology complexity and of course organizational behavior of most banks challenges are the most expected outcome in core banking projects however it will reduce the risk and help you stay within boundaries as appose to doing it “freestyle”. It’s much easier to discover you are doing something wrong when you start with clear base , than when you work in a totally “open” manner. because of the natural complexity the “limitations” an “off the shelf” software introduces is actually helping you control yourself from doing things wrong.

The trend of using “off the shelf” software in banking is expending fast and mainly driven by the fact nowadays banks feel the hit in their core business not only due to the increasing competition and globalization or even increasing regulations but due to the financial crisis events happening one after another that seems to happen in all regions and reveals how fragile the business is, and the fact bankers (or economy experts in general) don’t have the answers to the new scenarios knocking on the doors….  This situation forces the financial institutes to focus on their core basic business and avoid spending time and energy on IT adventures.

having said that it is still a huge challenge coming with an “off the shelf” software vendor that is proven and works therefore “fixed” on a specific way of work,  to “fight” the “dreams and illusions” the “do it yourself” folks are presenting in front of customers.

delivery3To me personally the dilemma is solved, if I’m on a tight budget and challenging timelines I will go for what I can see and base myself on reality rather than dreams (or illusions), it is true for my next housing project and definitely true to software project. However I’m still seeing that within the banks around the world the dilemma still exists and many of them would probably continue to take the “bumpy road” buying the best tools for a “do it yourself” project.

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