UBS is reported to have signed up as a development partner for SAP’s retail core banking product.
UBS is reported to have signed a deal to act as a development partner for SAP’s retail core banking application, ultimately aiming to move its entire retail and private banking operations onto the system. The UBS deal represents SAP’s second top tier customer for its Corebanking package, following the signing of Deutsche Postbank in late 1999.
Although greenfield standalone Internet banks have been a major market for packaged core banking applications, the market for established banks migrating off legacy systems has failed to take off. Packaged systems promise more flexible development, faster time to market for new products, a single view of the customer and real-time processing. But the largest banks have dragged their heels. After all, a core systems migration project is arguably the most complex IT project that a retail bank can undertake, with projects typically running into several years or more.
The omens for SAP/UBS’ project aren’t good. In the late 1990s, IBM signed deals with large European retail banks including Halifax and Handelsbanken, most of which failed to come to fruition as the complexity of the projects proved unmanageable. Only Accenture has succeeded in winning a significant number of core systems migration deals, but even these have been restricted to medium-sized banks.
However, SAP is better placed than its rivals. It already has significant credibility as a supplier of major ‘enterprise backbone’ applications. Also, as many of the packaged core banking applications on the market start to look dated, Corebanking is closer to the beginning of its development cycle than the end. Finally, SAP’s R&D resources, combined with its focus on best-of-breed software applications, give it potentially the most credible development roadmap in the core banking space.
As growth in SAP’s core ERP market tails off, core banking projects represent a major potential new revenue stream. The historical high failure rate demonstrates that the battle is by no means won – but if anyone has the credibility and resources to overcome resistance to packaged core banking applications, it must be SAP.
