Why eCo?

Through eliminating duplication, eCo participants can benefit from higher quality software while significantly reducing cost.

The IT value equation

The Financial Services sector spends a higher proportion of its revenues on IT than any other industry. This practice grew over decades as financial institutions offered ever more innovative services, often with ever more competitive pricing, to clients in ever more jurisdictions. However, it has resulted in duplication on a massive scale. The cost is absolutely enormous and threatens the viability of many businesses. Each of the large banks has literally thousands of applications and spends literally billions of dollars every year developing and supporting software of which only a small fraction offers any potential edge. At the same time, pressure to follow regulation and adopt best practice is driving a convergence that makes the duplication of software even more of a liability.

eCo was established to give financial institutions a practical roadmap, starting today, for reducing the amount of money that is spent on redundant technology. By eliminating duplication, participants can significantly reduce IT expenditure through the process of collectively adopting the best quality assets. Crucially, this leaves participants in full control and able to step up focused investment whenever and wherever it is advantageous. This is a new model for banking technology.

The eCo proposition – buying and selling components

A central strategy of eCo is to enable financial institutions to trade source code on commercial terms. The use of source code ensures maximum transparency and maximum flexibility and confers the benefit of quality improvements enjoyed by open source software. Sellers of source code get paid for their IP (which they retain). Buyers save money by avoiding unnecessary development and maintenance costs and get perpetual rights to the code, which they can modify. There is no complex and opaque per user/site/core pricing. Service partners are engaged to provide code line maintenance between parties, maximising the chances of everyone keeping to a shared path; for this they are paid explicitly. The quality of the code, meaning how likely it is to be successful at a firm other than the one that developed it, is assessed independently by eCo, both initially and again upon major releases.

By reducing the total amount of software in use and focusing attention on shared assets, everyone wins. Each party contributes in precisely its area of expertise and gets paid specifically for its contribution with virtually no fuzziness. By transacting under a standard eCo Master Services Agreement (MSA), costs and time to trade are minimised. This model is unique.

eCo and other mutualisation strategies

Many alternative strategies have been tried in an attempt to mutualise banking IT costs. These include the use of commercial packages; use of open source software; joint ventures; spin-offs; software as a service (SaaS); and the creation of utilities. We believe that eCo’s standardised commercialisation route will often be a better choice due to: the benefits of shared source code; the independent assessment of software quality; the clear separation of IP ownership and responsibilities; the simple, direct licensing model; the eCo MSA; participants’ retention of the ability to invest directly in enhancements wherever and whenever it suits them.

Some mutualisation strategies are more ambitious than this, notably (1) the use of SaaS or cloud hosting, and (2) the creation of a utility that moves an entire business process into a central independent unit. eCo endorses both of these models in principal, where they can be made to work. Given the added complexity of moving data and/or line staff out of a financial institution, we believe that such strategies are best tackled in stages. Where this is done, eCo can facilitate software convergence to de-risk the later stages.