Technology Selection Steps (Part 2 of 3)

[Laila Q. Deles]

by Sumit Bagchi, PinoyME
continuation...

STEP 3: DISTRIBUTED SERVER VS CENTRAL SERVER

If the decision is to BUY (or even if the decision is to MAKE!), the next decision point is a bit more technical.

Software vendors normally offer one of two technology-platforms, a) the Distributed Server system, where a server (with the microfinance application and database) is installed and operates independently in each office/branch of the MFI. Information from these servers are then periodically transferred and compiled at the HO and b) the Central Server model, which has one central server hosting the software and the database. Users from each office/branch/HO access this central server (mostly through internet) for their computing needs.

The Central Server model removes traditional barriers to growth by enabling:
• Real-Time Data Access: Data for the whole operations is available on real-time. This enables greater control and supervision, faster/ informed decision making
• All for the cost of a browser: All that the user needs is a computer terminal with a browser application installed! There is no need to buy costly licenses for the software, the database and the operating system separately for each and every branch.
• Easier and cost-effective maintenance/software upgrades: With the database and the MIS software running only at the central server, fast and easy maintenance/upgrading of hardware, operating system and MIS solution is possible at minimum costs.
• Easy/Flexible Access: Users can access the software from anywhere, at any time, simply by logging on to the internet, even from his house or an internet café.

However, for all its advantages, the Central Server model has its disadvantages:

• Internet connectivity: The availability of stable, preferably broadband connectivity is a critical need. Some MFIs have remote branch locations where internet connectivity might be an issue
• Costs: While branch-wise licenses may not be required, each branch needs to spend on internet connectivity. Also, costs of the central server infrastructure are high, especially if the MFI decides to set-up these facilities in-house. The third element of increased costs may arise on account of hiring technically qualified manpower to run/administer/maintain the central server infrastructure.

STEP 4: IN-HOUSE HOSTING VS OUTSOURCED HOSTING

If the decision is still in favor of the Central Server Model, then the next decision point revolves around the hosting of the Central Server.

Since most Central-Server models use internet for connectivity, the central server needs to be hosted in a data center for access over the internet. A MFI can choose to buy the server infrastructure and organize the hosting activity in-house or outsource the hosting to a hosting service provider that offers such services.
Outsourcing of hosting has the following advantages:

• Lower Cost and Technology Related Entry Barriers: Setting up, operating and maintaining in-house server infrastructure involves high up-front investments and sophisticated technical capabilities that MFIs do not normally possess.
• Focus on Core Business: With outsourced hosting, MFIs can focus on their core business rather than dissipate time and energy in Data Center management.

However, a basic (and valid) concern in outsourcing is the security of the database, which might seem to be at the mercy of the hosting company, liable to tampering/leakage. Outsourcing of the physical database must therefore be only entrusted to a very credible and reputed data center which has layers of security procedures in place and is preferably equipped with relevant certifications like ISO 9000, Quality Certifications and Data Security certifications.


To be continued...
(Excerpt from "Getting IT Right." This document identifies the critical decision points and the pros and cons at each step in the process of ‘getting IT right’.

PART A outlines the Technology Selection Steps that a MFI would logically expect to undergo and PART B examines the Total Cost of Use (TCU) framework that could be used to evaluate various technology options.)