This is the 3rd post in a series featuring our customers that are driving business innovation through application development. This is not a new topic but one that deserves some attention as we enter 2015 and organizations are revisiting plans and strategies for the coming year.
Temenos is a Swiss software company that offers banking software systems to financial institutions globally. Proven in more than 1,600 customer deployments, the company’s applications are used by 450 million people every day.
A service Temenos has recently been offering is its T24 core banking system on the Microsoft Azure software-as-a-service platform, which has helped the company more easily expand its offering to financial institutions in emerging markets.
We spoke with John Schlesinger, Chief Enterprise Architect of Temenos, about that experience and what he thinks the future has in store.
Q: What was the original business problem you were trying to solve by expanding to the cloud?
John Schlesinger: “The banking industry, especially retail banking, is going through a big revolution. Retail banks’ two highest costs are people and technology, so banks are being challenged to lower margins while still providing services to their customers. That means they’re having to take a hard look at their IT and people costs. The cheapest way for us to help them do that is to run their core banking applications in the cloud.”
“In the past, a major barrier to entry was the need to build a major data center, put hardware in it, and ensure that there was enough headroom to do bank processing. Now, banks can be up and running on Azure in less than a day, with no capital expenditure. And they can scale up as they go. We think that by 2020, all new core banking initiatives will be in the cloud.”
John Schlesinger: “When we started on this journey, the only company offering a credible platform-as-a-service solution was Microsoft. We definitely talked about where the cloud market was headed, and we knew we needed to pick a company that was deadly serious about investing in the cloud. We have seen that Microsoft is very committed to the cloud, and is one of the three companies, including Amazon and Google, that we think are sure to be left standing.”
Q: You’re now offering T24 as a service on Azure. How has that been going?
John Schlesinger: “Everything’s going according to plan. Since we started, we’ve built an entirely new team, including a director of the new division, a sales force, architects and programmers, and a new operations group. People are starting to recognize the enormity of what we’re doing, and there’s definitely a demand for this kind of solution. We have 6 customers in the cloud and many others making plans to adopt cloud technology. But in 10 years, we think we’ll have 5,000 customers and the vast majority will be running T24 in the cloud.”
Q: Have you had any pleasant surprises along the way?
John Schlesinger: “One of the things about running on Azure is you’re competing with Amazon, and Amazon continues to lower their prices. But we’ve been very pleasantly surprised at how the costs of Azure have remained competitive.”
“Another surprise was that, when we started out, SQL Azure had a 50-gigabyte limit. That restricted the type of bank we could bring on board, and it’s one of the reasons we only worked with microfinance organizations to begin with. But that limit has gone above 300 gigabytes, and the size of the servers running the platform has increased. Microsoft is also using solid state disk drives to improve the I/O per second, and that’s crucial for us. So we found that the platform’s capabilities and costs have improved way beyond our expectations.”
Q: Based on your experience with Azure, what advice would you give others in your shoes?
John Schlesinger: “You’re much better off finding a low-risk entry into the market and learning from that, and then making your bets once you’ve got your mind around what you’re doing. I would also tell any software company to do a very careful analysis of its cash flow to make sure they can get through the transition from a license model to a subscription-based model.”
Q: What application changes do you expect to see and experience in 2015?
John Schlesinger: “I think we will see three big changes. First, the world of applications—in terms of improving support for your customers—is becoming data-driven. If you’re not setting up your applications to provide that data in real time and with a low query cost, it’s not going to work.”
“The second big change is that you have to take componentization very seriously to maintain the platform. Componentization is like taking a bowl of pasta and doing three things: combing it, or refactoring the code; cutting it and making it into ravioli, which is akin to encapsulating that code; and putting the ravioli into separate packages, which is packaging the code in such a way that you can make online updates to it. We’re moving our product through these stages as fast as we can so the platform is easily maintained.”
“The other major thing is, once you have your capability componentized, you want to aggressively separate the workflow for handling requests from the componentized capability. So that’s the third change we are putting into practice: creating a new way of running the product so developers, installers, and customizers can make maximum reuse of that componentization.”
“Throughout the upcoming year, these three major changes will play a massive role in driving applications in the cloud. It will be very exciting to watch these changes play out, and Temenos is eager to play a role in it all.”
See more cases studies about driving innovation with apps: www.microsoft.com/app-development
NEXT BLOG POST IN THIS SERIES WILL BE FEBRUARY 5th.