Banks need technology to remain competitive in the highly volatile global trade finance market. Introducing new offerings, meeting ever-evolving customer needs, delivering exceptional service and complying with new regulations depend on innovative and cost-effective
technology solutions. Fragmented legacy systems and the cost and slow speed of traditional technology upgrades, however, can limit a bank’s ability to keep pace with rapid market transformation.
Traditionally, banks have taken a "build or buy" technology approach in their trade finance business, designing their own solutions or purchasing off the shelf. Facing the legacy upgrade dilemma, however, as well as an increasing total cost of ownership
for IT, many leading banks are taking a different approach—the cloud-based software as a service (SaaS) model.
With the SaaS model, a bank can move all of the software, hardware and services needed to run its global trade business to a private, highly secured cloud environment operated by a trusted partner. This type of model provides significant business advantages
over the traditional "build or buy" approach, enabling banks to achieve their business goals more effectively and for less cost.
Some key advantages of the SaaS model in comparison to traditional solutions include the following:
- License fees: For mid- to large-size banks, software license fees can exceed several hundred thousand to millions of dollars. With the SaaS model, there are no license fees.
- Software maintenance: With a traditional solution, these costs must be paid in addition to license fees and typically amount to 20 percent or more of the license fee each year. With the SaaS model, these costs are significantly lower and are built
into the annual fee.
- Hardware and related maintenance: Costs required for setting up application and disaster recovery infrastructures and ongoing third-party licensing and upgrades can be excessive. There are no infrastructure costs with a SaaS model; instead, these
costs are built into the volume-based fee.
- Technology upgrades: Traditional licensed software providers typically release new functional every 18 months or so. Then the bank has to justify the expense of upgrading in competition with other bank priorities. Even if approved, it could take
many months or years to complete the upgrade project at a cost of hundreds of thousands of dollars. With an SaaS model, new releases are delivered directly into production many times a year at no extra cost.
- Technical support: Usually as much as 20 percent of a licensing fee, the cost of technology support (e.g., help desk, application services, data center operations, etc.) can quickly add up. These costs are built into the volume-based fee of an SaaS
- Evolving with the market: Staying ahead of the technology curve and market changes can require a huge investment in terms of time and cost. Because the SaaS model delivers many releases a year into production, the bank has the tools it needs to grow
in a competitive marketplace.
The SaaS model's volume-based service fee covers all of the major items that would typically require an upfront and significant cash outlay. It typically includes use of the platform, 24x7 transaction processing, 24x7 support, new releases, hardware/software,
third-party upgrades, and business continuity/disaster recovery services.
As a result, the model reduces a bank's overall total cost of ownership for IT while enabling it to do more for less. Overall business benefits include increased revenue, operational efficiency, global transparency, service excellence, time-to-market and
risk mitigation, to name a few.