The human side of the cloud

People Cloud Employees
Cloud computing is more than just a technology; it’s a model for disruptive business transformation. And like any business transformation endeavor, it has to be supported by some fundamental realignment in organization structures, processes and even culture.
Take for instance the rather radical concept of distributed IT decision making in the cloud model. No more waiting for the IT department to provision technology; end users will independently assess and access the required infrastructure components based on demand.
IT, then, is no longer a detached purveyor of computing resources. From a pure maintenance and support function, it has to evolve into a more strategic role that involves working with different organizational units to understand their business needs and guide them to the appropriate technological solutions. In this new participative role, IT will be responsible for providing strategic technical guidance, defining standards and enabling innovation.
From a structural point of view, this means creating robust communication channels between business and IT. And the re-designation of IT personnel as cross functional strategists will have to be supported by extensive training programs to upgrade skills to levels that are commensurate with the new expectations.
As banks transition to hybrid cloud models, in-house IT resources will need to acquire the skills required to ensure that the disparate technological environments conform to all requirements of migration, integration and innovation. They will have to work with multiple service providers to achieve optimal integration of applications and data not only between different cloud providers but also across the entire IT infrastructure.
Banks can also leverage the power of cloud-based internal social networks to break down traditional departmental silos and build a culture of communication and collaboration. Integrating business partners, like Direct Selling Agents or banking correspondents, into the network will also allow for real-time access and collaboration to boost productivity. Using the native mobile capabilities of the cloud, banks can also empower employees with secure anytime/anywhere access to enterprise data and applications to enable quicker decision making.
In its simplest form, cloud computing may well be just a brand new delivery model for computing resources. But in today’s IT-centric enterprise, where technology has significant structural and cultural implications, it is imperative to rethink the entire organization around the cloud. The cloud is not just a fresh infusion of technology; it is a whole new way of doing business.

Catering to Customers on the Cloud

People Cloud Customers
Capital is expensive, compliance is exacting, competition is intense and customer dynamics have changed – that, in brief, is the ‘New Normal’ in banking. As the pressure on margins and profitability mounts, banks will have to review and streamline existing operating structures to increase efficiency and productivity. Most importantly, being customer-centric is now more compulsion than choice in the new order of things.
But there’s been a radical shift in customer needs, preferences and behavior. Customers don’t bank the way they used to. Virtual banking, be it online or mobile, is the channel of choice. Social media has significantly altered their information search and consumption patterns. Banks are also being challenged by rank outsiders with business models built around contemporary technologies and customer attitudes. There are financial intermediaries offering disaggregated banking services and personal financial management applications. Virtual-only banks targeted at the digital natives have become a significant niche. And technology powerhouses are muscling into the payments space with cutting edge m-commerce and mobile wallet solutions.
To compete effectively, banks need to reinvent their operating and business models and the cloud can play a transformational role in helping adapt to the new conditions. The cost, flexibility and scalability of the cloud model can enable them to reconfigure banking operations around changing customer dynamics. This will mean faster development and seamless delivery of omni-channel products and services that conform to the expectations of the new demanding customer.
The cloud is already revolutionizing the customer engagement model in banking.  A smartphone app from Spanish bank BBVA allows customers to transfer money to anyone by enabling withdrawal using a secret code sent via SMS. Commonwealth Bank of Australia has a mobile property guide app combining mobile augmented reality with real-time property information to help buyers. DenizBank customers in Turkey can now use its Facebook branch to manage accounts, transfer funds and apply for new products.
But the biggest impetus to customer-centricity will come from cloud-enabled big data analytics. The ability to parse huge volumes of structured and unstructured customer data, in real-time, can help banks personalize and pitch offerings even at the level of individual customers if required.
Operational excellence, innovation and an acute customer focus will be central to the banking sector’s ability to thrive in the ‘New Normal’. And the cloud has the potential to be a key enabler of all three.

What Banking IT Solution Vendors Can Learn From Peer Industries

The banking IT solution provider can definitely learn a lesson or two from the trends that are emerging from peer industries. An evaluation of the interesting developments in some of these industries, though   unrelated, is food for thought and a source of innovative ideas.
Manufacturing (Prototyping, Product Customization) – Bouncing back from the slumber induced by the Great Recession, manufacturing companies are gearing up to reinforce their market share with new approaches. One such is the packaging and positioning of offerings as “solutions” and not “products” to map end customer requirements. Automotive companies have mastered the art of rapid prototyping and are able to efficiently conceptualize and design prototypes meeting specific customer requirements.
Pharmaceuticals (Collaboration) – The biggest lesson from the pharmaceuticals industry is the one on collaboration. Industry heavyweights cement the partner ecosystem by collaborating with health insurers or health care providers to promote their products. In a concerted effort to facilitate connectivity with doctors and (smart) patients anytime and anywhere, pharma companies are promoting apps, kiosks, online tools etc.
Hospitality (User Experience) – Personalization of the customer experience with amenities a-la-carte, face-lift of the hotel ambience with robots at the reception, capitalization of social media and leveraging the potential of different channels to create unified interaction, are some of the developments shifting the industry’s outlook.
Advertising (Communication) – The advertising world is undergoing a paradigm shift as it wriggles out of the clutches of traditional media to communicate with target customers through new, innovative interactions. Advertisers are continuously reviewing the positioning of their solutions to ensure that they are perceived correctly by customers.
The dynamics in each of the industries mentioned above are fast changing. The trends visible today might pave the way for more innovative ones tomorrow. It would be in the best interest of banking solution vendors to track these developments and learn from them, where possible.

Scoping of Software Projects

Core banking transformation is a mammoth task involving huge investment, planning and strategizing. On procuring budgetary approval for the project, the next step would be to identify and engage an external consultant to aid the bank in the evaluation process. Having understood the bank’s business strategy and requirements, the consultant then converts them into a formal Request for Proposal (RFP) covering functional, technical and implementation aspects. It is crucial for the bank’s project management team, comprising its business heads, to engage in continual dialogue with the consultant to ensure that all facets are adequately covered in this document.
Banks should curb the tendency to replicate existing software processes in the newer versions and aim to fix any existing gaps; they should also ensure that the RFP reflects this. The new software should incorporate international best practices and, to the extent possible, eliminate older, more cumbersome processes. This would go on to reduce the extent of coding involved, resulting in lower project costs and shorter implementation lifecycles. Some of the exception situations, such as a client’s death, may warrant legal procedures to be covered and it may not always be possible to develop software which is process oriented and requiring complex engineering and complying with complex legalities across countries in the globe.
Consultants need to take a broad-based and calculated approach, ensuring that critical business and regulatory requirements of banks are met and users are eased into the newer processes. They should also advise banks on mapping existing practices within the new software, where possible. The inbuilt business functionality of the new software should be utilized to garner more business.
Core banking transformation success relies heavily on a sound understanding of current business processes; demarcating solutions, functions and features as “must-have” and “optional” will help prioritize them. Furthermore, banks and consultants should be flexible and quickly adapt to any changes along the way.

Rationalized Software Cost

Banks investing in core banking software have to be cognizant of the various costs involved in procuring and implementing the same, such as:
a) Licensing
b) Implementation
c) Maintenance and Support
In general, costs can be split into fixed one-time costs and recurring expenses. Licensing and implementation are fixed costs while annual maintenance and ongoing IT support are recurring. The licensing cost, however, may vary based on the number of accounts, transactions, customers, branches etc. as per norms followed by core banking vendors worldwide.
As for implementation cost, it could be similar for banks of identical size and business volumes with comparable lines of business, irrespective of retail or corporate banking. Factors like integration cost of existing systems likely to be retained by the bank may have to be considered as well. Furthermore, bank-specific customizations and process changes can add to the cost.
A matrix based on functionality, modules licensed by the bank, its status, for e.g. tier I/II/III, geography of operation etc., can help arrive at a ballpark estimate of the base price. Other factors such as regulations and/or bank-specific complexities will determine the final cost. It is also important to ensure that a piece of software is not priced drastically differently for banks with comparable volumes and business operations across a given region, say South Asia, Middle East or Europe.
Standardized pricing practices, such as defined price bands for different tiers, can create an environment of mutual trust between banks and IT vendors.  It would also make it easier for banks to evaluate vendor and solution options. Banks that have put off core banking transformation for want of more data will now be armed with information to take appropriate decisions.
This would be a step in the right direction to help propagate core banking solutions as well as create and sustain a healthy demand for these products. Without doubt, this will prove beneficial to banks and IT vendors alike in the long run.