IT Strategies for the New Economy (with Banking as a case study)

Transcription

1 IT Strategies for the New Economy (with Banking as a case study) Business models have already been changing in the new, globalised flat world. New economic models are pointing the way for developing effective business strategies in this environment. What are the IT strategies that your business should be travelling with on this journey? September 2008 Presented at: 13 th Annual Banking and Finance Conference FINSIA and the Melbourne Centre for Financial Studies September RAJEEV ARORA Principal Rajeev_Arora@infosys.com

2 A door like this has cracked open five or six times since we got up on our hind legs. It s the best possible time to be alive, when almost everything you thought you knew is wrong. Tom Stoppard, Arcadia (1993) 2

3 About me Rajeev Arora Principal, Infosys Australia IT Strategy and Architecture 25+ Years in IT industry, with last 10 years consulting to CxOs, CIOs and CTOs in IT Strategy and Architecture, IT Governance and Audit, IT Investment Management, Organisational Change Multiple verticals: Financial services, Telecommunications, Government, Utilities and Manufacturing Multiple business and technology horizontals segments Front office solutions and channels; Back office solutions; Integration architectures; Security and Risk solutions; Author of one of the earliest books on Enterprise Java in 1997 Education: Organisational Change (AGSM current), IT Audit (CISA), Masters in Technology (RMIT), Engineering (BITS-Pilani, India) 3

4 Agenda 1. Case Study Trends in the Banking Industry 2. Shifting World Today Emergence of Complexity Economics 3. Connecting business strategy and IT Strategy processes 4. The Agility Challenge 5. Implications for developing Banking IT Strategies 4

5 Trends in the Banking Industry Markets Maturity and Saturation 1. The markets are saturated / mature 2. Products from various providers are interchangeable 3. The distinguishing power of the distribution function is deciding Rapid, Cheap, Reliable processes are needed Channel, context and the chosen quality of service 4. Emergence of niche parties Unique combinations (Derivatives!) 5. Customer wants more control -> More control needed in providers 6. Customers Shopping around, seeking best price / quality combination 7. Focus on segmentation 8. Shifts in points of sale (Channels) e.g. supermarkets 9. Large global banks entering new markets, challenging incumbents 10. Less use of physical outlets 5

6 Trends in the Banking Industry Business or the Value Chain 1. Best sourcing of non-distinguishing business processes 2. With BPOs, knowledge of processes is shifting to low-wage countries 3. Limitations are shifting from IT to business: The emphasis is shifting from realisation (IT) to specification (business). 4. IT as Enabler alternative distribution channels, innovative offerings and consolidation of value chain 6

7 Trends in the Banking Industry Technology 1. Continuous growth of electronic channels Internet, VoiP, Interactive and IPTV, Mobile Internet 2. Industrialisation and standardisation of IT, making sourcing possible 3. Consolidation of processing centres 4. IT Enables alternative distribution channels, innovative offerings and consolidation of value chain 5. Network is the basic infrastructure 6. From custom to packaged solutions 7. Managing complexity, investment streams, delivery and vendor risks 7

8 Trends in the Banking Industry Social 1. Increasing effects of market deregulation and market participant regulation 2. Increased protection of customers 3. Decreased manageability of society - Citizens are responsible for own pension, career planning, safety and basic utilities are privatised 4. Blurring geographical boundaries 5. Increasing competition and market fragmentation 6. Independent is beautiful, the combination of consultancy and sales is suspect 7. Permanently increasing migration 8. Do it yourself first - Look up instead of know, consultants increasingly are sources of second opinions instead of primary sources of information 9. Information overload information is commodity, no longer a competitive advantage 10. Increased electronic crime 8

9 Shifting World Today Emergence of Complexity Economics Key Characteristics 1. Dispersed Interaction 2. No Global Controller (Increasingly!!!) 3. Cross-cutting Hierarchical Organization 4. Continual Adaptation 5. Perpetual Novelty Niches 6. Out-of-Equilibrium Dynamics Source: Brian Arthur, Steven N. Durlauf, and David A. Lane, of the Santa Fe Institute (As quoted on Wikipedia) 9

10 Contrasting Complexity Economics to Traditional Economics 5 Dimensions Complexity Economics 1. DYNAMIC - Open, dynamic, non-linear systems, far from equilibrium 2. AGENTS Modelled individually, adaptive 3. NETWORKS Participants (agents) work bilaterally 4. EMERGENCE Macro economics evolves from micro behaviours 5. EVOLUTION Differentiation, selection and amplification Traditional Economics 1. DYNAMIC - Closed, static, linear systems in equilibrium 2. AGENTS Modelled collectively, predictive 3. NETWORKS - Participants (Agents) work through markets 4. EMERGENCE Macro and micro economics are separate 5. EVOLUTION No mechanism for creating novelty 10

11 How Evolution Creates Wealth 1. Design Spaces Evolutions searches for fit designs 2. Physical Technologies Methods and designs for transforming matter, energy or information from one form to another in pursuit of a goal / goals 3. Social Technologies Methods and designs for organising people in pursuit of a goal / goals 4. Economic evolution From big men, to markets 11

12 What it means for Business and Society Strategy Competitive advantage is rare, temporary and appears to be lasting shorter periods of time Strategy as a portfolio of experiments An adaptive mind set Organisation A Society of minds Creating an adaptive social architecture Social architecture Finance Politics and Policy 1. Behaviour of individuals 2. Structures and processes that align people in pursuit of organisation s goals 3. Culture that emerges from people s interaction with each other and their environment 12

13 A Society of Minds Constraints on the growth of a firm (Edith Penrose) 1. Ability to manage complexity 2. Knowledge PTs and STs enabled organisations to develop co-ordinating, controlling and executing abilities that are far ahead of their knowledge creating abilities Magic of intelligence A Society of Minds (Marvin Minsky) Intelligence is not a singular thing, but a collective interaction of individual parts Greater than the sum of individual intelligence, if organised in a particular way This is the THIRD stage of technologies of production 13

14 Connecting Business Strategy and IT Strategy Processes Complexity Economics Strategies Globalisation Connectivity (Internet / Travel) Commoditisation Regulation Customers, Products, Channels, Business Strategy Business Operating Model What is fixed What is flexible Enterprise Architecture IT Strategy IT Operating Model IT Portfolio Information Applications Infrastructure 14

15 Implications for IT Strategy Planning CFOs, Business Performance Management CEOs, CxOs CIOs, Enterprise Architects Governance and Management Strategy Collaboration up and down the hierarchy on business strategy, business operating model and enterprise architecture Sourcing Developing an operating model as per business plans and market conditions Investment management Distinguish business drivers as arising from business strategy or from the operating model Organisational change Gathering pace of deep changes requires organisational capability to execute frequent end-to-end change 15

16 Implications for developing Banking IT Strategies Business strategy issues Global, national, regional or local Pace of change, investment Configurable value chains Ability to switch location of back office business operations Challenge Knowledge management imperative Retaining knowledge when outsourcing business and IT processes Challenge Degrees of commoditisation: Sharing and sourcing of services Challenges People and Organisations Ability and effort required to change 16

17 Resources 1. Enterprise Architecture as Strategy, Jeanne W. Ross, Peter Weill, David Robertson, Harvard Business School Press, August Origin of Wealth: Evolution, Complexity, and the Radical Remaking of Economics, Eric D. Beinhocker, Random House Business Books, Complexity Economics, Wikipedia ( 17

18 Infosys Today 18 Infosys Subsidiaries Insurance Healthcare & Life Sciences (IHL) Banking and Capital Markets (BCM) Communications Media and Entertainment (CME) Energy, Utilities and Services (EUS) Retail, Consumer Product Goods and Logistics (RET) Manufacturing (MFG) New Markets and Services (NMS) Australia, China, Mexico India Business Unit (IND) Consulting Solutions (CS) Enterprise Solutions (ES) Product Engineering and Validation Services (PEVS) - PED, PLES, IVS Infrastructure Management Service (IMS) Software Engineering and Technology Labs (SETLabs) System Integration Services (SI) Corporate Sales and Marketing (CSM) Infosys Leadership Institute (ILI) Tech Services Information Systems (IS) Quality Human Resources (HR) Education & Research (E&R) Infosys BPO Infosys China Infosys Australia Infosys Mexico Security Audit & Architecture (SA&A)

19 Finacle Globally Leading Banking Solution Gartner Magic Quadrant - Finacle has emerged as a global leader in the Gartner Magic Quadrant for International Retail Core banking Gartner has ranked Finacle right on top for the Ability to execute and amongst the leaders in Completeness of vision. 19

20 Thank you! FOR FUTHER DISCUSSION, CONTACT: Rajeev Arora Technology Focus Group New Markets and Services Infosys Australia 20