When Trading Apps first started supplying software to the securities finance industry, the norm was to deliver software to the customer’s in-house IT department for them to manage as an on-premise installation. Today, Trading Apps almost exclusively provides its products as Software-as-a-Service (SaaS) on hosted infrastructure managed by Trading Apps.
On-premise and hosted technology provisions have their perceived advantages and disadvantages, as do proprietary systems versus vendor products and services. In this article, I hope to explore the pros and cons of both approaches, albeit from a Trading Apps perspective.
Whenever banks are seeking to bring in or use technology from an external provider, they have several important considerations. Firstly, they need the confidence that the new product will meet or exceed the expectations or promises that have been made by the vendor
or internal technology projects. Will the final solution truly solve the issues, or indeed increase the profitability and business performance of the desk, or reduce risks for those who depend on its performance? How do you calculate your return over investment costs?
When considering a product to implement, the suitability should
be easy to assess for an existing vendor product, either hosted or on-premise. It is possible to see good demonstrations of the product, alongside thorough scrutiny of documentation and Q&A sessions with the vendor, before making the purchase. Fortunately, our marketplace involves recommendations and people moves, both of which add confidence to the pre-existing vendor solution.
But our industry has many examples where a new system development project, with many promises relating to functionality and costs, are proven unsuccessful. That is true of vendors and of IT departments, of course. Maybe this is why proven systems tend to stand the test of time and there is occasional reticence to change.
Normally with vendors, and definitely with Trading Apps, there is no big financial commitment until the product is fully accepted by the customer as fit for purpose — if the product does not deliver what was promised, the institution has the right to a refund for all its licence fees. Vendors tend to provide ‘proven’ products but, in many ways, they compete against the ambitions of internal initiatives.
Do institutions compare these in-house build proposals well enough and properly understand the true upfront and ongoing costs and risk of failure. Do they understand the likely timescales to going live, of internal provision versus buying in a ready-to-roll service? Hosted provision enabled Trading Apps to recently deploy a trading stack within five months of contract signature, working in close collaboration with internal teams to assist with integration. This was a real success for both vendor and customer.
“If a good product cannot be maintained to be functional and accessible whenever it is needed, this could cause havoc with workflows, reputation, risk and personnel morale”
Alongside the functionality of the product, the other high priority consideration is one of security. Banks and their supply chains
are a continuous target for cybercriminals. They must ensure that
their systems and data are protected from malicious attacks as the reputational damage from data breaches can be incalculable. Vendor assessments that Trading Apps must complete are a testament to how seriously this is taken. We have the benefit, in some ways, of multiple audits and scrutiny from across our entire customer base. The vast array of increasingly challenging questions continually pushes our team to be best in class, taking in suggestions from multiple banks and audit companies.
The next important consideration is how reliable the provision of the technology will be to the desk. If a good product cannot be maintained to be functional and accessible whenever it is needed, this could cause havoc with workflows, reputation, risk and personnel morale. Everyone knows what it is like when your system goes down and how stranded or stressed it can make you feel. But does the desk really know why the service went down? Where the product is managed in house, it may not be the fault of the vendor — the supplied product relies on the environment in which it is installed and managed. With so many moving parts, often it is difficult to identify the true causes.
So, what about on-premise versus hosted when it comes to ‘functionality’? Products of the complexity and interoperability of Trading Apps place great reliance on the background infrastructure and database management to work correctly. For on-premise customers, these are handled by the internal IT team of the bank and any equipment or infrastructure challenges commonly sit on their to-do list with all of the other demands that the team faces.
The IT crowd may present a one-office team focused on sorting your issues, but that is not often the case in a global bank and varies greatly between institutions. There are often separate teams with responsibility for networks, databases, hardware, software configuration and interfaces — quite commonly operating in a relatively siloed manner.
When Trading Apps hosts a product, we strive to ensure everything works harmoniously and stays connected on the client’s behalf and we provide this as a fixed annual fee. When considering budgets, vendor fees should be compared appropriately against the true costs within the bank of providing all of these services internally. Those costs are not just the machines and the connectivity, but the personnel costs to support, maintain and fix issues as they arise. With vendor-hosted products, all a client needs to manage is their web browser and external connectivity. Once the vendor is locked and loaded to the right parts of the system, we manage everything that is needed to have optimal enjoyment of the product.
After clients have made their decision and they move forward and want new features, there are new considerations. Inevitably, workflows and opportunities change continually through time. New systems and new interfaces need to be adopted and connected. Incoming files or feeds may alter and downstream connections to other systems or to external bodies need managing continually too.
As on-premise customers seek to enhance their vendor-provided product, the speed at which those improvements are available to them can be hindered by the process of moving through the internal pipeline to deliver this into the production environment. Whereas, in a hosted deployment, the vendor has direct access to their system logs to constantly analyse and fine tune the product’s performance, this is not always the case with on-premise setups, where it can be very difficult for vendors to get the correct diagnostic information they need from deep within the bank’s systems. When hosted, the vendor has access to both user acceptance testing (UAT) and production environments, allowing rapid diagnostic analysis, appropriate testing and deployment of the next enhancement or bug fix.
In summary, there is a lot to mull over before deciding to build or buy the next solution, and then whether to bring it in house or have it provided as a service (SaaS). Key considerations in shaping this decision are:
- Functionality – does it solve your problem or improve your business?
- Security – is it reassuring to know that vendor environments and procedures are multi-audited to the highest degree available in the industry, or do you prefer the comfort of the bank’s own standards?
- Reliability – good software is no use without good hardware, database and infrastructure management, which needs to improve with the product as you grow the business — how easy will it be to improve the product through time to keep you ahead of your competition?
- Cost – have all the costs been compared appropriately, including the future management of the product, and are those figures fixed or variable? If it fails, who picks up the tab?
When mulling these big decisions over, remember Trading Apps and, of course, other vendors are very happy to share their experiences. Trading Apps are keen to support clients in making the best decision for their situation.