Time after time, financial institutions are faced with this age old question. When assessing your IT solution deployment options, there are many factors to take into account. Both options have positive and negative consequences that must be considered to bring the best possible results for the financial institution. Ultimately, you have to determine which option offers the best competitive advantage, the best customer experience, the most cost savings, and optimum ROI.

For financial institution business managers and IT professionals, let’s consider two services that you are most likely to evaluate in the upcoming months:

• Open Accounts: A solution to open accounts online, in branch and call centers.

• Move Money: A solution to allow a user to move money from one account to another account anywhere. The market conditions have made these two services prime candidates for new deployment or upgrade in 2006. Before trying to build your own applications to deliver these services, you should consider the build or buy question. Here are several factors to consider in your decision:

• Features and Functions: Chances are you recognize the opportunity, and you have a good idea of what your financial institution needs. You may also think there are no commercial solutions out there that will exactly meet all of your requirements. You may feel you have no choice but to build the solution that matches your needs. In fact, it is more than likely what some of your role model peers may be doing or suggesting. Pause. There is something out there which may meet most if not all of your requirements, and it may be easier to modify the solution to be one hundred percent of what you need, or maybe you only need an eighty percent solution at twenty percent of costs.

• One Time Cost: How much will the solution cost to build? How much will it cost to buy? When determining the cost of building a solution, you have to consider the direct cost of the design, development, deployment, documentation and training as well as any third party components and hardware needed to bring the service to your customers. It may seem cheaper to build if you do not include all of the overhead or indirect costs. In reality, a packaged solution may be significantly less expensive.

• Ongoing Costs: Consider operation, maintenance, upgrade and support costs. What staff is needed to do all this work? How much will it cost to keep the service up and running over the next three, five, or ten years? Most applications in the financial industry easily last ten years or longer. Typically, ongoing costs are two to three times the one time cost. This is one area where a ‘buy’ option could be a clear winner if the application is going to change over time or requires significant operational support. A vendor providing the solution may be able to share such costs across many customers.

• Domain Knowledge: If the solution requires considerable domain knowledge and an understanding of best practices of your industry, do you have such experts on staff?

Would an outside vendor with industry knowledge be better equipped to bring that expertise with its solution? Can you keep up with changing technologies and services with your own staff, or will a financial technology vendor be able to do it better?

• Risk: There is higher risk associated with building the solution. If you decide to build your own system, there is no guarantee that the system will be functional or if the project will be on time. In most cases, commercial solutions and their vendors will have a track record that you can verify to manage your risk.

• Security and Compliance: Financial institutions have important requirements for IT solutions for the security of information and compliance with state and federal regulations and guidelines. If you choose to buy a solution, be certain the vendor’s technology is compliant with all the necessary requirements.

• Time to Market: How fast do you need the solution? Can you wait until it is created from scratch? Do you have qualified resources to build and support the solution? With a packaged solution, you can get up and running quickly. Obviously, if you build the solution from the ground up, it will take longer. Also, keep in mind the ‘scope creep’ that may be hard to control with all the internal people driving the project.

• Politics and Culture: Your institution does not have any politics to worry about. For the rest of us, it is a fact of life. What are the internal pushes and pulls? Who gets the credit for time to market or takes the blame for cost over runs? Does your IT team have ‘not invented here’ syndrome? Do all decision makers have a comprehensive view of resources and requirements associated with each option? It is necessary to have complete knowledge of all factors including benefits, risks, resources, and compliance, which will assist in the evaluation process.

• Strategic Value / Competition: Is there a competitive advantage to build rather than buy? Can you come up with solutions that will position you to be ahead of your competition and give you an advantage in the market place? Are the commercial options limited in its ability to configure and customize to make them unique for your service? Can you learn and benefit from a vendor’s industry knowledge and experiences?

• People: Always consider the people who will ultimately be responsible for delivering these services. If they do not want an external solution, it is easy for them to prove themselves right in saying ‘it will not work here’. Do they have the necessary skills and incentives in place to be rational in selecting the right option? Commercial solutions provide benefits in key areas such as cost, time to market, and risk management. Clearly, for most of you, the best way to reach the market with a state-of-the art solution in the shortest time is to buy a packaged solution rather than build your own.

Talk to your uMonitor solution provider to help you sort out your options. There is no cost to you until you decide to deploy their solutions.