SAAS-Valency: Sustain Beyond commodification in Banking SAAS

Needless to say, SAAS (Software As A Service) is the buzzword in the software market today across domains and no discussion in IT corridors is complete without mention of SAAS. Banking and Financial services (BFS) are no different to this magic Sauce called SAAS which will make the software sell like peanuts. I am saying peanuts intentionally because SAAS is like a double-edged sword, it sells more and as it sells more, it approaches being a commodity. Successful SAASification of a product line does signal commodification and it necessitates the product vendors to start playing in the value space rather than fighting the nasty pricing, scale and operational excellence game at commodity level to sustain themselves in the long run.  Most of the CRM, Service Management, Payroll, HRMS software being the first in space to be available in SAAS model have already become commodity and those players are looking at next level to stay afloat above the commodity market and at same to make inroads into new market space. Banking and financial services is gaining lot of traction in SAASification and it will reach the commodity mark sooner if not later. Only those BFS software players who have the hooks into value addition space secured in the beginning itself while making a software available as SAAS would be able to sustain and also will be in the best interest of the prospective customers.

SAAS - Valency is an important hook into the value addition space of SAAS software which BFS software vendors should look into while they embark up on SAASification of software. It has to be part of must have list of items on any SAAS product roadmap which has to sustain longer and serve as holistic solution.

SAAS - Valency:

I define SAAS - Valency as the ability of the product to integrate and more importantly cross pollinate with other adjacent products with an objective to maximize coverage of services within that particular market space. Adjacent products can be along the dimensions of either line of Engagement/ Line of processing / Line of Services. Any product would typically process data and serve it to end points using line of engagement. Integration is offered theoretically by most of the products leveraging compliance to common standards but that will be a necessary but not a sufficient condition. Valency focuses on just not integration with adjacent products but also on the cross-pollination aspect which means that there is meaningful value addition to the product and the customer by means of integration.

Adjacent products are those which provide services that are complementing and value adding to the services provided by the product in action, there by expanding the scope of features in natural way. Adjacent apps are not divergent in terms of the functionality but instead provide supporting services and more of horizontal in nature within the same vertical. Higher the Valency of the SAAS Product, greater is the ability to overcome inevitable commodification in SAAS market by means of being ready to crawl into value adding space with time and as market matures. Ending up in commodification space will leave the product vendors no choice but to operate on Pricing, SLAs, Scale and Ops excellence to sustain against competition which may not really sustain longer.

By Planning for higher valency from the beginning of SAAS product, it will enable the product vendor to deflect commodification and move up the value chain which will not only make the product sustain longer but also add value to customers and expand in market reach.

                                                            SAAS Product Jounrney Quadrants

BFS is one sector which has unique combination of sitting on decent capital and has access to huge customer base providing them the opportunity to harness the power of customer reach by providing additional and relevant services leveraging the incumbent channels. These are highly favourable criteria to plan for higher SAAS valency and thus making it a natural proposition to SAAS Products in BFS domain. Historically BFS products were monoliths trying to serve every aspect but with time they became more modular paving way for different players to serve different aspects, not only the product but markets evolved that way , where in now we don’t just have banks or financial institutions help us with banking and provide financial services but there are plethora of vendors like fintechs, payment providers, wallets, cards and the list goes on. This modularised banking and financial services which are being provided by disparate vendors itself presents an opportunity for integration and cross pollination of these products and services because for customer the more transparent it is the better and it provides opportunity for vendors to expand the portfolio and customer reach.

Management and CRM are two obvious and upcoming examples of adjacent products in BFS, if we are considering digital banking product as the SAAS offering. Banks not only help customers bank digitally but are also looking forward to providing them with service Management layer on top of banking features and also in general, same is the case with CRM, GRC etc. Ensuring ability of Digital banking product to integrate meaningfully and seamlessly with say Service Management Product / CRM/ GRC / channels like WhatsApp, Facebook etc and processing product in AI etc would mean higher valency of SAAS Digital banking products. It means insurance against commodification and value addition to the customers down the line.

If SAAS is the magic sauce to successful product proliferation, then SAAS Valency is going to be the currency for Sustaining SAAS against Commodification.