Why it's time for the finance industry to industrialise IT
Financial services is a key example of an industry in which digitalization has created an endless array of new challenges and opportunities. For banks and insurers to succeed in this environment, they need to change the way they think about application lifecycle management.
Much has been said about the challenges and opportunities that digitalization has created for organisations in traditional industries. On one hand, there's competition from disruptive startups, new rules and regulations, and a more demanding general public. On the other, there's a chance to accelerate innovation, create better customer experiences and take the lead in a changing market.
In order to beat the pressure and seize these opportunities, organisations need to be faster and more agile than ever before. This means changing the way they think about application lifecycle management - using DevOps methods and automation to roll out new products and services in a fraction of the normal time and at a fraction of the cost.
In this blog, I'd like to talk about how this new way of working applies to financial services - a key example of an industry in which digitalization has created an endless array of new challenges and opportunities.
The digitalization agenda in finance
Obviously, the idea of being active in digital channels and accommodating changing customer expectations is nothing new in the finance industry. Back in the 2000s, banks were at the forefront of this shift thanks to their efforts to offer services online, and most finance houses today have a digitalization agenda of some description - normally long-term legacy renewal or the development of mobile apps. But this isn't enough to become a truly digital business.
For today's finance houses, the ability to innovate quickly has never been more important. They're no longer competing just with each other, but with new digital service providers and even new attitudes to money - think of Bitcoin, for example, or the way that P2P lending platforms have sprung up to divert business away from traditional lenders. Similarly, customers want to interact with traditional banks differently - not weekly in a branch, for example, but daily on their smartphones.
In this kind of climate, organisations need to be fast to adapt when market conditions change and customer expectations shift gear.
This is a far cry from how banks and insurers have so far developed new software. Most of the time, they're firmly entrenched in the waterfall mindset and might dedicate months to planning and design before a single line of code is written. The result is that releases get pushed out yearly or quarterly rather than weekly or daily, which isn't exactly competitive compared with the likes of Google and Facebook - the kind of company that may well be behind the next big thing in finance.
Another reason that speed is growing more important for banks and insurers, both in Europe and further afield, is regulation. Whether they call for new cyber security measures or stronger reporting capabilities, many regulatory changes have a direct impact on IT and can create a substantial compliance workload for organisations that use the waterfall model and rely heavily on inflexible legacy infrastructure. For finance houses that are more agile, responding to new regulation is a lot easier.
The barriers to industrialised IT
So, how come so many banks and insurers have yet to make the move to more agile styles of application lifecycle management? Obviously, one of the reasons is legacy infrastructure and application platforms - almost all finance houses still use mainframe systems, for example, which, while stable, are expensive to run and inflexible when it comes to new development. New digital entrants to the market don't have this burden, which gives them a significant advantage in the speed and agility stakes.
Legacy renewal is a long-term project. It may take a decade to complete, if not longer. This isn't fast enough, so any new solution for application development and deployment will have to integrate with legacy assets as they exist today.
It'll also have to work within the organisation's wider ecosystem of suppliers and business partners. Very few finance houses manage all of their IT in-house, or outsource all of it to a single vendor, and many make extensive use of APIs to exchange data with other players in the industry. The transition to a more agile application lifecycle management model should therefore support this multivendor mindset, and enable organisations to use and reuse pre-existing APIs and components.
This might all sound like a lot of work. In reality, though, it's all entirely possible today with enterprise-ready solutions like Tieto Enterprise Cloud Orchestrator (TECO) - our new solution to help our customers speed up their digitalization efforts and industrialise their IT.
In recent weeks, Tieto's Niraj Sood and Ari Karppinen have both written blogs about this new way of working and the competitive advantage it can offer in almost any industry. In finance, where the challenges and opportunities of digitalization are far-reaching, solutions like TECO may be key to future success.
My advice to banks and insurers? Take a look at how much faster and more agile you could make your development process - not in a decade, but right now. Find partners that understand what digitalization really means to your organisation, both in terms of new products and services for your customers and your internal clock speed. Then, you can establish what you need to do to make this happen.
See a demo video showing how a netbank is launched with TECO in a matter of hours.
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