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Cloud Deployment of FLEXTERA

Today, financial institutions all over the world strive to continuously improve the quality of their products and services, generating significant growth of the demand for specialized IT systems. Nevertheless, many of them are not ready to make one-time large investments to implement modern software solutions. That is where cloud technology may help reducing IT expenses in accordance with today’s business needs.

With FLEXTERA solutions available for cloud deployment, Diasoft offers to its customers a new approach to the delivery of IT products based on the modern market requirements.

Increasing efficiency of IT spending and resource utilization

Cloud technologies provide a new paradigm of delivering IT resources to the end user. This paradigm ensures dynamic (on-demand) scalability of the provided resources and uses pooled resources that are available to the consumer as a service. The cloud technology is characterized by the following key features:

  • Dynamic scalability and resource pooling — the main differentiator of the cloud technology is the opportunity to both increase and decrease computational resources. Such changes are performed flexibly basing on the end user’s needs. The cost effectiveness of such elasticity of the cloud service is reached via dynamic ("on-demand") provisioning of the pooled resources that are dedicated to support a certain number of customers.
  • Resource as a service — with different computational resources delivered as a service, rather than as a product, cloud computing ensures that the end user does not have to deal with any basic technologies and operations used to support this service.
  • Resource standardization — standardization is the top-priority issue for the cloud computing paradigm. It is standardization that allows creating pooled resources for the dynamic scalability. It also allows delivering computational resources as a service ensuring its repeated usage through sharing and significantly reducing maintenance expenses. That is why this feature is the key factor for the cost saving and an important competitive advantage for the business user.

 

The three basic service models distinguished by industry experts today include:

  • Infrastructure as a Service (IaaS);
  • Platform as a Service (PaaS);
  • Software as a Servce (SaaS).

 

Software as a Servcie (SaaS) is considered an alternative to the on-site implementation of an application. It has several differentiating features, associated with the complex use of different types of outsourcing (hardware, software, services) and the transition from the product purchase to the renting model, with the payment depending on the used resources (On Demand licenses or Pay as You Go).

It is the common global practice, that a consumer pays only the monthly subscription for the access to the application when subscribing for the SaaS-usage of an application. In comparison with the traditional licensing, this type of payment is more profitable for the user since it’s easier to allocate budget for the regular monthly payments than for the one-time large purchase. The latter often requires special investment funds, particularly when they involve the implementation of complex business solutions.

Significantly, the use of SaaS solutions allows considerable time and budget saving already at the implementation stage. This becomes possible due to the standardization of the delivered service. In most cases, SaaS payments are based on the resource utilization, i.e. they depend on how much resources are really consumed rather than on any long-term obligations based on the predictive estimation of future business volumes. There is an opportunity to either increase or decrease the volume of the consumed resources in any moment of time – depending on the real business needs. This is especially important for the projects that are associated with the launch of new businesses or are performed in terms of an uncertain economic situation.

Benefits of cloud deployment for small and mid-size banks

The SaaS model provides obvious advantages to small and mid-size banks.

First of all, cloud technology allows small and mid-size financial institutions to easily get access to the infrastructure, platform and software that — in case of a traditional business model — would require the deployment of a complex IT infrastructure and ensure its maintenance.

Even small companies have to obtain necessary expertise to ensure everyday management of servers and storage systems to support their complex business applications. Using software and infrastructure deployed in the cloud (IaaS and SaaS), these companies do not have to worry any more about various aspects of implementation and launching of infrastructure and complex software packages. All they have to do is to sign a contract on the consumption of the required resources as services. In addition, this business model ensures a higher Level of Service than is normally provided when a traditional approach to the infrastructure is used. Since the Service Level involves the reliability and performance of the solutions, it directly influences business continuity as well as investment and operational risks.

To resume, the consumption of service-oriented cloud solutions allows the end user to focus on more important business aspects, while the cloud technology becomes a very simple asset ensuring the support of the company’s business.

Secondly, the choice to migrate a significant part or all IT services into the cloud means considerable cost reduction for many small and mid-size banks.

According to McKinsey & Company, with SaaS, small and mid-size businesses can save up to 20–25% of their IT spending. The estimation of Diasoft’s experts and our customers’ experience has demonstrated that a small bank can save up to 30-40% of its IT expenses in a 5-year period.

The picture shows the results of the calculation of the SaaS-application TCO that was performed for one of Diasoft’s customers. The figures proved that the basis for the saving lies in the reduction of the engagement of bank specialists and the vendor into regular routines related to the deployment, configuration, and support of a business application. With the SaaS model, the number of manual tasks is minimized, and every possible operation is automated.

 

Leveraging Cloud Computing and SaaS to reduce IT expenses of MFI institutions

The support of multi-tenancy and cloud computing principles allows deploying FLEXTERA solutions for MFI based on the SaaS model. Using the cloud computing principles a financial organization acquires a number of technological advantages and significantly reduces its IT spending. According to the experts’ estimations, 85% of IT resources stand idle, with 70% of IT budgets covering maintenance expenses and not the development of the IT infrastructure. Cloud computing allows changing this situation dramatically through the following technological features:

  • Consumption based pricing: the services are paid depending on their actual consumption; the use of virtual technologies reduces the costs associated with upgrading, scaling, and maintenance of the IT infrastructure, and license fees;
  • With a multi-tenancy model, the cloud computing customer does not need to buy expensive software licenses; all they have to pay is the use of the software basing on the real consumption;
  • Reduction of the IT staff and infrastructure;
  • Opportunity to scale resources effectively to fulfill one-time resource intensive tasks;
  • Transparent IT spending.

 

Creating standard business models to support cloud deployment

Speaking about SaaS, it is important to mention standard (reference) business models, capable to cover needs of most business users. What is essential is that the global financial services market allows for repeatable usage of such reference models. Since the modern business is highly regulated and integrated on the international level, it even facilitates the usage of similar or standard business models – that is tends to speak the same language and play by the same rules.

Identification of standard business processes and creation of reference models brings advantages to both end users and providers of business solutions. The vendor can significantly reduce the expenses associated with the maintenance of the solution, since its functional development (e.g. support of regulatory changes) is realized for the whole group of end business users, instead of a single customer. It is clear that the vendor has to shift the expenses for the solution development onto the customer. If the total cost of the change is included into the single instance of the solution, it may become quite a burden for the end-user. Moreover, the higher gets the number of the supported solutions, the higher become the vendor’s expenses. That is why the standardization, including the creation of reference models, becomes vital for the creation, consumption and development of cloud services.

Diasoft finds it very important to provide SaaS solutions that incorporate ready-to-use reference models for various business lines. Such models are built on the best practices of our customers. This approach opens an opportunity to significantly reduce IT expenses required for the implementation, launch and maintenance of standard business models. The risks related to the business continuity and regulatory changes are also mitigated since reference business models are created to meet requirements of multiple end users. Diasoft has developed a number of reference business models which are already offered to our customers.