Thursday, April 02, 2009

Pricing of Mobile Banking Solutions

Me and my wife have built quite a few houses - some that we lived in and others to speculate with. We have always been careful to use reputable contractors. and most often not the cheapest. We saw some of the disasters of half-finished houses or lousy quality with houses having been built by contractors with little experience or with low prices.

In looking at the mobile banking industry, I am surprised by the price-points quoted by inexperienced solution providers. These are sometimes so low, that it would be impossible to deliver solutions of acceptable quality. I assume that Enterprise customers often do not realise the complexity (see some of my blogs on complexity here and here) of the deployments of mobile banking solutions. By selecting solution providers on the basis of price, customers run the following risks:
  • The solution provider have underestimated the effort and now have to fund the effort themselves - this often translates into cutting corners and unacceptable quality.
  • The solution provider, having lost money on the deployment, tries to recover the cost in subsequent phases or getting a slice of the recurring revenue
  • The solution provider cannot effectively support the solution because of limited available resources.
  • Because the solution provider is not running the business on sound commercial principles, he goes out of business and the customer must move to another solution at great cost.
It is one of the biggest risks to this young industry that some solution providers are competing on price-points. The industry is far from mature and it is not possible to evaluate the differences between suppliers solely on the basis of price.

In the ten years that I have worked in this industry, I have seen all of the above risks materialise in practice with companies selecting solution providers on the basis of price only.

1 comment:

Richard said...

Hannes, I agree with you.
I often try to compare Mobile Financial Services vendors with other Enterprise enabling vendors such as ERP (Enterprise Resource Planning) or CRM (Customer Relationship Management).
In my experience, ERP is a good comparison where complexity is not always understood, but a higher price point both for the enabling technology and the integrating consultant achieve greater business benefit.
ERP is a case in point where low price point competitors (in technologies and SI consulting) resulted in the entire industry suffering from a reputation for negative business value.
The Mobile Financial Services industry runs the same risk - perhaps we need to study the historical Enterprise Technologies and glean some learnings.