With my recent move to a new website provider I was drawn back to thoughts on Hosted Treasury Systems. The option to have your Treasury System managed by someone else other than your internal IT department has been around for a number of years now. With the passing of time, some of the more traditional providers have moved into this space. Though as always, there appears to be hosting and hosting. I’d like to take a few minutes to try to add clarity to this area of Treasury Technology delivery.
In House versus Out House
Arguments for moving to a hosted solution are often based around a focus on core business. Internal IT departments operate on a set of priorities and Treasury may not be at the top of that list. The underlying factor for Treasury though may be a dissatisfaction with internal IT. This may be for the very same prioritisation issue. In fact often internal IT are just has happy to see this weird and wonderful area called treasury move away from distracting them from their core systems. There is also the case of access to expertise.
Let’s Get Physical, or Should I say Logical
There are Hosted Treasury Systems and there are Hosted Treasury Systems. You can have specific boxes in a data centre that are yours and yours alone. They are physically separated from other hosted customers. This approach can provide you great flexibility in terms of timing upgrades and what is installed. It can even give the ultimate flexibility, a move to another provider.
You do not need a physical box though to have this level of separation. Many Hosted Treasury Systems run on a virtual box. This is where you vendor has an array of machines configured into a single set of memory, processor, and disk space. You can then hire a slice of this memory, processor and disk space to call your very own. This is termed a Logical or Virtual machine. These are often attractive as they provide almost the same level of separation as separate physical boxes. However, when it comes time to add memory or disk or even processor, this can be done through configuration without anyone having to lift a screw driver.
These days most hosted solutions are run on this virtual framework. Should you decide to move to another hosting service provider, you can lift your installed applications and have them moved to your new provider or even back in house.
Of course having your own physical box, either installed locally or remotely, or having a virtual machine somewhere in the ether is all well and good but when it comes to upgrading your Hosted Treasury Solution you will still be responsible for the timing and the costs associated with that. Leave it too long, and the cost of upgrading can be prohibitive. Do it too often and you will be continually upgrading and never seeming to get any functional benefit from the effort.
It’s Nice to Share.
Another Hosted Treasury System approach is not to simply give you a logical slice of a virtual machine but to give you a logical slice of an installed application. A number, sometimes quite a large number, of organisations then have their own logical share of the one installed application. Logically split so that you can not see their data and they can not see yours but all installed on the one machine. There are some great examples of this used everyday. Google Mail is a prime example. For a more functional example there is Salesforce.com and in the Treasury world there is Reval.
With these solutions you can outsource all your Treasury system worries as long as you can maintain a connection to the outside world, you’ll have access to your Hosted Treasury Solution. Of course you will give up a few things. Upgrades will occur when the vendor decides not when you decide. If you want to move away from the service offering you have to move to a new Treasury Solution and not simply a new hosting provider. You are effectively locked in and, just a little, out of control. Depending on how many clients there are, your voice may also be a very small voice in the wilderness. Oh and, where is your data? Ultimately it will be on a machine somewhere and this can have it’s own legal jurisdiction issues.
Show me the Money
So there may be ways to simply lift your locally installed solution and place it somewhere where experts are available to take care of it. You’ll have SLA’s and your host will have some financial imperatives to ensure you get a good service. Providing you that service will be their core business so they will be inclined to do it well. Cost can be a surprise. Many internal IT departments have hidden costs you may never be aware of. With an outsourced Hosted Treasury System there will be no hidden costs. You’ll see every invoice for every dollar you spend. Though you may take some time coming to terms with what is included in the service, and therefore covered under your regular charge, and what is deemed project work and will be billed separately.
Head in the Cloud
Many years ago when I first started in the Treasury Systems business, all bright eyed and bushy tailed, I quickly learnt about Vapourware. Hardware was the box, software were the instructions, vaporware was what was sold. Well not always but you did have to be careful. Vapourware was a derogative term for something that did not exist in the way it was presented.
These days we have Cloud computing. This can free up your IT to focus on their core business support while also allowing Treasury to get the focus and expertise they need on their specialised systems. It also offers flexibility to shop around for the best provider of specific services at a competitive cost. But do beware that your cloud solution does not have too much vapour.