More and more financial institutions are making the move to utilizing Software as a Service (SaaS) instead of incurring the expense and required internal effort to setup and maintain in-house software solutions. Let me point out that SaaS applications are not about to replace core banking systems anytime soon. However when it comes to managing discretionary services that are free of risk when it comes to identifying personal information (see previous post) financial institutions both large and small are now seriously considering such applications.

As a starting point it is probably prudent to define what SaaS is and why many businesses are moving to it. For this purpose I will enlist the assistance of Wikipedia:

What is SaaS?

Software as a Service (SaaS, typically pronounced ‘sass’) is a model of software deployment whereby a provider licenses an application to customers for use as a service on demand. SaaS software vendors may host the application on their own web servers or download the application to the consumer device, disabling it after use or after the on-demand contract expires. The on-demand function may be handled internally to share licenses within a firm or by a third-party application service provider (ASP) sharing licenses between firms.

Why SaaS?

The traditional rationale for outsourcing of IT systems involves applying economies of scale to the operation of applications, such that a service provider can offer better, cheaper, more reliable applications than companies can themselves. The use of SaaS-based applications has grown dramatically, as reported by many of the analyst firms that cover the sector. But as of 2009, SaaS has only truly flourished in recent years. Several important changes to the way people work have made this rapid acceptance possible:

• Computers have become widespread: Most information workers have access to a computer and are familiar with conventions from mouse usage to web interfaces. As a result, the learning curve for new applications is lower and less hand-holding by internal IT is needed.
• Computing itself has become a commodity: In the past, corporate mainframes were jealously guarded as strategic advantages. More recently, the applications were viewed as strategic. Today, people know it’s the business processes and the data itself—customer records, workflows, and pricing information—that matters. Computing and application licenses are cost centers, and as such, they’re suitable for cost reduction and outsourcing. The adoption of SaaS could also drive Internet-scale to become a commodity.
• Insourcing IT systems requires expensive overhead including salaries, health care, liability and physical building space.
• Applications have tended to standardize: with some notable, industry-specific exceptions, most people spend most of their time using standardized applications. An expense-reporting page, an applicant screening tool, a spreadsheet, or an e-mail system are all sufficiently ubiquitous and well understood that most users can switch from one system to another easily. This is evident from the number of web-based calendaring, spreadsheet, and e-mail systems that have emerged in recent years.
• Parametric applications are usable: In older applications, one could often only change a workflow by modifying the code. But in more recent applications, particularly web-based ones, significantly new applications can be created from parameters and macros. This allows organizations to create many different kinds of business logic atop a common application platform. Many SaaS providers allow a wide range of customization within a basic set of functions.
• A specialized software provider can target global markets: A company that made software for human resource management at boutique hotels might once have had a hard time finding enough of a market to sell its applications. But a hosted application can instantly reach the entire market, making specialization within a vertical market not only possible, but preferable. This in turn means that SaaS providers can often deliver products that meet their markets’ needs more closely than traditional “shrinkwrap” vendors could.
• Web systems show reliability: Despite sporadic outages and slow-downs, most people are willing to use the public Internet, the Hypertext Transfer Protocol and the TCP/IP stack to deliver business functions to end users.
• Security is sufficiently well trusted and transparent: With the broad adoption of SSL, organizations have a way of reaching their applications without the complexity and burden of end-user configurations or VPNs.
• Availability of enablement technology: According to IDC, organizations developing enablement technology that allow other vendors to quickly build SaaS applications will play an important role in driving the adoption of SaaS. Because of SaaS’ relative infancy, many companies have either built enablement tools or platforms or are in the process of engineering enablement tools or platforms. A Saugatuck study shows that the industry will most likely converge to three or four enablers that will act as SaaS Integration Platforms (SIPs).
• Bandwidth of wide-area networks has grown drastically following Moore’s Law (more than 100% increase each 24 months) and is about to reach slow local networks bandwidths. Added to network quality of service improvement this has driven people and companies to trustfully access remote locations and applications with low latencies and acceptable speeds.
• SaaS has the effect of democratizing software, allowing small and medium businesses to have access to functionality formerly the domain of large enterprises. Many analytical software tools have been released as SaaS applications and are available on a monthly subscription basis
• Data Aggregation. Instead of collecting data from multiple data sources, with potentially different database schemas, all data for all customers is stored in a single database schema (i.e. multi-tenant). Thus, running queries across customers, mining data, and looking for trends is much simpler.

Although there are many variants of the SaaS model for banking, the one most near and dear to my heart has to do with currency supply chain management. I do not want to turn this post into an advertisement for my employer, however I am proud to be involved in the growing success of this emerging cash management delivery model. In my opinion currency supply chain management is a perfect vehicle for a SaaS deployment. There is no customer or bank data security risk; the solution is infinitely scalable and with the appropriate “engine” driving the application it can manage everything from the smallest ATM network to large ATM/Branch/Vault supply chains. It also has the distinct advantage of being legacy platform independent – meaning a robust SaaS cash management solution can assist any bank in moving from a “marginal”, “stable” or “best practices” based solution to one that is truly “transformational” in it’s ability to drive significant process improvement and surprisingly dramatic cost reductions.

In closing I would like to depart from my self-imposed rule not to make this blog a Transoft marketing tool – just this once (or at least until I am compelled to do so again – never say never, right!?!). I am honored to be involved with a tier 2 financial institution that is breaking ground for institutions of similar size (and larger) and I firmly believe they are amongst the “early adopters” that are starting a trend by embracing SaaS as a significant business advantage. I will let the press release speak for them…

MEDIA RELEASE

Tuesday, June 23, 2009

Woodforest Financial Group chooses Transoft International’s SaaS Cash Management Solution

Industry leading Cash Management Solution chosen by fast growing financial institution.

CARY, N.C. — Transoft International, the leading provider of currency supply chain management solutions, announced today that Woodforest Financial Group has chosen Transoft’s OptimizeCF currency management software for ATM and Branch cash management.

OptimizeCF, the only currency supply chain solution built from the ground up as a true Software as a Service (SaaS) application will be used to automate cash forecasting, cost balancing, ordering, monitoring, expense tracking and more for Woodforest Financial Group. Using historical demand data and statistical algorithms, ATM and branch cash orders and returns are cost optimized to effectively meet demand and minimize holdings – all at the lowest possible cost. In addition, OptimizeCF takes into account seasonal fluctuations, events and other trends that influence demand for cash to ensure maximum network availability.

“We have chosen Transoft’s OptimizeCF solution based on its proven foundation of cash optimization techniques, wide range of features, and the company’s overall concentrated focus on cash management tools. We are aggressively implementing the solution and expect to see immediate and positive results.” states James Dreibelbis, Chief Executive Officer at Woodforest Bank.

Bo Holmgreen, President of Transoft International Inc. remarked, “We are excited to have Woodforest Financial Group choose the OptimizeCF platform to manage their currency supply chain needs. Being chosen by Woodforest Financial Group is a significant confirmation that our extensive investment into this Software as a Service Web 2.0 application is the groundbreaking cash optimization solution being sought by financial institutions of all sizes.“

About Woodforest Financial Group

Woodforest Financial Group Inc. family of companies includes both Woodforest National Bank and Woodforest Bank.  Each bank plays an important role in the continued growth and strength of Woodforest. Woodforest strives to make every customer’s personal banking experience simple and convenient. We’re committed to our motto of Banking your way…EVERY DAY AND NIGHT!^® by offering responsive products, quality customer service, and branches open “around the clock” in select markets!

About Transoft International, Inc.

Transoft International, Inc. is a leading provider of currency supply chain management software solutions for the banking industry. Transoft products include OptiCash, OptiNet, OptimizeCF, OptiVLM and OptiVault. These sophisticated applications have been developed by experienced cash management professionals to efficiently and cost-effectively handle all aspects of the complex cash management process. In use worldwide by banks, ATM networks, armored car service providers and retailers, Transoft solutions are generating significant recurring cost savings for all forms of currency supply chain networks. For more information, please visit www.Transoftinc.com.

Media Contact:

Andy Kozma

919-326-6238

andy.kozma@transoftinc.com