Over the past several months, I’ve built my case and given several examples of how financial institutions can make the move toward running payments as a business.  Let’s recap.  Payments data centers used to be these “gentle giants.”  They moved steadily along, processing payments one batch at a time, and did what was required of them.  But, as the industry has changed, and technology has evolved, we find that many legacy payments centers have “weight issues,” and come with a high total cost of ownership (TCO).  In order to find our next revenue success with payments centers, we’ll need to put them on a “diet” and begin to focus on decreasing cost of ownership while moving towards agility and innovation to recognize their real value.

Data center owners inside financial institutions and other payment processors have taken different approaches in reducing the TCO of their payment data centers.

One approach is to be very aggressive in reducing the cost of the initial payment engine license, or the price of the server the payments data center runs on.  Many will argue that this approach can hardly be touted as a TCO reduction – and I do agree – yet, this is where many discussions on cost of ownership end up, so it must be noted here.  The cost, in this approach, is easy to measure, it’s a quick win, and more importantly, the discussion can be had at the time the budget is negotiated – that awkward moment right in between deciding on a new payments system, and actually deploying it.  But does this measure total cost?  The question that lingers in my mind is what impact this approach will have on the TCO of the new payments system over its lifetime, say, 10 to 15 years.

Let’s consider another – and I would argue more accurate – approach, using consolidation as a way to reduce TCO.  This includes not only the consolidation of the tens of payment engines a bank is running, but the consolidation of payments gateways, and information in a payments data warehouse, as well.  In my experience, I’ve seen that consolidation does pay off.  My suggestion, when consolidating, is to use a payments-aware business process layer for flexibility, not only for integration.

The suggestions above will most certainly assist in reducing the cost of our payments data centers, as they, in one way or the other, reduce either the cost of the software licenses, or the cost of the servers the data center runs on.  So, as an industry, how about we integrate and build on this notion?  I’m always surprised at how a low cost of ownership is a critical selection criterion for payment engines, yet at the same time, very often the cost of the software is separated from the ownership cost of the infrastructure it lives on.

I welcome your thoughts and opinions on cost “diets” for our payments data centers.