The emergence of any new phenomenon often spells the demise of the existing scenario. The internet revolution is credited with ending the reign of several products, services and businesses, such as snail mail and music CDs. Physical marketplaces are fast losing their importance in the era of e commerce. Gaming, libraries, ticket counters, bill payment counters, newspapers & publications, advertising boards etc. have all rapidly moved to the internet domain, leveraging its ability to connect them with a massive borderless audience easily, in next to no time and cost.
Banking too has not remained immune to the internet wave. The first wave saw the emergence of tools and practices that simplified or did away with tiresome branch banking processes and counters. The traditional banking concepts prevailed, but the approach was now far simpler. The next wave of the internet revolution, however, might very well change the very face of the banking landscape. Internet enabled innovations are today transforming the way the world will bank in future. One such innovation is internet finance of which crowd funding and peer to peer finance are two major concepts.
Crowd funding, in the simplest terms, can be described as the raising of funds for an initiative or campaign from a ‘crowd’ (mostly the supporters of the idea) through the use of an internet platform to facilitate the process. The underlying initiative could be a non-profit, promotional or even commercial campaign, such as one that raises funds for a startup or new business idea. Of the different types of crowd funding, the one called ‘reward based crowd funding’ promises some rewards to the contributors at the end of the campaign. For example, in the absence of a single large investor, the proponents of a new business idea can seek to raise funds through crowd funding where the investment and risk would be divided among a number of small investors brought together on an internet platform. The investors might be promised equity stake in the startup business in return. Crowd funding can be looked at as a means of alternate finance, in principle quite similar to an IPO.
P2P finance on the other hand aims at matching the needs of investors (to earn interest on their savings) with that of the borrowers (to obtain funds for their projects), just as any other banking institution does. However the need to have a bank as an intermediary is eliminated by the use of internet platforms that bring the investors and borrowers together, allowing them to transact directly. P2P finance operates on the basic concept of presenting fund requirements of individuals/ small businesses as investment opportunities to ordinary savers or small investors. Most P2P finance platforms provide modelling and marketing of each P2P loan as an aggregation of smaller standard loan units, which can then be floated in the online virtual banking space. It thus allows injection of funds towards a single loan by multiple investors up to their capacity and as per their risk appetite. As compared to traditional banking, this model of internet finance fetches higher returns for investors, while ensuring lower cost of funds to borrowers, thereby offering a better deal to both parties. This is achieved by freezing the interest rate in the zone of possible agreement – between the deposit and lending rates offered by banks. The investors are allowed to choose the projects or loans they wish to fund. The repayment can be injected back into the system as reinvestment.
Internet finance is not far from being considered mainstream. It is now threatening to overtake traditional banks. However the banking community and regulators are at a crossroads, where the rules of the game are yet to be standardized and measures devised to boost consumer confidence in the system, and ensure smooth operations, and minimum default and fraud. The world is set to witness a major transformation in the way it banks.

It might be interesting to view Systems Integration work through the lens of organizational behavior. A typical vendor-client relationship between two firms is pretty unambiguous, easy to operationalize. A client organization engages a vendor for either upstream or downstream work; the vendor does it in its own setup and delivers to the client organization. The client organization evaluates the performance of the vendor, at times providing an incentive, and this easily fits into the overall supply chain with few adjustments on either side (vendor or client). Neither party is threatened in this setup.
A Systems Integrator’s (SI) entry fundamentally changes this equation because the SI delivers the service in the client ecosystem by being very much part of it. The SI’s work involves interacting intensively with multiple entities within the client organization. This brings up the internal dynamics and power play of the different sub-groups within the client organization. The SI itself becomes an important entity, which needs social and cultural integration as well – it can’t be clubbed under stakeholder management. If the SI work is large, it needs adjustment on the client side too by way of organizational adaptations.

SI AS A THREAT TO THE CLIENT

A large client is never a homogenous group within. It consists of multiple sub-companies and entities divided by work, functions, geographies, offices etc. Though all these entities are aligned in the overall mission, sometimes they also compete with each other. A large SI’s entry into the client system changes the equilibrium as it shows up with substantial overlap. An SI’s mandated work can overlap with that of some entities within the client organization. It becomes a threat to some. This poses the first challenge in the SI’s integration with the client organization.

BEST PRACTICES VS CLIENT PRACTICES

SIs are the specialists in execution; the ones with the industry standards and time tested processes and methodologies. The client organizations (large ones) also have their own processes, which have some maturity and have been proven in their context. This is the first conflict in defining and institutionalizing the processes. The SI, as a specialist organization, can do the work at lower cost and higher quality but needs to tweak it for the client’s acceptance.

WHO IS THE BOSS

For the program objectives to be met successfully, the SI needs to manage and assert itself within the client organization. The SI is responsible for managing and driving the client organization that in turn evaluates its performance and remunerates it. It is a cyclical process, which is inherently ridden with conflict. In a complex matrix setup it can take a lot of time to divide the right level of authority and responsibility between the SI and the client.

GOVERNANCE IS THE KEY

I think a large SI program should be looked at through the prism of M&A, cultural integration included. As in any M&A, the key success factor is to set up the right operating model with a clear definition (and more importantly acceptance) of the roles and responsibilities in the team. In large programs the team gets mixed up, at times part of the client team executes the program and sometimes parts of the program team perform the client functions. The model should clearly segregate the “delivery entities” and “client entities” when it comes to activities and deliverables. The primary function of the delivery entity is to create the output, which the client entity accepts and signs-off as in a traditional supplier-customer relationship. Program success depends on “one-team” effort, irrespective of organizational boundaries.

AUTHOR PROFILE

Sunil has over 15 years of experience in consulting, system integration and product development roles with Infosys, Accenture, McKinsey, Oracle and Tata Steel. He can be contacted at sunil_mishra06@infosys.com