What are four good reasons for a bank to use software as an online service?  

Small size, undifferentiated software, need for availability of software across different sites; and, last but not least, an unsophisticated internal technology department, according to a report issued by Celent.

The research firm defined "software as a service" as the process whereby a vendor licenses an application to a client on demand, taking care of the management and maintenance of the system. The software as a service provider may use its own dedicated data center to host the application or it may use the cloud. Among the values of software as a service: lower initial capital expenditures and the ability to scale quickly.

“Smaller financial institutions lack the scale to run data centers that offer high availability and security,” wrote Bart Narter, an analyst with Celent. “While large banks will have exceptionally differentiated products, smaller banks tend to differentiate on great service, customer intimacy and community ties.”

Software as a service providers can also offer multiple connectivity points to the Internet enabling a broader and more reliable connection than a bank’s data center, according to Narter.

Desktop software is one of the first services which should move to an external supplier as it isn’t a core competency of the IT department or a competitive differentiator. Other services include email and collaboration software.

“Banks don’t compete based on their collaboration software and this is clearly not a core competency for IT departments,” wrote Narter. “Given the nature of collaboration software, it requires high availability both internally and externally.”


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