Around December 12, 1996, the staff members at the research and software development (R&D) unit of the Technology Associates (TA) company were busy thinking what would be the best strategy to convince the management of AFAIB, a new company licensed to operate Islamic banking in Country X, to award the banking software project to the company. Khaled Al-Sayer, an expatriate finance manager from the Islamic Development Bank, Jeddah, was not convinced that any local company in a small country like Country X should be entrusted with such a mission-critical strategic system. Among his major concerns were the complexity of the Islamic banking operation compared to conventional banking, the tight schedule, and the budget.
Khaled had worked in many Islamic banks in the Middle East. In his last place of work in Bahrain, he worked with a group of programmers to develop the system they use there. Upon his posting to Country X, he had made arrangement to adapt the system for the new bank without considering the fact that the system was developed specifically for a particular bank and not for general use in any Islamic bank. This has been the problem with most of the available Islamic banking packages and is one of the reasons why that bank had to develop its own system locally. There was also the problem of technology, as, at that time, there was no local expertise in Country X to support the kind of technology used in the development of the system at Bahrain. In 1996, the Internet was not very available in Country X and remote support would have been too expensive. Due to other capital expenses, AFAIB had limited resources to acquire available expensive commercial banking packages. In addition to the fact that the operation of Islamic banking differs from conventional banking practices, customization would, in turn, increase costs and delay delivery. All these facts left the management of AFAIB with the option of searching within the sub-region for an affordable and sustainable system with adequate support and provision for upgrading in view of future expansion.
There are only few possibilities, since the banking packages available at sub-regional countries are also expensive and the problems of customization due to original design are also present. The package in use in another Islamic bank in the neighboring country had its interface in a different language with a different accounting structure. Ahmed Barde, the managing director of AFAIB, a seasoned financial practitioner and one-time senior executive at the central bank of Country X, contacted his colleagues in the banking sector. At this time, there were three banks operating in Country X. One was Standard Chartered Bank (SCB), a multinational banking group that used BANKMASTER for its main banking operations. We call the other two, Bank A and Bank B. They both use in-house banking systems developed locally.
The management of Bank A agreed to sell its banking system to AFAIB and provide support to customize it. Bank A actually had the capacity since the main actor in the development of the package was still with the bank as the IT manager. After lengthy negotiations, the high price demanded by Bank A seemed to discourage the management of AFAIB. The issue of competition was also another major consideration. Bank A was going to be one of AFAIB's main competitors, and there was concern about entrusting the backbone of its operations to a competitor. There are, however, situations where competitors become partners; for example, in Hong Kong, owners of leading supermarket chains and department stores joined together to build an electronic commerce infrastructure to address common problems (Damsgaard, 1998).
While all this searching was going on, the management of TA kept visiting AFAIB and using other local contacts to convince its management that TA had the solution to AFAIB's systems problems. There appeared to be some scepticism at the bank about the qualification of TA, the only software house in Country X. This was despite the fact that TA had most of the major companies and organizations as customers and had undertaken many successful large-scale software development projects in the past (e.g., a billing system for a national utilities company, a works management system for a World Bank-assisted project organization, etc.). In addition, most of TA's management and operational staff were trained abroad and had considerable experience from working in various places, including banks. In fact, one of the major banks is one of TA's main customers. Usman Garba, TA's managing director, is still responsible for the payroll system that he developed while working there. With no other option left, the management of AFAIB contacted TA and a demonstration of a prototype banking application was fixed for the 26th of December, 1996. A prototype was designed by TA's developers based on their experience in banking and accounting systems and basic Islamic banking operation procedures provided by Khaled and other former colleagues of Usman, now employed at the bank.
The prototype was presented in the presence of AFAIB's management team (Operation Manager, Investment Manager, Finance Manager, and the Managing Director). Khaled asked several technical questions and others also probed to confirm the readiness of TA to meet AFAIB's requirements. They inspected TA's facilities, and their fears were reduced though not totally allayed. They now considered the risk of trusting TA as minimal. The main problem was now the issue of time. They had hoped to open to the public by middle of February 1997 and wished to start using the system from the first day. Before any serious development work could commence, there were still other issues like the nature of the contract, cost, etc., which could not be addressed until a more detailed analysis could be carried out. After two weeks of intensive preliminary analysis, draft, and redraft of the contract, representatives of both companies finally signed the contract. The management of TA was able to use the software contract to negotiate the hardware maintenance and networking contract. The bank was able to start its operation with the necessary modules. A banking system that covered most of its operations was ready within 10 months.