The Banking Platform Vendor Development Quandary

I have discussed questions such as “Which banking platform vendor is the right one for a given financial services firm in its specific requirements context in a given country?” with Forrester clients for some time. Interestingly, the share of these discussions touching on questions such as “How viable is vendor X?” and “Is vendor Y the right one for a bank the size of mine?” is increasing. What is the reason for this?

Recent Forrester reports have shown that the 2008 and 2009 banking platform markets were not as active as before the crisis (see the Forrester report “Global Banking Platform Deals 2009”). In addition, the most active region (Asia Pacific) is not necessarily the most attractive one as far as size of projects budgets are concerned (see the Forrester report “Global Banking Platform Deals 2009: Regions And Functionality”).  

It is clear that in such a global situation, the reduced deal numbers of many vendors and the economic trouble of some are reason for concern for many delivery teams making or supporting the long-term decision for a new banking platform vendor — particularly when preliminary findings from a Forrester survey show a new thrust for the renewal of the financial service application landscape. At the same time, banking platform vendors’ behavior is changing:

  • Very large banking platform players (in terms of new named customers) are starting to focus on smaller and medium-sized banks — maybe because it is easier to sell to them, maybe because their already large client base makes it harder to find larger new clients, or maybe because the solutions offer more value to these smaller (from a global perspective) banks.
  • Some of the challengers of those vendors are starting to focus on strategic clients as well as on the large and largest banks. Infosys’ ongoing project with Union Bank in California is one example of this trend; SAP’s recent success in winning a deal for Deutsche Bank HQ is another; and press reports (for example in The Hindu Times) say that TCS has also signed a most likely even larger deal for many of Deutsche Bank’s international subsidiaries.

Next to this emerging strategic alignment, there is another key difference between the various banking platform vendors: size. The global banking platforms market sees direct competition among vendors with total revenues in the 10-billion-plus USD range, those with less than 100 million USD in revenues, and those in between. It becomes very clear that in particular those — in some cases very successful — vendors that see themselves “in between“ will find it continuously harder to compete with the large powerful gorillas as well as the tiny fast antelopes. Consequently, repositioning as well as growth strategies can be expected.

All these developments bring the risk that a given banking platform will turn into an entirely different (but not necessarily a worse) partner for you and your financial services firm. Do you see a risk in doing business with a vendor that may become a “bad fit” for your firm after some time — in terms of targeted customer groups, available functionality, or well-suited delivery capability? Let me know what you think. JHoppermann@forrester.com