Who cares? Why bother? What difference does it make? This is the feeling that I get when I talk with industry professionals these days about technology. Three years ago everyone wanted to be a technologist; today developers and designers are shunned like Typhoid Mary. Instead of discussing new opportunities achieved through technology we are talking about cost savings, rationalization, shared services, off-shore outsourcing, and on-demand computing. Pardon me, but what does that have to do with technology?
Is this just a factor of tight financial pressures and endless budgetary downsizing or is this the shape of things to come, where technology is not the answer and business process is? Can the industry change, from a Not Invented Here culture, to if it isn't nailed down outsource it? Is this even acceptable?
it's just a step to the right
The industry excesses of the 1990s coupled two decades of acquisitions have clearly pushed the term "best-of-breed" to a new level. Firms' infrastructure hosts a myriad of heterogeneous hardware platforms and software applications. The largest firms manage thousands of "critical" applications, many of which are indeed, redundant.
The industry is managing a maintenance horror show that needs to be addressed now. The more complex the infrastructure the more difficult the integration, the less flexible the organization can respond, and the more costly is their overhead. It becomes a downward spiral.
To address this nightmare, firms are going through a painful process of rationalization, outsourcing, and making difficult decisions on which platforms are indeed critical and which are expendable. But does that mean that technology is not important?
Unfortunately in the back-office, it does, as the industry moves toward outsourcing, service-bureau deployments, and shared services, technology does become less important. The nature of service bureau negotiations puts price over functionality in most all cases. However we should not throw away the baby with the bath water. Because the infrastructure is outsourced or maintained abroad, doesn't mean that the industry should be any less responsive, opportunistic, or flexible.
Cost with today's business environment should be a prime concern for core infrastructure of commodity-type products, but as new products, services, and distribution channels are offered, firms must invest, not only to remain competitive but also to push the envelope, increasing its trading, banking, and servicing flexibility.
Technology in this light will play an even more critical role reintroduce competitive advantage as infrastructure commoditization makes it more difficult to differentiate products and services. It is just the products and services that we have traditionally thought of as competitive are now commonplace and a whole new set of emerging products and services will be defined as competitive. The product maturity curve has not died we have just moved a step to the right and need newer products and services to fill the gap.
differentiation the key to value
What is a firm's value proposition? Why do clients do business with it? The key differentiating factors that firms will strive to compete will be: advice, product, capital, service, and cost. Does the firm want to be a low cost provider, a high service partner, an innovator, a product supermarket, or will the firm use its balance sheet to offer clients products and services that other smaller firms can't?
Technology will facilitate, strengthen, or defend any or all of these positions. Firms need to decide which paths to pick and achieve their goals by building, maintaining, and redefining these positions. If a firm's market position is valuable, intruders will encroach and competition will eventually erode differentiation. Defending a firm's position requires they benchmark their goals, align their initiatives, and extend their "balanced score card" framework not only to their internal and external resources, but to their technology investments and initiatives as well.
This is a time of rationalization - rationalization of technology, rationalization of budgets, and rationalization of people. The excesses of the nineties were just that, excesses. The industry needs to rethink much of its direction and get back to plain values -- what do I stand for, and how can I best deliver that value to my client.
While rationalization is a painful process we must not forget opportunity. We must accomplish these goals in the light of our industry, one of the quickest, most demanding, and most opportunistic on the planet. In our voracious desire to cut costs, reduce complexity, and outsource non-core functions, we must not forget that opportunity goes to the fleet-of-foot, and technology, in an information-based industry will always drive advantage. Larry Tabb is the founder and CEO of TABB Group, the financial markets' research and strategic advisory firm focused exclusively on capital markets. Founded in 2003 and based on the interview-based research methodology of "first-person knowledge" he developed, TABB Group ... View Full Bio