[kictanet] TCO & Cloud

Fri Jan 27 11:03:18 EAT 2012

Hi Francis,

I will disagree with you in the issue of security as we all know that its not about where the data sits but how secure it is.  

Many a times a go to an ATM just to find a mini-statement sticking out of the printer slot which tells you that the issue is not really account visibility but how difficult it is to manipulate.

Still looking at the security issue, who is likely to offer better security, some small fly by night operation like the one that developed the web sites for the recently hacked government web sites or a muli-billion telco?  

For micro institutions, less than 250 employees, like we have in Kenya getting on the cloud does not require those text book approaches as most of the so called core applications are not mission critical which is why some of our large banks can continue to operate even with this so called core banking application offline.  Many of the organisations do not even have an online backup site.

I consulted for a bank some years back who switched their core banking application over a weekend with almost no disruption to their services.  Once the data conversion process had been perfected all that was needed was 6 hours to upload onto the new system.

There is a very clear reason why I had TCO (Total Cot of Ownership) in the subject of my post, many organisations do the calculation you just did to justify capital expenditure (CAPEX) and forget that there is an operating expense (OPEX) such as insurance, maintenance, power production/consumption and none core staff to that CAPEX.

If those funds where lent out to the members/customers at 12% pa the organisation would receive and additional US$ 6.24 Million per annum while saving on certain OpEx  such as 12% on comprehensive maintenance (6 M), 4% on insurance (2.1M), office space (1,000 sq. feet @ 80/- = 0.8 M), none core IT staff (4 M) and power (4 M - KPLC & generator) which adds up to about Kes. 17 million per annum.

With the same provided as a service at a charge of 5/- per transaction with 200,000 accounts of which 30% are active each with 2 transactions per month adds up to 7.2 Million per year which is covered by the interest on the money that has been used to acquire Temenos.  

The Kes. 17 million saving from the OPEX will bring in an additional 2 million in interest.

All this just by using my form 2 accounting knowledge, imagine what I could come up with if I applied my advanced finance skills and was actually being paid to do it?

Regards

Robert Yawe
KAY System Technologies Ltd
Phoenix House, 6th Floor
P O Box 55806 Nairobi, 00200
Kenya Tel: +254722511225, +254202010696

________________________________
 From: Francis Hook <francis.hook at gmail.com>
To: robert yawe <robertyawe at yahoo.co.uk> 
Cc: KICTAnet ICT Policy Discussions <kictanet at lists.kictanet.or.ke> 
Sent: Friday, 27 January 2012, 9:59
Subject: Re: [kictanet] TCO & Cloud

Hi Robert,
Approaches to the cloud have to be rather cautious...especially in the
financial sector and other sectors that handle personal info.    Some
organisations will opt to have a hybrid crowd where they have their
private cloud (with Temenos, HR systems, etc - sensitive stuff) and
perhaps farm out to a public cloud apps like CRM, Sales processing,
customer feedback  interfaces, etc

On the issue of K-rep - if they have 200,000 accts and the system cost
Kshs 52 million - this works out to Kshs 260 per account holder -
something that can be somehow "loaded" onto ledger fees over say three
months without too much furore - but in the long term the customer
benefits from more innovation in products, greater responsiveness to
their needs by the bank, timely and accurate info, etc etc.    For the
banker's sacco...hmmm....I think then we have to ask how small is
"small" - at that level it works out to abt 2,600 - looks like a big
number but I suppose the account holders are all bankers :-) with good
deposits (vis a vis Krep's who might largely be low/middle income).
But I agree for a single branch it might be like buying a Leyland bus
to take my three kids to school...

My two cents (...with 12% interest)

On 27 January 2012 09:18, robert yawe <robertyawe at yahoo.co.uk> wrote:
> Hi Listers,
>
> I came across a news item about how KREP Bank is to "invest" US 600,000/-
> (Kes 52,000,000 aka 52 Million) for a new banking software.
>
> The system, Temenos T24, is a monster of an application also being under
> used by Kenya Commercial Bank in addition the Kenya Bankers SACCO barely
> uses it in a single site.
>
> We keep bragging about how we are a technology savvy nation and developing a
> knowledge economy yet we are the most under-utilisers of technology.
>
> Which is a clear explanation why Vodafone cannot understand our obsession
> with wanting the MPesa servers installed in Kenya yet I am sure we currently
> utilise less than 1% of the capacity of the servers in Germany and 5% for 2
> days in a month.
>
> Temenos can handle over 3,000 transactions per second and handle over 25
> million accounts across 2,000 branches
>  http://sqlcat.com/sqlcat/b/technicalnotes/archive/2011/04/26/lessons-learned-from-benchmarking-a-tier-1-core-banking-isv-solution-temenos-t24.aspx.
>
> Temenos can handle the needs of all the banks in Kenya (approximately 6
> million unique accounts) and still not break a sweat while consuming less
> energy and resources than a mobile base station.
>
> Please let no one raise the issue of lost IT jobs because last time I
> checked a server was not a charcoal "jiko" that needs fanning.
>
> KREP has less than 200,000 accounts & 35
> branches http://www.k-repbank.com/branches.html, with Temenos they can run a
> transaction for each one of their clients every 58 seconds so what does the
> application do the rest of the time?  Kenya Bankers SACCO is an even more
> telling story with 1 branch and less than 20,000 members also uses Temenos
> that is internally installed.
>
> If Equity was to use the same software it will take 21 minutes to run a
> transaction for each of its 4.3 million clients so why do we complain when
> MPesa takes 5 minutes (over 14 million accounts) to handle a transaction on
> the 15th and 30th of the month?
>
> I am sure many of you in the banking sector are wreathing in anger because I
> am refusing to acknowledge that the data needs to be kept secure that is why
> you must look the servers in your individual server rooms.  So why doesnt
> the same arise when you open up your applications to KenSwitch for shared
> ATMs, to the mobile providers for mobile banking and to the ISPs for online
> banking.a
>
> Here is my solution, Safaricom (I am using them as an example as they are
> less likely to sue me) buys off all the licenses of Temenos that all those
> small banks, DTMFIs, MFIs and SACCOs have bought and then install Temenos in
> their 2 billion cloud.
>
> Buy all those Sun and HP servers that have been running those core banking
> systems and donate them to universities around the country, they can recover
> the costs by writing them off next year as obsolete therefore passing on the
> cost to the taxman.
>
> Then they can offer a complete package to the banks for using the cloud
> services without a nimbus and stratus pricing structure.  Safaricom, being
> experts at per second billing, can offer a similar solution to the financial
> institutions for use of the system.  To the financial institutions the use
> of the cloud will be treated as an expense therefore reducing their tax
> obligations.
>
> What about the staff you say, the only ones who are likely to loose are
> service providers like myself who have actually become over glorified
> cleaners more because we charge more than really the service we render.
>
> We have all been throwing profanities at the Walter of the Lazy African
> article fame yet we continue to prove him right every single day, yes, you,
> him, her and I.
>
> Have a lazy day.
>
> Regards
>
> Robert Yawe KAY System Technologies Ltd Phoenix House, 6th Floor P O Box
> 55806 Nairobi, 00200 Kenya Tel: +254722511225, +254202010696
>
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-- 
Francis Hook
+254 733 504561
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