SAP has vowed to triple its financial services business, and become the largest IT supplier to banks within three years.
Dominic Trotta, head of the financial services business at SAP, told Computerworld UK that banks, trading firms and insurance companies were a “strategic industry” for the software vendor.
“We’re going to triple our business and become the number one software provider for tier one and tier two clients by 2015,” said Trotta (pictured), formerly a chief information officer at Barclays and a CTO at Citigroup.
The revenues generated by SAP’s financial services business are not publicly broken down, but sources close to the vendor estimate it to have crossed the €1 billion mark in the last financial year. Total group revenues, including this and other sectors, were €12.5 billion in 2010, meaning that while banking is a large business for SAP, it does not yet have a clearly dominant portion of revenues.
SAP expressed strong confidence over its future growth in financial services. “The core banking market is very fragmented from a vendor perspective, with companies such as Fidelity, Temenos, Oracle and the Indian players in specific areas – and none has more than five percent or so marketshare,” Trotta said. “We should easily be able to hit our targets.”
SAP modules available to banks address everything from core analytics, transactions, reporting, sales, finance and human resources, Trotta said. The company is likely to draw on its existing presence with specific business modules in use at banks in order to offer them an expanded range of software.
SAP is promising banks better outcomes through the “strategic use of standard software”, including enterprise resource planning, Netweaver as an integration platform, service oriented architecture, BusinessObjects business intelligence, Sybase mobile capability, a mixture of cloud and on-premise platforms, and in-memory computing.
Trotta said he expected the large banks to initially stick mainly with on-premise transactional computing, as well as fixed and mobile customer relationship management and business intelligence. Over time, however, he expects cloud computing to become more popular among the large banks, mirroring their smaller counterparts that are already making software as a service investments.
Over the last two years, SAP has been pushing its in-memory computing offerings across industries, and Trotta said it was an attractive proposition to banks and trading firms. “Anytime we speak to a large bank, the topic comes up. In-memory is so much more efficient, and the high speed of access to risk and capital data is something they really look at.”
Large banking clients to centre their technology on SAP include HSBC, Barclays, Nationwide, UBS, Citigroup, Societe Generale and Deutsche Bank. Insurers include Allianz, Lloyds TSB and ING.
“We bring a deep understanding of banks’ business and can help them operate, collaborate, make decisions and adapt better,” Trotta said.
Banks as a whole had left technology updates around core processing “for as long as possible”, Trotta said, “and it’s got the point where many find their IT is detrimental”. As the economy begins to recover, this was prompting investment, he said.
“Additionally, banks are looking for more transparency and better risk analysis, meaning they need to improve the technology to help that,” he said.
Banks, many of which had traditionally developed key IT systems in-house, were looking to more off-the-shelf software, in order to operate in tougher financial constraints, with scarcer resources, and to gain “more consistent outcomes from the systems across the business”.
“The industry is catching up with other sectors, like oil and gas, electronics and car manufacturing,” he said. “The world has changed.”
Many banks were overhauling IT, taking a “step-wise” approach, Trotta said. “It depends on the bank, but often they start with getting all their customer information on one system, no matter whether it’s loans, credit cards or savings. Then they might tackle improvements in specific areas and assess their reporting capabilities.”
SAP approaches most of the banks through system integrators, many of which “have been in any particular institution for years”.