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February 11, 2008
SaaS: Making IT a 'Strategic Weapon' for Banks
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3Tera Chairman and CEO Barry X Lynn discusses why it's only a matter of time before all financial institutions -- at those that want to be competitive -- will be utilizing utility computing to enable software-as-service applications. Says Lynn: "[W]e are seeing financial institutions starting to think about it as a strategic weapon again, and using it that way. Those who do not will either play catch up or fade away."
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GRIDtoday: Generally speaking, what kind of market are you seeing for the delivery of financial applications as a service? What kinds of applications are companies looking to get from a SaaS model?
BARRY X LYNN: The market is huge and already somewhat tapped. Look at banks; they all have online banking now. Look at brokerages; they all have online trading. Many banks offer corporate treasurers Web-based cash management services. Insurance companies allow subscribers to submit claims online, et cetera. The big change is this: These Web-based services have become predominant in financial institutions, and, in many cases, dominant. So, a financial institution no longer adds value simply by paying higher interest rates, charging lower commissions, keeping premiums down, et cetera. They add more value as distributors and processors of financial information. Affecting this distribution and processing on the Web through SaaS applications is less expensive, by, I'd estimate, 50-fold, versus doing the same transactions in person in a branch office.
Gt: What factors are driving this, and how is this demand not being snuffed out by concerns over security, reliability, availability, etc.?
LYNN: The main driving factors are progress, the ability to reduce costs, and being able to provide more services to more customers (e.g., online banking, payroll and tax payments now available equally to large corporations and to SMBs), and with far greater convenience to the customers -- all things that become competitive advantage to institutions who offer such services. Given the available bandwidth, processor speed and the cost effectiveness of it all, the expense incurred doing SaaS-y things is so much less than it is for human interaction. The Web also provides financial institutions with unlimited geographical reach.
It is not being snuffed out by concerns over security, reliability, availability, et cetera, but, because of these concerns, uptake is slower than it can be. Many of these concerns are valid, but many are the result of resistance to change and the remaining Luddites in the large corporate datacenters. However, so much investment has been, and is being, made in the areas of information technology security, privacy, scalability, et cetera, that technologies addressing these issues are state-of-the-art. Platforms that enable Web-based services and SaaS, and use these technologies, such as 3Tera's AppLogic, have become extremely secure. Running the SaaS in a "cloud" makes it far more difficult to be targeted by hackers. Uptime is several nines out of the box and several more nines with relatively inexpensive customized configuration. Our product scales linearly. We have found that running a SaaS on our platform -- be it four processors, 40 processors or 400 processors -- incurs very little overhead, which remains flat in all of these cases. And this is not theory -- we have done it!
Gt: How does 3Tera play into the concept of delivering financial applications as a service? What essential elements of a SaaS strategy does 3Tera bring to the table, and on what level(s) of the SaaS model does it operate?
LYNN: If a financial institution uses 3Tera as its SaaS platform, it can choose from several models. If they are offering a completely standalone service, including its own data, they can set up that application as a fully encapsulated element, either in their own datacenter or at a hosted datacenter, including all of its virtual infrastructure, totally isolated from whatever else they are running in their datacenters. Because the volume fluctuations of SaaS are volatile and unpredictable, without 3Tera, they would have to provision themselves for peak volume, something they may hit a small percentage of the time or, perhaps, not at all. With 3Tera, they can provision for their average needs. When those needs are exceeded, they can dynamically burst into additional resources, provisioning on the fly, and releasing those resources when they are no longer needed. Thus, they only incur the cost of what they consume, rather than incurring the cost of what they might, maybe, perhaps, but maybe not, someday need.
Also, if financial institutions want their SaaS applications to have access to their corporate database information or systems of record, they can do so with 3Tera, as we enable secure virtual gateways, rather than channel connections, so that those databases and SORs remain physically isolated from the SaaS. I have already discussed the security, reliability and scalability that 3Tera affords. To do this, we operate at the lowest level of the SaaS environment. Our platform runs on top of a computer grid, so it is, effectively, an operating system for the grid that enables all the other elements of the SaaS infrastructure. The native operating system or systems (yes, 3Tera enables the mixing and matching of multiple OSs in a single application!) runs on top of our AppLogic and the SaaS's required middleware, application software, infrastructure, data, et cetera, runs on top of the native OS or OSs.
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