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Build, Buy or Outsource? You Decide
In an age where financial institutions and corporates are under pressure from regulators, shareholders and customers, what is the best route to take to ensure you have the most effective technology that delivers optimal solutions for clients?
Invariably, when it comes to payment solutions, this argument offers three options: build, buy or outsource. Each has its benefits but they also have their challenges at a time when companies are cutting costs, trimming workforces and reducing budgets. Everyone seems to be in streamlining mode these days, while simultaneously trying to be as innovative as possible.
Building would seem to deliver flexibility and a heightened level of control. But it can also be a complex process and any company making this choice would need partners on both the legal and technical fronts. If the solution being built is not part of the core business, then the very act of building and resourcing it can take it into the core, thereby creating recurring annual costs and maybe becoming expensive to maintain and run. There can be an element of ‘reinventing the wheel’ about having to build something from the start and if the project feels like this then you should be looking to buy or outsource. Why self-build when you can buy a commoditised service or solution off-the- shelf?
There are a number of advocates for buying the capabilities you need but it can manifest itself in a number of different ways. There is the software-as- a-service (SaaS) model, in which third-party providers host applications and make them accessible to customers over the internet. It’s a derivative of the cloud, alongside infrastructure-as- a-service (IaaS) and platform-as- a-service (PaaS).
Off-the- shelf solutions will be tried and tested. They are likely to provide an element of customisation ‘out-of- the-box’, therefore allowing the solution to be deployed within the customer’s organisation without adapting the company’s process or target-operating- model. Beyond this, customisation is available with some off-the- shelf solutions but cost, agility and time can become a challenge.
However, buying off-the- shelf does not always tick every box and there may be unwanted features that will have to be discarded or stripped back. There are also potential issues around integrating a new product into in-house infrastructure and inevitably, possible costs around continued maintenance.
Regardless of these issues, buying an established product, possibly an industry standard, brings many benefits and there is a certain logic in opting for a product that has a strong track record. For example, why would anyone attempt to build a Client Relationship Management tool when there are products like Salesforce that have cornered a market?
Assuming that neither build nor buy fits the bill, then outsourcing or white labelling becomes increasingly attractive.
By farming out payments business to a service provider, a company can concentrate on core business and outsource functions and processes that are no longer considered to be core. This reduces operational costs and the expensive outlay on technology, and if the correct provider is chosen, will keep the customer ahead of the curve with the regulatory, compliance and technical aspects of the service.
There are considerations as you are, after all, putting customer relationships and service levels in the hand of a third party but the benefits outweigh any concerns. But there are many good examples of how outsourcing can reap benefits for the company and its customer base, who can benefit from the broader expertise of the provider.
Whatever the route, any company that decides to build, buy or outsource has to carefully manage the process in order to ensure quality standards are maintained, transition is seamless and, above all, customers feel they are getting a good deal. If any of these fall down, any anticipated operational or financial gains run the risk of being compromised.
By Robert Conway, Head of IT Development at Earthport
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