Is it really impossible for the financial industry to copy the leap that the manufacturing industry did to outsourcing/off-shoring? Or are we looking at this the wrong way and only see the obstacles?
“We must walk consciously only part way toward our goal, and then leap in the dark to our success.” Henry David Thoreau quotes (http://thinkexist NULL.com/quotes/henry_david_thoreau/) (American (http://thinkexist NULL.com/nationality/american_authors/) Essayist (http://thinkexist NULL.com/occupation/famous_essayists/), Poet (http://thinkexist NULL.com/occupation/famous_poets/) and Philosopher (http://thinkexist NULL.com/occupation/famous_philosophers/), 1817 (http://thinkexist NULL.com/birthday/july_12/)-1862 (http://thinkexist NULL.com/birthday/may_6/))
Inspired by a presentation by a large financial player earlier this week I started thinking about WHY the outsourcing/off-shoring road is so filled with obstacles that you almost cannot see the pavement. And how a “leap over the obstacles” could be approached pragmatically.
There are similarities to manufacturing and finance I have found out by doing the transition from working with IT- solutions near manufacturing production/product development environment to financial services IT-solutions.
- For the manufacturer the factory floor and production is the heart of the business – if nothing comes out from the factory floor there is no company!
- For the financial industry the “core banking systems” are the factory floor – and if those do not work there is no company!
One could argue that it was easier for manufacturing/telecom as they were not subject to laws governing the handling of personal data.
But I beg to disagree – they instead have classified product development data and this data is in many cases so sensitive that it is not in any sense trivial to let it out of the house as it is essential to the company’s survival. It is crucial for their future existence – and still they managed to off-shore production and product development.
I have come to the conclusion that the similarities are larger than expected – and could therefore the transition phase that the financial market is starting to look at regarding off-shoring, be helped by what manufacturing/telecom did?
What if we could take this one step further and look at HOW manufacturing managed to transfer their “heart of the business” from local production to outsourcing in low-cost countries.
Paralyzed by complexity?
When we look at the core banking systems and solutions and see the complex interactions – not to mention the legal aspects – we get totally paralyzed and only see “this is not possible to move to off-shoring”.
And at the same time we have the challenges:
- cost cutting demands
- we are unable to sort out cutting the ever accumulating cost of the larger core systems due to complex interactions
- hard decisions on letting go of valued colleagues as a consequence of above
Is this our Catch 22?
Perhaps we should look at the equation from another end and see what manufacturing did.
Modularization – can this be key?
A product is an assembly of different parts/components. By modularization – finding, identifying and making parts/components generic, independent of WHERE they exist, one can streamline the work to create/maintain the product/service. If only some of the components can be ranged into this, that brings added accelerators such as:
- Off-shoring/outsourcing
- Lean processes – Toyota, Toyota, Toyota… (http://en NULL.wikipedia NULL.org/wiki/Lean_manufacturing)
- Shorter time to market = future growth
- Synchronized product development = shorter time to market
- Sustainability
Why wait until we are bleeding and are more or less forced to take action (like telecom and manufacturing) when we can plan and initiate at a speed set by us and thereby make it proactive?
In the end it is simple – to be able to keep our core business we need to cut the cost on the “in-animated” parts that do not involve persons. And the IT-systems are therefore the perfect target with a large bulk cost that is increasing over the years. So – how to bridge the gap – is in essence what we need to figure out to be able to meet the future!
Do you think we can take the leap over the obstacles?