Do you want to print out the layout and interconnections of IT systems at a carrier, bank or logistics company? Of course, you can probably do it, but you would need a lot of paper, ink and a big wall to showcase it. And it’s not only IT, but also the processes that are tied to the IT and assume things always go in accordance with the procedures and plans. At the same time newcomers and other agile companies do things with light specific apps that use open APIs. How long can businesses live in two parallel realities?
First off, some real life experiences. A customer wanted to change an address on file at the bank, he did it in the web bank and it looked to be OK. But he continued to get mail to the old address. He called the bank and was told the address was changed correctly. But still he got mail at the old address. Then he visited the bank and found a person who actually investigated the matter. And yes, it turns out his address was changed. But each bank account, loan and investment are their own respective objects and they have their own customer addresses. So all these addresses needed to be changed as well. It was done, but when he moved a few years after, he again discovered mail being sent to the address updated several years prior.
A courier firm tries to deliver a letter. The customer waits many days for the delivery, and doesn’t get or hear anything. Then he gets the tracking code from the sender and checks the status on the internet. The courier has tried to deliver it daily, but delivery has ‘failed’. He calls the courier and is told that the courier has visited his address daily, but the main entrance has been always locked. Yes that’s true, it is always locked and requires a PIN code or card to open. The customer wonders how it can be possible for a human being to visit the same address each day but not do anything else. He calls the manager of the firm. The manager reveals that the delivery person has a process and instructions to try the delivery three times, and he has no tools and is not allowed to contact the customer, because this is the process the company has.
We could surely share many further stories about IT systems and processes: how a public sector health care IT system can cost billions, when modern similar systems only cost millions, how it can today take months to open a bank account for a company to fulfill all anti-money laundering checks and compliance requirements when this can be done online in less than one minute, and how it takes days to transfer money from one country to another one when an online service does it in seconds. The last one is also a good example of how incumbent companies (in this case banks) utilize customers, make money with their money during the transfer and at the same time take high fees and offer bad exchange rates. Old models, systems and processes are often also the excuse that are used to explain bad service, costs and restrictions, like a hotel chain that said they must charge $10 for the WiFi access for each customer’s device, when it is ‘not technically possible to do so that the customer would have only one price to all devices’. Right.
Now we see these old models collapsing in many industries. One good example is that even armies that are often conservative have realized that they cannot only count on heavy processes and huge systems. They need to use light apps, mobile devices, cloud-based solutions and open data and APIs. It doesn’t make sense to design heavy systems that are one-to-one tied to heavy processes with zero tolerance to handle situations where something goes wrong or a situation is not according to the process. It is much more effective to develop ‘back offices’ that offer many services that are needed in the process, standard APIs and access to the functions and data, and then a lot of flexibility to build hundreds or thousands different apps to use those functions in different situations and contexts.
Carriers and banks are some of the last standing strongholds of these legacy systems and processes. Banking is conservative and regulated, and carriers manage that huge expensive infrastructure that newcomers cannot easily replace. But change is coming to these areas too. Finance Technology is an area that attracts now a lot of VC money and growing rapidly, investments in it went from $3 billion in 2013 to $12 billion in 2014.
In digital finance we see already now it is often easier and faster to pay with PayPal or Stripe, have digital banking at Fidor Bank, it is cheaper to transfer money globally with TransferWise, it is fast and effective to build online investing and lending on Crowd Valley’s back office, online lending and investing data is available online and over API at DealIndex and many digital lending and investing service work well for people and companies that cannot even get a bank account or at least loan. Of course, some conservative people talk about higher risks, but the reality is that these new systems are often based on more data, transparency and opportunities to monitor processes.
New models to implement things come to all industries. Some incumbent companies and industries are still able to delay the development. But the change is coming. It is also a hard time for many process consultants. Too many processes are planned based on heavy inflexible IT systems and the assumptions that all situations are similar and nothing goes wrong. Fintech is a good example of how a risk averse and regulated industry is also changing in a fundamental way. Maybe carriers will be next in the queue. And smart companies and people will start to adapt to new situations earlier. Those who want to be the last ones to protect the old processes, systems and world simply cannot survive.