Many businesses are being hit hard in the current economic climate and today's financial market dictates that maximising efficiency is the vital component for many companies' future existence. In the current market climate, banks of all sizes are looking closely at their IT budgets and ways of reducing money spent on IT services and maintenance. Amidst these conversations, the Software as a Service model has emerged as a particular favourite, highlighting one way for financial institutions to manage their IT budgets more efficiently. The initial perception was that the market potential only included the smaller bank and building societies. However, with the recent months of market turmoil, there are now strong signals that this delivery model is highly relevant for all banking segments.

Banks cannot afford to stand still and are having to continue to innovate and progress to ensure their future survival. As such, they are looking to install the latest software features faster than ever before. In the case of lending, for example, there is an urgent need to better manage their lending portfolios, getting control of their risk profiles and comply with regulatory requirements such as Basel II IRB. Although SaaS is not yet a mainstream concept, banks can use the model to access highly specialised applications that traditionally only the larger players were able to afford or develop in-house.

Nevertheless, a change in mindset is still needed for SaaS adoption to become more wide-spread. A certain loss of control and having a third party handle the banks' IT infrastructure can initially be an uneasy prospect. However, the time spent to maintain the software is greatly reduced and the benefits of low entry costs and a pay-on-consumption pricing model make Software as a Service a simple model where banks can focus on their business instead of IT operations.

To say in Bill Gates' words, however, ‘the broad foundations of the internet will make a 'services wave' of applications and software available instantly. This new wave will be very disruptive.' The upheavals of the past weeks will now give the financial services industry an opportunity to completely rethink their IT strategies.

Mikael Krohn, VP, EDB Business Partner