Automation of SACCOs - FSD Kenya

38 • AUTOMATION OF SACCOS: ASSESSMENT OF POTENTIAL SOLUTIONS
Moreover, a service level agreement typically ensures constant availability
and continuous improvement of the service, which can improve application
performance considerably. Obviously, the provider needs to be managed like
any other vendor, requiring certain skills.
Implementation considerations and prerequisites for ASP:
When entering an agreement with an ASP, it must be ensured that the offered
functionality meets the SACCO’s business requirements. It is recommended
that the SACCO chooses a provider that can customise the solution according to
specific requirements, employing a multi-tenant environment (1-to-1 model),
but does not offer a standard service to all customers (1-to-many model). Each
SACCO making use of the service can have its own virtual application with
separate data for products, services, users, etc. However, offerings available in
the market can also limit the SACCO’s option here.
Connectivity is a major prerequisite for the success of the ASP model as the
application is not hosted locally within the SACCO but on a distant server
and data needs to be transmitted accordingly. Hence, engaging an ASP is not
recommended for SACCOs located in regions with generally poor connectivity.
Moreover, given unreliable Internet connection in large parts of the country, a
SACCO still needs to have the necessary technological infrastructure in place to
enable offline operations, i.e. a server with the front-end application and the
local database. Otherwise business continuity cannot be ensured in case of
connectivity downtimes. The necessity to maintain this infrastructure leads to
a reduction of typical ASP advantages. According to the provider Neptune, the
SACCO needs to have the same infrastructure in place for offline operation of an
ASP model as for locally hosting an application. Maintaining this infrastructure
has cost implications and necessitates retaining personnel to look after the
technlogy.
Where connectivity is adequate, the ASP model can improve access for
SACCO personnel when the service is accessible through a web browser. Staff
members can then access the application from any computer ot other device
that is connected to the Internet instead of having to travel to the SACCO
premises. This facilitates completing tasks such as loan approval by loan
committee members remotely.
In order to understand the potential acceptance of an ASP in contrast to a
locally hosted application, the project team asked SACCO managers about
their concerns with regard to engaging an ASP. While some general managers
had not heard of the concept and could not articulate their considerations,
one of them stressed that the financial element would probably be the most
relevant for considering an ASP. However, the provider would need to offer
sufficient flexibility with regards to fulfilling specific requirements and also
guarantee that data is not being exposed to competitors using the same
service. He feared board members could be hesitant to engage an ASP as they
would prefer to own an asset. However they could be convinced when being
educated about the pros and cons.
Current state of ASP options: With regard to available providers of
SACCO software as a service, Neptune claimed to have their solution Orbit
ready for ASP operation. However, it became evident that both SACCOs
currently using Orbit have local installations of the software and do not yet
obtain it as a service over the internet. NECCO FOSA Sacco is supposed to go
live on the ASP model early 2010. It needs to be confirmed if Neptune can keep
their promise.
While cost savings are supposed to be the primary benefit of engaging an ASP,
the project team considered Neptune’s asking price as relatively high. Taking
the provided information into account, the project team estimated the cost
for the two standard SACCOs to amount to approximately 6.42 million and
12.9 million Kenyan shilling in the first year. This would imply that entering
a one-year agreement with Neptune as an ASP would, for the larger of the
two standard SACCOs, entail approximately the same cost as acquiring Bankers
Realm (12.24 million), with the substantial difference that the SACCO would
own an asset at the end of the year when acquiring the system. From year
2, the estimated costs would amount to Kshs 2.2 million for the annual
maintenance of Bankers Realm and to a considerable 10.8 million Kenyan
shilling for the continued use of Neptune’s services.
Although it needs to be noted that the vendors did not have sufficient
information to quote an exact price and the estimates can only serve as a rough
indication, it became obvious, that the alleged cost advantage does not seem
realisable in this case. One would expect the service of an ASP to be cheaper as
costs can be spread over a broad customer base. The relatively high cost could
be due to the fact that Neptune is only starting to offer Orbit as an ASP and
prices could go down once more SACCOs make use of the service. Potentially,
syndicate buying of an application can be an option to realise a cost advantage
similar to what is possible when entering an agreement with an ASP.
Apart from Neptune, two other vendors discussed the option of providing
their software as an ASP. Craft Silicon pointed out that they are currently
implementing an ASP model in Malawi, where they offer their solution Bankers
Realm to a network of 40 SACCOs through the national umbrella body, Malawi
Union of Savings and Credit Co-operatives, each SACCO having an independent
application. Fintech stated that they are currently preparing their solution
for an ASP model, having received a corresponding request from WOCCU.
However, their activities do not seem to be triggered by market demand. If
the lack of demand is due to the SACCOs not being aware of the ASP option or
because they are aware of it but don’t like it has not been determined.
recommendation regarding ASP options: The project team
recommends actively monitoring of the progress of these two vendors
in terms of offering their solution as an ASP. Moreover, it is necessary to
understand their pricing approach, especially since the functionality of Bankers
Realm and FinSacco is deemed more comprehensive and SACCO-specific than