[kictanet] TCO & Cloud

Fri Jan 27 13:09:46 EAT 2012

Francis,

Most of the issues you mention on customer service are only applicable with a certain level of account holder who we would refer to as your corporates who make up less than 1% of the accounts.

The other 99% are mainly salary account holders who receive a single inflow once a month and spend the rest of the time drawing down the amount.  

With the proliferation of ATMs, mobile and agency banking this kind of account holder is already being served through a cloud solution.

Outages within most organisations are today much more frequent than those involving external providers, most ATMs are down not because of the connectivity but more for lack of cash. With services such as bank account to mobile money transfer and cash back the ATM is slowly becoming obsolete, at least in the Kenyan scenario.  Most ATM cards are now debit cards meaning that they are usable at various point of sale locations.

As customers use less and less physical cash the easier it is to mine trends than before making it easier to extend credit to establishments since you have a better view of their cash flows.

In the land of the blind the one eyed man is king until a two eyed man/woman arrives in the village, if we use the global definitions of SMB all businesses in Kenya, except mpesa, that we refer to a enterprises actually fall under this category and those we call small are actually micro.  Therefore from your take on the same then all businesses in Kenya should be embracing cloud solutions.

MPesa is run as a cloud service no applications are installed locally right from Safaricom head office to the till in Gabatula, it has 34,000 plus branches, employs over 50,000 people, transacted over 600 billion last year, at peak times handles 200 transactions per second (Temenos can handle 3,000), has over 15 million accounts and made a profit last year of over 1 billion.  

If MPesa was to be listed in the NSE it would be the most profitable organisation once you remove the burden of its parent.

If this organisation can survive on a cloud solution even Kenya Breweries can move their systems onto the Safaricom Cloud (for lack of any other examples) especially since they are implementing a model similar to Safaricoms.

Francis, lets accept it that we have no leg to stand on in as far as not using the cloud is concerned.  

Why have I not released my applications to the cloud? Because the only provider has been unable to provide me with a easy self service model. http://www.esds.co.in/cloud-servers-hosting.php 

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, 11:28
Subject: Re: [kictanet] TCO & Cloud

Hi Robert
I agree WRT TCO...perhaps what I overlooked to mention is ROI -
increased visibility of accounts and account holders, Business
intelligence (tracking bad debts, defaulters, speedy loan approvals
for HNW and customers that pay their loans on time, etc), reduced
queuing time thanks to having proper systems in place that enable a
teller access requisite data needed to decide (ergo bringing a lot of
decision making to front office = better customer service, customer
retention, etc).

By and large yes, the TCO argument should be weighed against the ROI
(whether tangible is shs and cts, or intangible via better  customer
service, increased staff efficiency, better GRC practices (esp this
point as banks are increasingly under scrutiny), etc.   And yes, there
is more gravitation towards OPEX from CAPEX (but at the core there
might be some inherently irrefutable justification to take either path
and this will vary from vertical to vertical)

Back to the cloud issue - and  I'm now playing the devil's advocate
:-> - thinking of instances that have been shared on this very forum,
where the systems of an operator/provider/host etc go down (internet
services, mobile money, voice services, govt websites etc) - from an
institutional perspective, perhaps that is something to eschew?   If
something goes wrong (at a connectivity, security level for example),
and even with a back up site, then it more or less cripples the sector
(and the economy).

The cloud however, would be best positioned to SMBs who, owing to
their size, needs and budgets, want to totally do away with CAPEX of
this nature and instead have a pay as you go system (like you
suggested where an operator hosts an app and charges end users on a
pay as you go basis and then shares revenues with the app vendor).
This would make sense for smaller banks (or SACCOs and MFIs).   Also
other SMBs that need some CRM/Payroll/HR, etc functionality but do not
want to buy the whole bus since they have no where to park it or no
one to drive it.

On 27 January 2012 11:03, robert yawe <robertyawe at yahoo.co.uk> wrote:
> 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
>
>

-- 
Francis Hook
+254 733 504561
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