Are best-of-breed systems actually best for banks?

In the current marketplace, every bank wants to be a best-of-breed financial institution. Having the right technology and infrastructure in place can enable banks to innovate, to differentiate and to maintain a competitive edge.

However, chasing best-of-breed technologies is not always the best way to become a best-of-breed bank. Instead, banks should opt for solutions that best fit with their existing systems, their objectives and their budgets.

In the past, as a systems integrator, we typically worked with clients very closely to figure out the details of their hardware, software and systems and then piece together a solution and deliver it to their site. Today, however, we are taking the components and forming them into a service rather than figuring out the individual hardware elements. We can take a pre-configured cloud appliance, for instance, and in many cases we can pre-assemble it with specific software.

These are fit-for-purpose solutions, as opposed to best-of-breed solutions.

For example, a fit-for-purpose solution could be a risk engine, with all the underlying technology and risk software pre-configured and pre-loaded. We can either drop the risk engine at a customer location, or keep it on our premises or with a cloud provider and make it accessible regardless of customer location.

Banks can very simply concentrate on the functionality and on business outcomes instead of the reliability and performance of the technology components.

Many banks are still solely focused on best-of-breed technology. They want the best of each type of component. Over time, these components commoditize and a newer value chain evolves. Banks are then quickly left with components that used to be best-of-breed. As a result, institutions get stuck in an ongoing process to invest in and maintain what they have while constantly looking for newer best-of-breed solutions that can help them differentiate.

But technology is evolving so rapidly these days that something enabling a differentiated service quickly becomes old – and banks then have to look for the next, best thing because the competition is catching up.

In other words, these banks are left searching for something that doesn’t exist.

They have been going through elaborate processes to detail requirements and evaluate different vendor offers. After an elaborate search, they may find only a 60 percent to 70 percent fit for their needs and then they will engage a services firm like CSC to combine and run all the various best-of-breed components. This can be a very costly and ineffective exercise.

It no longer makes sense for banks to look only to best-of-breed. A better option is to search for the best functional fit for technology –  fit-for-purpose solutions that are best-suited to the bank’s capabilities and objectives.

RELATED LINKS

4 keys to success in the banking digital transformation

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Banking is changing: Winners, losers and the new ecosystem

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