SAP intends to release software later this year that would standardize the enterprise resource planning software, known as ERP, it provides to large corporations and mega banks.
SAP is one of the world’s largest enterprise software companies (with a quieter-than-you-would-think profile in the United States).
The standardization, about which SAP provided Bank Innovation with a recent high-level briefing, has the potential to alter the ERP landscape, and could put SAP at an advantage over other bank enterprise software companies. SAP is a major enterprise software provider to corporations outside of banking.
To be clear, details on this new product set are sketchy as of today. Broadly, SAP sees bank enterprise IT at a significant crossroad. Banks have turned a corner, understanding that fundamental reconfiguring of core enterprise systems are needed to enhance customer acquisition and retention and to cut costs. SAP is working on figuring how to make these changes even more valuable to their bank clients. SAP’s plan centers on standardization, application development speed, efficient analysis of massive gobs of data (into elegantly designed graphics, mind you), and leveraging the company’s existing customer base outside banking. This is bold stuff, folks.
It also has the potential to cut SAP’s top line in banking, which I sense would be an acceptable result. The main reason for the lower revenue would be a shift to cloud services rather than enterprise subscriptions that pump SAP with licensing and maintenance fees. But the world of enterprise software is going to the cloud — and so will SAP, a point stressed by Dominic A. Trotta, global head of financial services at SAP, who briefed Bank Innovation. This redirection toward cloud computing at SAP, parenthetically, comes as Banking has become the single largest source of software revenue for SAP.
The implications of these sea changes exemplified by SAP are, to say the least, enormous. Consider any Top 50 global bank today. Despite their scope today, and the complexities of their current systems — NatWest’s recent systems debacle should immediately come to mind — these banks have been relatively nimble in customer acquisition and retention. By and large, they have kept pace with the broad array of startups. Once this heightened ability to quickly come to market with new applications and better integrate with large corporates comes online, the mega banks should be able to lap startups if only by leveraging their more robust and meaningful data set. It’ll be a whole new era of global bank innovation.