TECH TALK: An Affordable Alternative Technology Architecture for Indias BFSI Industry

[This article was written for Dataquest.]

At least one of the top-selling banking software solutions works only on the MS-Windows platform. This means that banks considering the solution have to necessarily use an infrastructure which comprises of thick, new desktops and MS-Windows as the OS. Built into this assumption is the need for its customers to upgrade desktops every 3-4 years. Are there alternatives?

One of the large banks in India recently had a tender for a messaging solution. The tender was open only for IBM (Lotus Notes), Microsoft (Exchange) and Novell (Groupwise). Are there alternatives?

A large financial services organization is considering upgrades of its desktops all running the MS-Windows and MS-Office organisation. The total cost of ownership over a four-year period per user will work out to Rs 1,00,000 (USD 2,000), by no means a pittance. Are there alternatives?

Indias banking, financial services and insurance (BFSI) industry is the new cash guzzler. Technology is rapidly becoming the oil of the 21st century for India. Investments in hardware and software are being made in large quantities as organizations modernize and want to us IT as both the foundation for their business and for competitive differentiation. But in doing so, we do not realize the cost at which this is happening.

Given infinite (or large) resources, there is no question that organisations in India would want to use the best technology available in the world. Price is often used as an indicator of the bestness of a technology solution. So, the desire by Indian banking institutions to spend on putting a world-class IT infrastructure is understandable.

Unfortunately, this is not an ideal world and resources are not infinite. Indian banks earn in rupees and spend in dollars for technology. Most technology happens to be dollar-denominated, with the result that the Indian price points can appear seemingly quite expensive. Organisations are then faced with two options: either to go ahead with the spend without the corresponding dollar-denominated earning capability, or to limit technology investments.

If it was just a single bank, then it may not matter because customers would not have a choice. But there are multiple banks competing for business. So, as one starts spend on the best dollar-denominated technology, so does the other, and then the next, and so on. Who wins? The technology vendors. Who loses? The non-spenders. The IT-spending banks end up neutralising each others technology impact, and customers get lower returns on their monies in the bank since a portion of that is being used in an IT arms race.

No bank would like to compromise on the technology architecture that it builds, but are there alternatives which can create a comparable technology base but at more affordable price points?

The solution does not lie in not adopting technology. In no way do we want Indian banks to be behind or technologically inferior to their global counterparts. So, what then is the alternative?

The Indian BFSI players are of two types: the ones at the top of the pyramid that are big enough to be able to easily afford the dollar-denominated tech spends, and the ones who are not able to but have to spend to match up to the competition. The alternatives are needed more for the second category than the first.

Tomorrow: Part 2

Published by

Rajesh Jain

An Entrepreneur based in Mumbai, India.