Banks still prefer to build their own systems

Analyst says study shows banks like in-house products, likely because vendors are not marketing their software effectively.

Vendors are failing to market software applications effectively to banks and financial services companies, analyst research has found.

A report from Forrester found the majority of European financial services firms still have a strong focus on in-house software development, with around one-quarter of the 64 finance firms surveyed using off-the-shelf applications.

The analyst house said that vendors of financial, insurance and banking platform software need to improve their marketing strategies.

Jost Hoppermann, an analyst at Forrester, said: "User companies should evaluate their communications with vendors. On the other hand, this [report] is a checklist to see whether vendors have considered everything. There are a couple of vendors who need to be forced to communicate in terms of roadmaps and product plans but I'm still collecting evidence on this."

The report, written by Hoppermann, says: "Currently, many banks and insurance companies are very well aware that they need to distinguish very clearly what they need to build in-house and what they can purchase off the shelf. The latter option is cheaper and faster, although unfortunately often less differentiating. Several application software vendors in financial services need to work on providing the right information to spur their clients to choose off-the-shelf software."

The analyst firm said that three-quarters of European financial services companies favour in-house development, although such 'in-house' development was defined as anything from totally home-grown applications to a mixture of self-made and off-the-shelf software. Sixty-nine per cent of those firms also said they prefer to operate insurance or banking platforms in-house.

Only a minority of respondents said they used applications supplied by vendors.

Hoppermann said that vendors need to market applications with scalability in mind for banks to accept them but opinions in the financial services sector differed.

Neil Bath, group head of IT for stockbroker Brewin Dolphin, said that finance firms are too comfortable with legacy systems to trust vendor products: "There was nothing unusual [in the report]. There are so many legacy systems that we’ve grown up on there will always be a measure of that but I always try to get the best solution – sometimes that's products from outside, sometimes that's inside - there's got to be a balance.

"I think the cost and fear of change stops people getting rid of legacy [systems]. People hate change so organisations are fearful of it. You have to get things right - the trouble with in-house is that you tend to create jobs to keep [developers] busy."

Nick Kalisperas, director of IT trade body IntellectUK, agreed that a balance is necessary: "In some organisations it's not surprising that they favour in-house over off-the-shelf. Obviously off-the-shelf stuff will give you complexity but we're in a fluid situation where there is a balance between offshore, onshore and near-shore."

Silicon's Dan Ilett reported from London.