For eFinancial Store Fronts, Outsourcing is Cheaper
The build vs. buy question has always been a thorny issue for financial service firms that want to control their own trading systems. How about selling other types of financial products and services-such as tax planning and financial planning software?
"You still need a high impact, personalized online selling environment," says Keng Lim, president and CEO of Escalate, Inc.
That's the kind of scenario that Escalate, a leading player in the e-Commerce Service Provider (ESP) category, was created to solve. The Redwood Shores, Calif.-based start-up, whose customers include major retail sites such as eGreeetings Network and Quokka Sport, provides an integrated online selling environment called the Escalate Commerce Network.
Lim says Escalate is currently in talks with several online brokers and financial sites like a CBS MarketWatch, that want to start an online store to sell investment planning software or financial reports to their customers.
"Typically, you need to set up a full e-commerce online infrastructure. You need to buy software to do catalogue management, you have to write software to do shopping cart, as well as check out, accounting, as well as customer service and membership management," he says. Then, he adds, "There's the whole supply chain, logistics and the integration with suppliers and shipping."
The Web site would plug into the Escalate Commerce Network, much like financial firms hire DoubleClick to run their ad server, says Lim. Escalate runs its own data center but uses co-locators such as Exodus, Digex, MCI and BBN.
Even though financial firms have been resistant to outsourcing in the past, "we allow them to control the business," says Lim, who adds "they own the customer data, they own the transacations." They also get access to reports and business intelligence tools. "All this stuff takes a lot of time to build," he says. "It's all done for them."Lim contends that e-commerce is changing the economics of outsourcing.
Citing a Forrester Research report, he says it costs a company 35% of its e-commerce revenues to operate e-commerce. Lim contends that he can move a company doing 250 transactions a day, online in six weeks or less, at a cost of $125,000 to start, and probably less than $100,000 a year to support. That works out to less than 10% of revenues. It takes seven months to build from scratch, $1.5 million to get started and $1 million a year to maintain. "We offer a solution at 90% less time and less money and it puts you into a position to pursue market share," he says. Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio
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