Kristin R. MoyerDavid Furlonger and Peter Redshaw here….Yesterdays Australian Financial Review detailed a story about three banks that intended to form a consortium to force change in the provision of technology services from major IT providers such as HP, Microsoft, Oracle and IBM.[ http://www.afr.com/p/business/technology/banks_seek_billions_in_it_savings_JBwXh6ZmMhhRLrGUMBZCSK]
There seem to be two different components to this story.
First is demand — the issue of vendor supplied technology costs and an attempt by these three organizations to directly impact buying power by grouping their requirements and forcing major vendors to change their service provisions and costing models.
Second is supply — the potential for a group of banks to cooperate in the provision of cloud computing (e.g. infrastructure as a service) to, we assume, other industry participants.
With respect to the first issue, the focus on cost optimization has not dissipated even if the financial services industry is somewhat more stable than it was a year ago. The attempt by these three banks to force pricing changes is evident that CIOs have not lost sight of the need to extract greater value from the services they offer to the business. Productivity improvements are a major component of those initiatives as highlighted in the 2010 Gartner CIO Agenda [Banking CIO Agenda: Getting to Grips With Transformation]. Whether three banks can speak with one voice and so have more power than one remains to be seen. And, whether any reaction from the vendors is strategic in terms of them fundamentally shifting their delivery model and pricing paradigm, or more tactical in terms of just short-term price improvements is also open to question. Our hypothesis is the latter is more likely to occur than the former because of the negative impact that a strategic shift will have on annuity revenues.
The second issue is arguably a lot more interesting, however it isn’t completely novel in the industry – more of an incremental development on previous activities. For example, several Tier One banks have provided infrastructure capacity for equity trading by brokers for many years and others also have a variety of long-standing and similar, white-labelled services for brokerages. Custodian banks and exchanges also provide shared infrastructure and co-location for trading platforms. Independent of the banks there are shared environments that combine networks, data and applications such as BT-Radianz, SunGard STN, Bloomberg and Reuters and SWIFT that have existed for some time.
Clients need to exercise some caution before assuming this development is suddenly going to transform their technology sourcing strategy. Cloud computing is still over-hyped and often used as a term to erroneously describe the evidence of something new when this may not be the case. For example, every bank that offers a payment acquiring service can – at a stretch – be described as involved in cloud. This isn’t new – payment services (whether credit card for retail, or SWIFT based for more B2B applications) have been around for years – almost since the inception of the Internet. Similarly, some of the shared service models in place in the Nordics for the mainstream banks, or Germany and Spain for the savings banks have operating models that might tenuously satisfy requirements for a “cloud”. The cloud may be an enabler, but clients have to look at the main business purpose and the desired results of these efforts before jumping to conclusions.
Comments Off
Category: Uncategorized Tags: cloud computing, Consortia, Infrastructure, sourcing
