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To Buy or Build: Navigating the Technology Dilemma for Financial Institutions

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Thought LeadershipDigital Transformation

How do you choose when to buy a solution and when to build your own in house?

For years, the only option for most financial institutions seeking new technological tools was to design and build solutions in-house—but this often came at great expense and expenditure of resources.  

People have come to expect easy, digital access to their finances, along with the ability to apply for loans and new accounts and complete transactions remotely from anywhere, at any time. While this generally began with online banking, it has extended to all facets of a customer relationship – including up through complex corporate lending. 

As the financial services industry strives to keep up with these often drastic changes in consumer behavior, digital technology has evolved to become both the primary mode of differentiation, as well as the means of leveling the playing field for FIs of all sizes. Which means institutions feel more pressure to make a decision when it comes to technology: buy, build, or... both?  

Evolving Through Cloud Adoption 

Modern, cloud-based digital technology is necessary for financial institutions that are seeking to address the customer experience, improve internal operational effectiveness, streamline internal communications, and allow access to data across the enterprise. Increasingly, financial institutions are adopting cloud solutions to replace legacy banking systems. 

It’s clear the industry will continue heavily investing in digital platforms and products to provide the seamless experience consumers are seeking. Historically, the financial services industry, which is known for its conservative in-house approach to embracing new technology, had limited choices at its disposal to deploy cloud solutions. While large enterprise banks were typically endowed with the resources and capacity to build some of their technology in-house, mid-sized and smaller FIs were largely left behind. 

In addition, many FIs were shackled to legacy architecture, a technology stack growing increasingly and rapidly obsolescent, and limited access to the financial, technical and human resources they require to get where they need to go fast enough. 

Expanding Avenues for the Digital Transformation Journey 

As demand has grown for digital interactions and more efficient, streamlined back-office processes, the range and quality of solutions and third-party vendors providing these digital capabilities also grew exponentially. Another option became available—to buy or outsource these solutions from an external vendor. Now, the industry faces the decision whether to buy or build. 

While building technology internally was once the de facto choice for FIs, buying has become a far more appealing option. With pressures growing for FIs to act fast when it comes to tech adoption, buying a ready-to-use tool or product offering can be a much faster way to react to market changes. Sourcing an external provider is a direction even larger institutions are heading toward. 

Today, in most cases, it’s no contest. When comparing critical factors like speed to market, ROI, the ability to hire specialized skillsets, and ongoing IT maintenance, the choice to buy is overwhelmingly the correct option for most institutions. The best offerings on the market now offer a depth of capabilities and features, backed by a commitment to reinvest in continuous improvement and agile development, along with sound architectural purity and platform stability. An out-of-the-box solution can drive your efficiency and speed, allowing you FIs to serve your customers more efficiently, and with a better user experience.  

An Emerging Strategy: Buy AND Build

There are some unique situations in which in-house development of some digital pieces can make sense. For example, if the specific capability an FI is looking for is not currently available or requires a bespoke feature that is not customizable through other providers. Or, if an institution’s driving principle is to innovate or disrupt the market through technology, they may choose to build some capabilities for further competitive differentiation. Even still, the need to connect built solutions to vendor solutions will continue to expand as the ecosystem grows.

Regardless of their needs, FIs no longer need to navigate digital transformation or cloud adoption on their own. Even if the intention is to build internally, partnering with a best-in-class solutions provider will be necessary. This represents an alternative option: buy and build.

Even if an FI has the resources or need to build some capabilities in house, it could be beneficial to partner with a leading solution provider in the market for at least some technology functionality, particularly those that fall outside core competencies and competitive differentiators.

Results You Can Count On 

No matter the need, FIs no longer need to navigate digital transformation or cloud adoption on their own. Whether you decide to buy and build or simply buy, partnering with a best-in-class strategic partner allows you to benefit from the vendor's expertise and experience— allowing you to streamline efficiency and productivity. The result? You can serve your customers better and faster. 

Investing in the right technology partner allows you advantages such as: 

  • Faster Time-to-Market: Increase agility by quickly responding to market changes and offering your customers innovative services and experiences.  

  • Scalable Infrastructure: Connect and embed your services and build an ecosystem of trusted partners to deliver best-in-class service to your customers.  

  • Enhanced Collaboration and Communication: Centralize data on a secure, single platform to increase transparency and collaboration across your institution and easily leverage customer data across lines of business.   

  • Digital Experience: Deliver personalized, fast, and intuitive customer experiences at any time and in any place through digital channels.   

Working with an outside vendor to purchase a cloud-based all-in-one solution offers financial institutions a way to modernize their legacy systems, improve their operational efficiency, and deliver personalized experiences. Buying rather than building can help FIs save time, resources, and costs, in addition to leveraging the expertise and experience of the selected vendor.