A recent Forrester survey showed that European financial services firms still have a surprisingly strong focus on in-house development.
Only about a quarter of the banks–and an even lower proportion of the insurance companies–are strategically heading toward off-the-shelf applications. Financial services ISVs in general, and insurance and banking platform vendors in particular, need to communicate the capabilities of their applications much better than today, manage different corporate and national cultures, and deliver more than just functionality: It is as much about technology and quality as it is about a vision for a future application landscape.
Banking platform vendors need to capitalize on the renewal opportunity. The rush toward application renewal obviously represents a huge opportunity for all kinds of financial services ISVs in general and for banking platform vendors in particular. To capitalize on this opportunity, many vendors have to do some homework regarding communications and marketing, product quality and technology, architecture, and vision.
Application renewal in financial services will not only make huge investments necessary, but is also one of the most significant IT projects of a financial services firm–if not the most significant and risky. Trust between vendors and financial services firms, based on a timely and open flow of communication, is a necessary basis for this kind of project. If the vendor’s roadmap is less than crystal clear–no clear and timely information and no clear assessment of quality deficiencies, but a lot of marketing glitter and noncommittal statements–then user companies should avoid that vendor. The risk and investment on the financial services side and the opportunity on the vendor side, however, should make this approach unnecessary – particularly if vendors want to convince banks (and insurance companies) to move away from their still very in-house-focused strategic application renewal directions.
The survey also found that three-quarters of European financial services companies favor in-house development, ranging from purely homegrown applications to a mixture of in-house development and off-the-shelf applications and 69% of these firms state that, from a strategic perspective, they prefer to operate their insurance or banking platform in-house.
On the other hand, the survey reports that only a minority of European firms in financial services have made the strategic decision to base the major share of their application landscapes on off-the-shelf applications–or even to mainly use insurance or banking platforms.
While public discussion is focused on outsourcing, offshoring, and packaged applications, the survey indicated that IT organizations of financial services firms regard themselves to be relatively unaffected.