Is this the key?

A new alliance of Microsoft, Intel and Compaq reckons it can solve Asian banks'' tech needs.

Microsoft, Intel and Compaq have got together to form, Keystone - an alliance designed to meet Asian bank's technology needs. Here Jason Fedder (Asia Pacific regional manager, Enterprize solutions group, Intel) , TS Krishnan (director, financial services, Asia for Microsoft) and Michael Stephens (director, Solutions group, Compaq) talk about how this objective will become a reality.

Why are Intel, Microsoft and Compaq getting in bed together to form Keystone?
Jason Fedder:
What's remarkable about that question is you don't think we are in bed together already. We obviously already have many areas of cooperation. What Keystone represents is an extension of our current cooperative programmes and agreements on a systems engineering level and a business development level. Keystone is really a recognition of the value those cooperative efforts can bring to bear. It's essentially an agreement between the three to put resources and cooperative efforts into addressing the needs of financial services organizations here in Asia-Pacific. So we're partnering under the keystone banner because that's a logical extension of the work we do together. Why Keystone? Because we recognize there are substantial opportunities and compelling value propositions that come about when you combine our core architectures. And we want to enhance our speed to market with those solutions.

TS Krishnan: There's one more advantage you get. In the past the customer would have had interaction with Compaq, Microsoft and Intel separately and would have been getting very similar messages. With Keystone we'll be going together and delivering the same message. So from a customer's viewpoint, there should be richer interaction with the customer, and so they will benefit from a faster, more efficient process.

Michael Stephens: Customers can also adopt these solutions knowing they are fully robust.

Is this a joint-venture or a partnership?
Fedder: It's a partnership. Each one of us has assets and resources that we can bring to bear in terms of developing and optimizing these solutions and bringing them to marketplace. Each one of us has put in technical expertise or assets in the form of laboratories or testing facilities here in Asia-Pacific. What we are really doing here is create an alliance and institutionalizing the work that already goes on between the three companies. Obviously we've made a substantial investment from a pure cash perspective.

How will you split revenues?
Fedder: Where an end-customer chooses a Keystone solution, that will comprise a number of components including hardware and equipment that will feature the Intel and Compaq architecture, it will involve software and services components. So it will automatically generate revenue for all three.

So you're basically just bundling?
It's a bundling that contains pre-optimization, pre-configuration optimization work and services. So time-to-money of the project is reduced as well as the investment cost.

Krishnan: Bundling is a very marketing-centric view. Keystone is much wider than that. We hope to enhance the solutions we will bring to the table. In that respect, it is a lot more strategic, than just a reactive, bundling opportunity.

What type of client are you aiming at?
: Most of the tier one and tier two banks across Asia are, in some respects, customers. But in a lot of Asian countries they don't have access to a lot of the solutions we are bringing to market, so the aim is to go to our customers, look at their business strategy for the next two years, and help them create a framework of solutions. This is about a solution architecture, with add-on solutions over time.

So we're looking at regional and domestic banks, as well as global banks.
When you speak about solutions architecture, are you talking about things like customer relationship management?
Stephens: The three organizations in Keystone looked at the typical bank and looked at the hotspots where there was a need for changes in the applications - such as shifting transactions from branch networks to the internet or wireless. We looked globally to find the world's best in-class solutions - some from Europe, some from the US and some from Asia. In the case of internet banking, it is not new, but banks have started to deploy new, more sophisticated internet banking solutions - that have account aggregation, bill-payments online etcetera, And in addition, CRM is another area of growth. This means wealth management solutions too.

How much will Asian banks spend on these hotspots?
An agency called Datamonitor did a study and it estimated banks in Asia-Pacific spend close to $20 billion every year on information technology. They project this to be growing at 7% per annum. That gives you a sense of how big this market is, and how fast it is growing.

Fedder: If you are a small bank in China looking at developing an online banking capability, rather than you having to go to the marketplace and develop the expertise, you can instead go to the Keystone portfolio of solutions and lower the deployment cost, and decrease the time it takes to implement. When the customer comes to us, it will not be off-the-shelf, but it will be as near as possible in terms of their ability to rapidly deploy it.

Are you in competition with the consultants?
Fedder: We're not talking about creating a separate revenue stream for three companies for consulting. The work has already been done. The leading system integrators such as Accenture already do substantial amounts of their business on our architecture, so there would be no reason for us to do that. What we are trying to do is work with the marketplace as a whole and say, here are a portfolio of solutions to these specific business problems, and by the way we have already done the integration.

Stephens: We're taking the risk out of choosing a solution. The reason big banks use consultants is they get the consultants to do the evaluation for them. Over time we will take the technology risk away from the solution, although a number of the solutions are delivered by those large consultants. We are, in fact, working hand-in-hand with them. We're a more risk-free solution for a risk-averse industry.
Krishnan: One of the reasons the alliance will work is that each of us has a clear area of focus. Intel brings the architecture, Microsoft bring the software and Compaq the hardware. The consultant's role is still intact. They still have to give the overall direction to the bank. So it's very complimentary.

Is it fair to say it's more the small and medium-sized banks you are targeting with this, rather than the bigger banks?
Stephens: The types of solutions we're bringing to market will suit large and small institutions.
Fedder: One of the partners of Keystone is i-Flex from India. They make a range of core banking and business intelligence solutions. They are the largest single software provider to Citibank, and at the same time their applications are also used by very small banks in India. So there is an organization under Keystone where we have pre-optimized and integrated the solution for tier one international banks as well as tier three local banks.

Some people say the Microsoft architecture is very suitable to the small and medium-sized enterprize, but bigger banks feel it is less stable than Unix, for example. Is that fair?

Krishnan: It is precisely this sort of myth that we want to break with Keystone. We absolutely can run mission critical applications for large banks. It is exactly this kind of perception we want to challenge. We feel the best way to do this is to build references so that we can go back and show customers our stuff working.

Stephens: At the end of the day, customers should not be paying a premium to solve a perceived risk. We're saying we can outperform the other systems, and we are prepared to demonstrate that. Some customers do have this type of thinking, and it's been around for a while. But it's not correct.

Fedder: It is generally a perception held. Historically, the comparison have been made with a standard banking infrastructure, created in the last 20 years with a mainframe in the middle. But one of the things that has been happening and particularly here in Asia is for a shift from a centralized to distributed architecture. For example, a small retail bank in Hong Kong will find it hard to implement internet access for their customers through the centralized model. In a distributed computing environment all those issues you've raised related to Microsoft and Intel architecture disappear.

Is the biggest market opportunity for Keystone going to be China?

Fedder: There's no question that China is a substantial opportunity. But will it be the biggest? A couple of things are driving this; the business environment and the regulatory environment. China will be very big. India too.