Editor's Note: In Part One of this two-part blog series, we're discussing the choices banks and credit unions face when replacing an outdated system with a new one. FIs often feel forced to choose along a spectrum of cost, convenience, and control.
It is not very different than the same logic most of us consider when we are undertaking a home remodeling project. You can do-it-yourself, which requires time and talent. It also may be interrupted by other priorities, repeatedly causing the finish line to move further into the future. Or, maybe there is an option for buying much of what you need already built. Why build cabinets when spectacular looking ones are sitting in a warehouse ready to install?
The choices we consider when remodeling are basically the same options banks and credit unions have when they need to replace an aging system with a new one. Should we implement a pre-developed off-the-shelf solution or build something from scratch ourselves? These options have been around the industry for decades and typically are positioned along a spectrum, one end of which is labeled “More Control” with the other end identified as “Less Cost.”
The Quest for Control
Building your own solution gives you complete control over the final outcome - from the solutions architecture to the features and functions. The control this option offers goes beyond the initial solution developed to include the ability to control your priorities and ensure your specific needs are met. However, this requires a large team of IT engineers and staff to develop and maintain software solutions over the life of the system. If you compare it to clothes shopping, this option goes beyond the metaphor of a tailored suit. It is more like producing the suit from weaving the fabric to be used to tailoring it to fit.
Buying a pre-developed off-the-shelf solution is often seen as a better alternative as well as more cost effective. However, the level of control for the institution is diminished and resources are still required to implement and manage the solution. Going back to the suit analogy, this has been compared to buying your suit off the rack and accepting whatever the company that produced millions of the same suit thinks a size 42 (if a male) or 6 (if female) is.
There are specific challenges to consider with the “build” and “have built" options that are worth mentioning since they each should be carefully weighed as part of deciding whether to pursue one of these options.
Money and Time: There is no way to overstate the kind of commitment a financial institution makes when using either of these options. A basic solution, e.g., a digital banking platform, requires highly skilled developers who are knowledgeable about how to utilize all the benefits of modern technology. Anyone who has run a software unit knows that the only thing certain at the beginning of most projects is that the plan will likely need to be adjusted along the way. These roadblocks typically add cost and impact what each sprint cycle will deliver.
Scale is no Slam Dunk: Nonetheless, scale should be the Holy Grail for any solution that could impact customers and members. Achieving it requires very savvy architects who have knowledge of the IT landscape in most financial institutions, which is cluttered with ancient back office systems, each typically locked in a line of business silos. Each time the system is changed, it must be ensured that the ability to scale is intact.
Refresh Your Tech: Building the solution is only the first step. The market never sits still. New options emerge from the technical world. It may be a new feature or a different approach to software architectures that improve time to market for new features. To ensure the platform continues to meet industry needs, there will need to be a team designated to identify what is on the horizon while at the same time discerning how to shape the solution to meet the needs of its users.
You Must Comply: Compliance is an ongoing theme within our industry. Any solution or system that comes in contact with or stores personal data must operate within a complex set of government regulations. When building in-house, you need to ensure your solution meets all requirements.
Check back next week for Part Two of this series to find out more about finding the right balance of control and whether that means build or buy—Or perhaps a third option.