Banks are increasingly replacing custom-built enterprise resource planning (ERP) applications with standard off-the-shelf products, according to research conducted by the European Business School and sponsored by SAP.
Although banks have traditionally relied on home-grown, custom-built software to handle banking and back office processes, the survey of senior managers at 114 of the world's largest banks found that 50% were already using a standard ERP software package and an additional 14% considering an ERP purchase.
Five years ago, off-the-shelf packages represented less than 40% of software in banks. This is expected to top 60% in the next few years.
EBS says the shift toward standard software is in response to tougher market competition, shrinking margins, new legal and regulatory requirements and increasing mergers and acquisitions.
The need for improved business processes and better transparency and quality of information are the two most cited reasons for adopting an ERP system.
According to the research, new ERP systems with portal functionality are increasing end-user acceptance and adoption. Furthermore, the ability to integrate ERP with other IT systems was cited as critically important, particularly as the majority of banks surveyed (60%) prefer using IT product from multiple vendors.
Dirk Schiereck, endowed chair for banking and finance, EBS, comments: "Banks' desire for business growth, the ability to evolve and integrate systems and the need for wide-ranging and easy-to-use functionality represent the primary factors affecting ERP buying decisions, surprisingly much more than cost considerations. This indicates to us a clear and growing understanding by banks of the strategic long-term value of enterprise resource planning."