To print: Click here or Select File and then Print from your browser's menu
This story was printed from silicon.com, located at http://www.silicon.com/
Story URL: http://www.silicon.com/research/specialreports/enterprise/0,3800003425,39128575,00.htm
Quocirca's Straight Talking: Compliance time - again
Are you ready for BACSTEL-IP?
By Quocirca
Published: Friday 11 March 2005
UK businesses have until the end of this year to migrate to a new electronic payments service. How is it going? Quocirca's Jon Collins reports.
Nobody likes a deadline. Yet since Y2K and the introduction of the euro in 1999, the number of targets for technology change appears to be on the increase.
Not least are government initiatives such as those for online filing of tax returns. Meanwhile, corporate governance requirements from Sarbanes-Oxley to the UK Freedom of Information Act are driving a number of standards across Europe and elsewhere.
Coming up soon - the end of 2005 - UK businesses are faced with a deadline imposed by the banking industry for the rollout of BACSTEL-IP, a new delivery channel for electronic payments. The majority of companies over a certain size prefer to make BACS (Banking Automated Clearing System) payments automatically, most commonly for payroll but also for commercial and other financial transactions.
For many years, payments have relied on a service called BACSTEL, supported by the majority of banks and delivered to end user organisations through a network of solution providers. However, the underlying technology is clunky, insecure and expensive to maintain - so just over a year ago, its replacement (BACSTEL-IP) was announced and a two-year deadline was set to migrate companies from one to the other.
With ten months to go until the deadline, it's not clear whether this can be achieved. While there is still time for a successful conclusion, what lessons can we draw from this and other migrations?
In January 2005 Quocirca looked into the current status of BACSTEL migration by speaking to 100 companies across the UK. The migration approach taken by BACS, the solution providers, consultants and other organisations can be considered as a three stage process:
By considering these stages in turn, we can look at what's been done and whether the objectives are being achieved.
First, the information stage. Most of the organisations we spoke to (95 per cent) were fully aware of the need to migrate and of their obligation to do so - though some were less aware of the 'hardness' of the deadline (we shall return to this point).
In general awareness campaigns have been building on the fear factor - highlighting the dangers of failing to migrate - but many solution providers felt that this message had served its purpose. Such messaging may have been a contributory factor to our findings that smaller companies in particular feel more than a little resentful about the migration - 60 per cent believe it is an unwelcome imposition, compared to 18 per cent for the largest companies. For these it is just one more thing they have to do.
All the same, there are recognised benefits to the migration - 80 per cent of respondents considered the benefits worthwhile. As the migration continues, we will ask more companies how it went; our initial findings suggest companies will be quite pleased with the improvements the new service offers.
Moving on to enablement, this is largely the domain of the solution providers. One of the main benefits seen by respondents is that BACSTEL-IP solutions have gone through a more stringent process of certification than the previous technology. This has resulted in a reduced set of higher quality service providers.
However one difficulty expressed by a significant number (58 per cent) of companies, was in finding time or priority to undertake the migration. Companies are looking for additional support in this area. The ideal solution is one which costs nothing, takes no time and achieves immediate, maximum benefit. Solution providers and banks alike are looking for ways of improving their customers' ability to migrate, for example fast-tracking applications and hand-holding companies through the migration process.
The use of the term 'their customers' is deliberate and its implications unfortunate. While solution providers are always willing to accept new customers, they are currently focusing on migrating their existing clients. It's a similar story for banks, which suggests there may be an issue with 'orphans' - organisations whose previous BACSTEL provider does not have a certified BACSTEL-IP solution and who therefore need to find an alternative provider. There are an estimated 15,000 orphans out there.
The major banks are helping to resolve this issue by communicating with customers about the need to migrate. However some of the smaller banks (for example, agency banks) do not yet have BACSTEL-IP solutions in place for their customers and are not being as proactive as they could be in informing their customers.
While the subset of 'orphan customers of agency banks' may be a small percentage of BACSTEL customers overall, it may be sufficient to prevent a switch-off of BACSTEL-IP at the end of the year; worse, it may start a trend of dispensations where customers are given extra time to migrate.
This brings us to the final stage: enforcement. Understandably the major banks are doing everything they can to treat the end-of-2005 deadline as a hard stop and each is reliant on the others to maintain this position.
Perhaps the biggest issue will be resources. All the banks and providers we spoke to expressed concerns about whether there are sufficient people to resource the migration, particularly if there is a glut of late arrivals towards the end of the year.
One way to ensure sufficient capacity is to pre-book implementations with solution providers; both banks and solution providers are setting a June or September deadline to have everyone 'booked in'. While all parties are acting proactively to achieve this (and clearly it is in the solution providers' interests to do so), there is a latent fear that demand will outstrip supply if things are left too long.
There does not appear to be any real agreement as to what happens after this time; if there are contingency plans nobody is revealing them. As one bank put it: "We should be OK if nobody blinks." But if the orphans' situation is not resolved, some banks will have no choice. Perhaps this illustrates one of the biggest difficulties with this kind of deadline: it needs to be taken seriously by all parties.
So will the deadline be met? The majority of people involved, both companies and providers, think that it will be - with a percentage of companies expected to migrate shortly after.
The banks and BACS need to decide whether this is good enough and if it is not what carrots they are prepared to offer to enable companies to achieve it or what stick they will use to enforce the deadline.
Ultimately it's a question of money - both the cost of keeping old and new systems running in parallel, and the operational expenses of the migration teams. It may be worth spending a little more upfront than risking these additional costs when it has become too late to avoid them.
A summary of Quocirca's BACSTEL-IP report can be found on our website.
Copyright © 2008 CBS Interactive Limited. All rights reserved. Top of page
