October 12, 2018 | Written by: Ndu Emuchay
Categorized: Cloud | FinTech
A leading financial services institution knew its cloud transformation execution wasn’t hitting on all cylinders. The CIO had made modest gains in cloud adoption, using virtual machines in the data center and some off-premise cloud platform services for customer engagement. Defining agile teams and taking advantage of new capabilities in such areas as microservices architectures and artificial intelligence. The progress was safe, experimental and iterative, but in the larger scheme of what the organization needed to scale success, the efforts were, frankly, underwhelming. She stayed up nights, wondering, what’s next for us? How can I scale success, show true results to the board and get my entire organization, including the business, enthusiastic about real change driven by cloud transformation? I know I’m just biding time until I need to make a real decision. I need an enterprise scale transformation approach powered by new technologies including cloud. But what is it and what are its real catalysts?
Businesses today must be bold about their transformation to reap real rewards. Imagine you could accelerate the velocity of the business through information technology while saving 21% year over year on IT costs. Imagine you could modernize your app portfolio in half the time as with traditional techniques. Imagine you could get more IT strategy alignment accomplished in days applying techniques grounded in IBM Design Thinking than you did in all of the past year.
You can achieve business agility, aggressively address cost, and zero in on your strategic cloud adoption and digital transformation priorities. These are not mutually exclusive objectives and IBM can show you how.
In the weeks following Sibos last year, IDC published new industry predictions that underscored the urgency to become a digital native enterprise. By 2021, “at least 50% of global GDP will be digitized” with technologies such as artificial intelligence, blockchain, cloud, and mobile disrupting current ways of working. This profound opportunity serves as a clarion call to accelerate digital transformation investments that achieve business outcomes while aligning to the needs of changing customer demographics and preferences. As a core pillar of the world economy, it is estimated that 30% of total IT investments of financial services companies are executing digital transformation projects. Have you started yours?
Digital transformation for the financial industry considers unique challenges such as non-traditional entrants, regulatory demands, and an increased demand for integrated customer experiences. Addressing these challenges requires flexible capabilities considering business and technical perspectives that enable an enterprise to leverage a combination of existing strengths, such as an understanding of customer behavior combined with new capabilities such as emerging technologies, new ecosystems, and optimized organizational configurations. Sample focus areas include:
- Enhanced operational backbones: Technology platforms, such as those enabled by multi-cloud environments in order to support a broad ecosystem of applications and processes such as AI-based chatbots, robotic process automation, and mobile payments.
- Improved digital interactions: Strategies and tools to extend and monetize existing assets such as APIs to enable a marketplace for open banking with third parties, for instance.
- Innovative solutions: Culture and processes to create disruptive solutions and market-leading experiences for customers, including automated threat intelligence for secure financial transactions.
- Vibrant ecosystems and partners: Enriching the value chain, sometimes in co-opetition, disrupting and reshaping industry and geographic boundaries. (The recently announced Bandwidth Alliance is one such example of an ecosystem, among many).
In our work with some of the world’s leading financial services companies, our team has observed an urgency to achieve digital transformation with an extension into the value chain provided by digital ecosystems. At the same time, we have observed a gap in expertise, experience, and cross-disciplinary participation for how to proceed and achieve outcomes at scale. According to Forrester Research, “banking platform transformation projects often run mainly inside IT; business participation is weak […] Such IT-driven projects often fail to establish the mechanisms to address new business requirements during the multiyear journey.”
We know through our extensive experience working with clients that successful digital transformation extends significantly beyond technical decisions. If an organization values co-opetition, growth, and empowerment, it can more easily embrace change, making it more likely to succeed in digital transformation and the ecosystems that support such transformation. Every organization has a unique corporate culture that influences how that organization makes decisions and how they adapt to new business challenges and opportunities. Whether employees are encouraged to take risks, to innovate and be creative or to be measured and prudent, is dependent upon how those activities are viewed within the corporate culture.
With these observations and lessons learned, I will summarize considerations and potential next steps financial services clients can take as they embark on their transformation journey, accelerate such programs where they exist, and enable the digital economy — the theme of Sibos 2018:
- Industrialized core modernization as a near-state activity that extends existing systems with agile cloud-based capabilities to create innovative apps and services, while ensuring safety, security, and compliance for the enterprise and its end users.
- Pilot programs to trial new capabilities and ensure that value is being achieved in the medium term while keeping focus on the long-term strategic outcome. This is an opportunity to measure progress through meaningful key performance indicators, for example: new customer queries, compressed time from idea to market, percentage of revenue acquired, exceptional user experience via new digital channels, and percentage increase in net promoter score (NPS).
- A future state that builds towards banking-as-a-platform — an operating model enabled by discrete financial capabilities integrated into a digital ecosystem utilizing open APIs and customer-centric insights.
- Re-imagining and re-evaluation of the envisioned future state, and the calibration of where you are as compared to that future state. This is important, as decisions made in the past, while right at the time, require reevaluation to assure continued fidelity to inform the course-adjustment needed to effectively support strategic outcomes.
As part of partnering with clients, we start an essential conversation that every business must have in considering digital transformation. To maximize the return on investment, value, impact, and scaled success, every business must establish an integrated adoption and transformation strategy that covers multiple dimensions. Only then will modernization and innovation fulfill its maximum potential, scaling across the entire organization–allowing the CIO to rest easier at night.
If you will be at Sibos this year:
IBM at Sibos 2018
Visit the IBM booth (#F22) at Sibos. Or attend one of our various speaking sessions to hear from and chat with our digital transformation experts. Stay tuned for more blogs on Sibos 2018!
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