Digital Seamless Banking Part III- The Operational & Business Model

In my previous posts I described my view on both the concept I call “Digital Seamless Banking” and the details of its scope from both the customer facing & backend functionality required. For more details please refer to my previous posts:

“Digital Seamless Banking – the concept”

“Digital Seamless Banking Part II – how it should work”.

In this post I would like to share how I see the internal essence of the bank beyond its functional & technological aspects as I believe this is the main leap banks must do if they want to act in this business. The aspect I am talking about is how do you operate such a bank? What kind of business functions you need to have and where the revenue of this bank should come from? Is it same as the current bank just branded differently? Or is it something completely different?

I assume that if you read my previous posts you can imagine that I see this kind of bank differently than just re-branding the current functionality and setup to be called “Digital” and this is because according to my understanding  “Digital banking” is very different than “Digitizing current Banking” and it requires a totally different approach in how and what you do as a bank , the kind of services you give your customer together with how you expect to monetize your efforts in comparison to existing banking.

And what are the main differences? Well these are the things I see:

  1. The customer expectations from the bank – I discussed this already in my previous posts that in the new digital world the banking world split into two :
    1. The day to day money services & low risk credit in which people are using to perform daily transactions.
    2. The complex, heavy duty and high risk funding requirements people need mainly in specific events in their life. It could be buying a house, starting a business, investing in the stock market or dealing with their long term wealth management.

The main change we see is in the first type of money services for day to day transactions, here the customer expects a different service and experience than the one traditional bank provides and he turns to variety of solutions coming from retail & technology vendors (PayPal, Amazon, Google, Apple).

  1. The Interaction Model – in the new world as appose to the traditional one, the interaction with customers is indirect. A customer of PayPal never met a single PayPal employee or offices however beyond using their payment services he receives from time to time all sorts of electronic communications updating him on policy changes, new features and business offers.
  2. The Pace – the pace of change in the new world is dramatically higher than traditional banks used to. The change is not only on technology side which many banks focus on but on working models , new players and new needs from the people. Today’s new world introduces new buying behaviors, people communication approaches and business models on a daily basis which requires fast reactions especially to those on the front.
  3. The monetizing model – traditional banks expects to earn money in the traditional manner : fees on different type of services they enable their customer to do and interest on credit they provide , however in the new digital world you have a different way of monetizing models : advertising  and direct/in direct selling all by leveraging your customer base. That means you don’t charge fees for enabling your customer to use your services on the contrary you give it for free and encourage them to use it as much as possible. Because in this world the more they use your service, the more you get from third party (advertisements, sales commissions, etc.)

Current traditional banks which means their organizational structure, business policy, business model and employee mind set is totally different from the above therefore even if the money services requires by  a “Digital Seamless Banking” are quite simple from techno functional aspects I doubt such banks could offer this to customers using their existing backbone (organizational , processes , etc.).

So how do I see this bank? Well I will try to describe it schematically touching the main functions and their objectives. Before I describe them I think the most important thing is to set the ground for some principles I see when thinking on such bank:

  • Lean – a “Digital Seamless Bank” needs to be very lean, why? Because if one wants to be fast & always up to date he must apply a lean organization that act fast. The big and complex organizations most banks usually are cannot make it as it takes too long to identify change, analyze and approach, approve it, budget it and act when you need to pass long processes and many people which all has their point of view , interest and so on. It could be an internal unit within a bank however it requires independence in budget, decisions, and technologies and so on which is very hard to setup from my experience working with banks globally.
  • Computerized as possible – this is what makes it digital; the bank’s services must be computerized to the extreme with no human decisions required. It is easy for deposits and withdrawal however it must be the same also for funding. Meaning when a customer “involves” the bank during his day to day process (purchasing a car, a product online or a service) this should not have any human “banker” involvement/interaction, all automatic with fast seamless response.
  • Paperless – one of the biggest faults we still see in today’s banking is the paper based processes, even though technology is so advanced still banks (driven by regulation and habits) asks us to sign papers, send them by mail (not e-mail) or bring them physically or in a best case fax them. A true digital seamless bank must change and get rid of his paper addiction. Beyond that banks can actually take this point and leverage it to become the “digital identity provider” being perceived as a trusted entity (but this is for another post maybe).
  • Branch-less – of course we discussed this already, the Digital Seamless bank would have no branches, and as such will make sure its customer can receive all required services (banking & support) by the bank’s digital channels and business Ecosystem.

After clarifying the main principles a Digital Seamless Bank need to be based on let’s review its main business functions which would touch both organizational aspects and business model:

Customer Management – on the first thinking this function seems obsolete now that I have no branches and move all my customer servicing to both applications and external service providers from my Ecosystem (like retailers) , however when you think of it its actually not the case. The customer management is different however it is much more important as Digital Seamless Bank would be successful only if it will be attractive to its customers and will be able to increase his customer base/service usage dramatically. To do that you must have a dedicated function that knows who are your current and potential customers? What are they doing in their daily life? Where do they need you as a bank? Where they already use you and where not?  Beyond that there is of course the daily support required for customers which would be technical support for problems, how to use the bank’s services, raise awareness of existing and new service offerings and more. Of course this function must adhere to the above principles to be lean, computerized, paperless and branch-less.

Sales & Marketing – this function reflects the main money engine such bank would require to actually making profit from the simple banking business.  It would not necessarily deal with “banking” aspects as we already discussed the fact that banking profit models of fees and interest is going to be very simple. This function would need to drive transaction volume by preparing attractive bundles and raise them to the potential customers leveraging the different interaction channels the bank has with his existing and potential customers. This function would need to know what data is required on customers, where do fetch it, where potential customers are being in the digital space and how to get their attention and so on. This function would need also to deal with revenue potential by selling the customer base / transaction volume to relevant entities.

Business Development – this function needs to think always on the future however not the far future (which some call it strategy) but the near future from both technology and people behavior. As our digital world is constantly changing, new players coming in, new business models and new technologies the Digital Seamless Bank must identify these changes on time and react by developing new capability, partnering with a new player or just adjusting his messaging and lingo according to new things happening. Why only the near future? Because no one really knows how the world would look 10 or even 5 years from now due to the fast changes happening  so it is really a waste of energy trying to predict it, however what is already here and gaining momentum in the next year or 2 this is something that definitely possible to analyze and predict, and of course act upon.

Ecosystem Management – as we discussed the Digital Seamless Bank would need a strong Ecosystem for his being, from retailers to serve its customers, online stores and service providers, social networks to interact & acquire customer information up to technology partners to enhance the bank capabilities. Therefore the Digital Seamless bank would need a function that manages this Ecosystem from identifying who they are, closing and maintaining contract and agreements with them, up to monitoring the day to day business done via them.

Technology & Information Systems – this function comes without saying being the backbone of the Digital Seamless Bank. However such bank would need to decide on the size and shape of such function. Should it be like in today’s banking world of huge IT departments developing and maintaining their information system and technology or a leaner function uses external providers as required? First answer which seems logical is to say lean function however I did not analyze it deep enough to provide a concrete answer as it could have different considerations and options (maybe in future posts…).

As you can see all of these functions are tied together and serve each other, the actual organization structure might be different combining two functions together (customer management with sales & marketing, or sales and marketing with business Development) and the size of each function could also different from bank to bank however this is the logical aspects I see in a digital seamless banking. From a business model I believe the picture is clearer, the money would come from bundling day to day products and services into the money required to acquire them. The more you know on your customer money usage behavior and where he is spending his time on the digital world the better you can offer him a fast and convenient money services from your bank. Using your customer base for promotions and sales activities is another money engine which is very common to this business.

There is another world of Digital Seamless Banking for small & medium businesses however this is a different topic for future posts …..

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Digital Seamless Bank Part II – How should it look?

In my previous post I shared with you my concept of digital seamless banking which is more than just developing a few cool mobile apps and establishing a “digital” strategy but really developing and providing customers a different kind of bank. This bank needs to be very simple on one hand however provide his services in ways that would ease the usage from a customer perspective.

The main aspect is the seamless factor, meaning blending the bank services into existing day to day processes the customer is already doing without the need for the customer to separate the financial need from the action itself. Examples would be:

  • Providing cashier (Deposit & Withdraw) services via existing merchants (like supermarkets, convenient stores and more) that would enable the customer to have better coverage together with blending it into his natural processes.
  • Providing payments options via widely used social networks
  • Providing funding capabilities as part of product or service purchasing process without the need to approach the bank separately
  • Providing social funding options

You can read more on my previous post however in this post I would like to share how I see this bank from both the services it should provide and how the services should be provided.

The financial products & services a Digital Seamless Bank should provide

In digital seamless banking the statement “more is less” fits perfectly, because if you look at the main reasons today’s bank fail to serve its new generation of customers is exactly because it is not focused on them and their needs. The complexity of offering so many different banking products and services drives high costs, regulation & operation complexity that at the end provides poor service to all customers.

Therefore one of the main success factors that would decide whether a bank would succeed in becoming a true digital seamless bank would be the simple set of offering this bank would provide. In my view looking at the most common banking activities most of us need, these are the main banking products a digital bank should focus on:

  • Current account (also called checking account) : which is the most basic type of account that enables a customer to transfer his salary , deposit and withdraw money , transfer money to other accounts, make payments and so on.
  • Simple loans : the term simple loan could be confusing as in the loans business there are so many variations especially in the names however I mean low risk loans (10-15 K ) with simple interest types and calculation options for short/medium periods (up to 3 years). These loans could be offered in different manners from “loan for any purpose” to “fund your cell phone purchase” however their basic product is simple loan.

This is it from financial products perspective which could set the ground for a lot of different types of financial services offerings most customers use on a frequent basis like:

  • Deposit their salary to this this bank
  • Deposit and withdraw cash for different purposes
  • Send money to friends & family
  • Make payments and pay bills
  • buy products & services on line and on regular stores
  • Get funding for paying their study tuition, buying their car, purchasing products and so on or even starting a small business

these services does not require too much complexity and actually do not require direct interaction with the bank, therefore it could be seamless and embedded into existing processes the customers already doing.  All the more complex banking products and services like:  Mortgages, Investments & Savings , Financial advisory /consultations , Commercial banking , Other , should be kept out and stay with the traditional banking as they require much more customer specific adaptation, they have more risk to both the customer and the bank and they are much more complex.

Knowing the current way of thinking of today’s banks, I know for a fact my proposed approach would be something hard for them to accept at first, because they want it all and for them doing less seems like losing potential business, however I see this as a crucial step in establishing a truly different kind of banking experience I call “Digital Seamless Banking”.

the second aspect of the Digital Seamless Banking offerings I would like to touch is the high level set of IT setup such bank would need to have in place in order to fulfill his objectives:

The first set of IT solutions the bank would need are the customer serving channels from which the customer would consume the bank services. For Digital seamless banking I see the following channels:

  • Standard e/mobile banking – the simple applications we know that allow a customer to enter his account , monitor its balance and transaction history, conduct simple actions like bill payments, transfers, get reports and so on. this could be done from his home computer and/or his smartphone.
  • Cashier applications – here the bank would need to provide several options for its customers to deposit and withdraw money from their account. The Digital Seamless Bank would need to develop an add on that could be embedded into different retailer applications so its customers could leverage the retailers (supermarkets, convenient stores, other merchants) for deposit and withdraw directly from their account. For the customer it should be transparent how it is done, when he enters a retailer he just ask to make a deposit or withdraw and the retailer clerk , sales person, provides him this service. enabling his customer to use Automatic Money Machines would be another option even though I believe with proper retailer coverage this one could be removed and save the bank significant operational costs.
  • In store payments – here the bank would need to develop and add on that will enable all sorts of stores (physical and on-line) to offer its customers to pay for a service or product directly using their digital seamless bank account as part of the natural sales process. It could be to pay for the groceries in the supermarket , or pay for the TV I orders from the online store together with offering me the option to fund it in case I need / want to do this.
  • Social network payment transfer – set of add-on’s for relevant social networks (Facebook, Twitter, etc.) and common mobile apps (WhatsApp, Skype, etc) to enable the bank customers to transfer money to his friends without the need to step out and use the bank dedicated app or require any special details from his friend that needs to receive the money.
  • Crowd funding apps – the digital seamless bank would need to offer a crowd funding platform as this is an emerging business in which banks must find the way to step into. Today the concept is that 100% of the funding is coming from the social network which brings and advantage together with limitations, the advantage is that you don’t need a bank as you collect the funding from the social network however the limitation is the amount of money you can raise. A Digital Seamless Bank could change this and offer different models that could join both worlds and offer a bigger opportunity for funding (I might expend on that in future posts…).
  • Customer support – any Digital Seamless bank would have to have some sort of customer support application which could be a combination of chat, phone and virtual apps however their purpose is not to provide banking servicing but only technical support for problems.

The second set of IT solutions a Digital Seamless Bank would need is the back-end solutions required to operate and support the business like:

  • Core banking solution – to manage the Digital Customer account (current/checking account) and loans to cover the funding aspects.
  • Payment hub – to manage different payment processes between customers, between banks and possibly between partners. in some cases this functionality would be covered by the core banking solution in combination with the integration capabilities and in some cases a dedicated solution would be required.
  • Data capture and analysis – to enable the bank to track important activities and analyses usage patterns. I also include here functionality to enable the bank to create special offers to customers based on their needs and the bank business aspirations
  • Channel integration – as the main aspect of the bank is to offer its services via different channels mostly third party , this will require some sort of specific integration layer to manage and monitor this aspect of the bank.
  • Customer Relationship Management (CRM) – to capture and manage the customer data and ability to use it for different purposes from very basic reporting and operations up to marketing and sales campaigns relevant for such business.

Post 2there could be more back-end functionality needed and some might classify them differently however these are the main functional requirement to explain the concept. there are more things like accounting and billing, reporting and more that I did not include in this post.

That’s it in a nutshell how I see the Digital Seamless Banking setup from both banking products & offerings and IT setup required to support it. If we look at the market today we will see that the “Digital Seamless Banking” is implemented today in fractions by a combination of several Fin-tech, Technology, Retail and Banking companies which requires the customers to have different solutions depending on the type of service they want, having one “Digital Seamless” Bank could simplify their day to day life and be attractive over the existing service providers.


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Developing the Digital Seamless Banking

Digital BankingDigital Banking is a hot trend that is being discussed and implemented for years now, it started with the online banking more than 17 years ago when internet was introduced to the public and since then it conceptually stayed the same.

Every bank has a “Digital” strategy and most of them mean digitizing their customer facing channels to look modern , enable self-service operations instead of doing them in the branch and maybe introduce some additional functionalities (even though not much) however not too many banks really take it to the next level.

Even banks that did some more innovative digital functionality do it in fractions and as part of their existing old fashion banking business so at the end the customer does not get a fully new and modern experience from his bank.

Having said that, I do see these days more and more banks around the globe that are recognizing that just having another digital channel or implementing new UX technology is not enough because the business is changing, and it is changing in several ways:

The first significant change is, the customers are changing; the new generations of customers are different, they have different pace, for them it is all about “now”. If they need a loan, they expect to get it now, if they need to send money or pay a bill, they want to do it now, they don’t want to ask, get approvals, send information and most important they don’t want to wait.

The second significant change in the new customer behavior is how they consume their financial services. Most banks think that it is about the front end, how it looks, another app another device etc, however the reality is that it is actually about the process. The new customer does not care from where he will get the funding or money service as long as it will be embedded into his natural process, save him time and help him achieve his goal which could be to buy a product, pay for a service or send/receive money. For him the fact the payment process is disconnected from the buying process is a problem, or if he needs to separate the loan application from the reason he needs the loan is something which is not natural.

The third significant change is the fact that new digital/online players coming from outside the banking business entered the market and they understand the new customers much better than the banks. Players like PayPal, KickStart, Facebook and others address the customer needs and understand him much better than banks. The new customers’ presence exist in the virtual spaces, social networks and in the online universe. They are happy to shares their habits, desires, successes and failures knowing they might compromise their privacy. The new players know how to use this in order to provide the customers with digital financial services they need like funding and other money services in the context of the customer day to day activities. The new players are coming from the different types of end user processes like online shopping or initiating an idea analyzing what and where money services are required and providing an easy solution which is embedded into the end user natural process. In that process banks are left out and gradually losing more and more business.

As I mentioned banks around the world see the threat and understand they must act fast however there are two main challenges in their current approach:

  1. Heavy Regulation – banks are heavily regulated much more than any other financial institutes and definitely more than the new players which are actually technology companies with huge amount of money and almost zero regulation. For a bank to offer money services like PayPal for example will require a lot of special approvals in most countries and this could be a very long process.
  2. Business & Technological Fixation – most banks I know are too fixed on their current business processes, way of work, and technological perspective which is coming from an ancient world. Even the most advanced banks still trying to fit their existing processes and way of work to the new world by wrapping it with nice face rather than changing their processes accordingly.

Regulation is indeed a serious challenge however my observation is that the fixation of the banks and lack of real game changer visionary is the real stopping factor. That includes all sort of external advisors banks usually hire to help them with strategies which mainly fixed on how to digitalize the existing bank.

To help banks move to the right direction I am currently crafting a concept I call “Digital Seamless Banking” which could set the stage for banks to enter the new market. The basis of the concept is for banks to start developing financial services offerings in the way that the new generation of customers wants to consume them, which require at first stage to simplify and minimize the direct interaction between the customer and his bank, and when done embed the offering with a third party service provider or product provider transaction.

The “funny” thing is that all the ingredients required to implement such concept exists, the day to day processes requires financial services are well defined, the channels used exists, the technology is in place and the core functionality is quite simple however the whole concept, business model and operation setup is definitely not in place.

“Digital Seamless Banking” – The concept name is built from two main aspects one “Digital” and the second “ Seamless” as I believe banks must combine both if they really want to provide a game changer for them and for their customers. In my mind the seamless aspect of the concept is more important as it reflects the change in the new generation perception to banking. They don’t see the banking process as key but just as a “small” step towards their objective and they want it to be lean and transparent as possible. Additionally the fact that customers have new funding options(like crowd funding), will force banks to be more user friendly , remove obstacles and offer a natural flow within the customer day to day activities.

The digital aspect will get two significant aspects; the first would be by enabling the bank to integrate its financial services into different non-bank applications, the second would be removing the need for the customer to use physical artifacts in order to get his financial services.


Digital Seamless Banking – how it works?

Digital Seamless Banking

“Digital Seamless Banking” means that the new digital bank will serve its customers by embedding his offerings and services into its customer’s day to day processes in the digital & physical world, so the consumption would be seamless from the customer perspective. Here are a few examples for such processes:

Think about a young person (25 years old) going to buy his new car, this guy expect to enter the car agency, choose the car he wants, pay for it and drive off with his new car. He has no patience for long processes and even though he will need funding, approaching his banker could be considered as agony. Getting the funding options and processing it as part of the car buying process would be ideal, so in that way he could do it all at the same time, by providing its information only once working with the car sales person. Blending the bank funding offerings into the car agency application process enabling the customer to get a loan together with buying a car would give the customer the banking product/service without the need to actually meet the bank.

Now think that after the customer got his car , his bank sends him several options for car insurance adjusted to his personal information / situation enabling him to purchase it all in one click from his smartphone that behind the scene will actually provide him additional funding so the insurance cost would be split over a period of time.

Another example would be to offer Facebook users all sort of financial services via the Facebook interaction from money transfer between users, loans and more so unlike current digital thinking of providing the bank customer nice looking modern specific channel applications, you blend the financial services into existing non-bank processes and applications which simplifies the consumption from the customer perspective and open’s great deal of opportunities for the bank.

From pure financial/banking perspective the digital seamless banking is quite simple, as in most cases you would offer simple loans and money services (payments, transfers, etc) however the important aspect here would be to know your customer beyond the “banking” aspect and link it. For example knowing which kind of smartphone your customer uses could help you as a bank to offer him smartphone upgrade or accessories together with funding and payment options. Think about a scenario where you as a bank send a special offer to all your customers who use old dated smartphones based on a great deal you closed with a smartphone provider which is bundled with a great funding offering and all in one click.

The potential of Digital Seamless Banking scenarios is enormous however the first step is acknowledging the fact we need a totally innovative approach to the new customer perspective, the new and emerging players in the digital financial world and how they all interact with each other.

As I already stated most of the functionality a Digital Seamless Banking requires already exists, some of it implemented by banks, some of it implemented by different companies however it is not offered by one digital bank that will combine all the features without forcing the customer for the “old” banking processes.

in my next posts I will try to share a more comprehensive view on how such bank would look like , and discuss whether the current banks/financial institutes could or should play in this market.


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The cost challenge in core banking solutions

low-cost-is-the-new-high-valueWorking in the core banking solution area for more than 15 years from building channels and core solutions from scratch up to implementing packaged software (SAP) I am constantly encountering the struggle of both banks and IT providers to have the best solutions in a reasonable price.

In the past it was perceived as the main cost factor was the old technology (mainly COBOL on MF) with its limitations that the promise of new technologies like Object Oriented, JAVA, , SOA , etc. seemed to be the cure. If you think about that it definitely helped solving some problems which affected the long term cost, however even after some major technology upgrades we can still see that both developing and maintaining the solutions are expensive.

The packaged software is another trend that took great momentum in the past 10 years which also promises cost effective solution (if done right) however from too many reasons (from bad quality solutions, wrong pricing model, lack of implementation knowledge, and ,and, and… ) the cost are still high.

Nowadays we have a new savoir “THE CLOUD” which I’m I am hearing the same “music” on how it will solve the cost problem and will make everything easier pretty much like OO , SOA and other approaches was supposed to do.

Honestly speaking I am not sure if OO , SOA and now Cloud are wrong actually I totally understand the concept behind each and the potential however my question is:

Do we really know what a reasonable/realistic cost is?

Meaning what should a bank expects to pay for developing a core solution (loans, deposits, channels)?

I sometime have discussions with different people (from banks, SI’s and my own company) which have very different expectations some seems unrealistic to me, and mainly in consistent and vague in their cost assumption basis or benchmark they came up with it.

Here some facts I have from my experience:

1. Core banking processes are complex from many different aspects (technology, functionality, integration , scale)

2. The banking business is highly changing not so much in the essence (loan is a loan for many years) but from the way it is done, from the technology it uses, and the business model it supports
3. Banks are huge and complicated organizations from many different aspects (staff, org structure, politics, amount of IT solutions doing the same things, etc)

4. SI’s and Vendors in the banking business are huge and complicated with many contradicting objectives to cost reduction ….

These are the facts (among others) that influence the cost no matter which approach you take (build yourself, packaged, cloud) and we should be realistic on our expectations.

So to summarize my point I would propose to ensure we are clear & aligned on the problem and its cause before we jump to different concepts that revolutions to solve something we are not sure what it is…..

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The main mistakes Banks do when evaluating software package

In this post I would like to share my insights on some common mistakes banks are doing when evaluating their options for replacing some or all of their core solutions with new ones based on software package (more about software packaged for banking can be found in my previous posts).

We already discussed some barriers in going for software package however we can Trustmedefinitely see a global trend as more and more banks are evaluating buying their new core solutions Vs. building them (developing) on their own. The thing is that it seems evaluating and picking the right package is not easy in banking and making a mistake could lead to a very long and painful experience for the bank. This is why on one hand banks are spending high efforts in evaluation process; however seems to repeat some common mistakes which lead to wrong decision or bad feeling .

In the past 7 years I am working with banks around the world representing one of the leading software vendors for banking and here some of the insights I have on the main mistakes banks does.

If you look to how most (if not all) banks around the world are approaching such move like replacing one or all of their core banking solution you see that they are all following a common process they call RFI/RFP which usually goes in the following way:

  • Collect requirements from the relevant departments within the bank (functional, non-functional, technical, commercial, and so on) which represents the desired way of work based on the current one
  • Put all on paper divided to sections and send to all vendors you feel are relevant
  • Analyze the responses by using some sort of weighting/prioritizing methods to score them (in most cases the scoring method is not that scientific but biased by the different stakeholders like IT or specific business driver )
  • Then shortlist the vendors came with best score and invite them to do some demos the banks provides (insisting on fulfilling them as written)
  • Some (not all) ask for some kind of POC and here the variations on what is included on a POC is very wide.
  • Evaluate the implementation approach and SI (usually not too deep)
  • And of course in parallel to all that run commercial exercises to understand the costs.
  • Decide

There might be more or fewer steps which in different order and names however these are main relevant steps I usually encounter and here are the main flaws in the process in my point of view:

  1. Lack of alignment within the bank – in most banks I see that the process above is involving wide spectrum of departments and roles however in a non-aligned manner. Each role puts his pain points, desires and requirements not necessarily aligned/aware to each other and sometimes contradicts one another. then you put it all in one document which seems to be a unified story/picture but in fact it is just a selection of requirements that are representing different views on different levels that does not paint one concrete picture.
  2. Enforce vs. Adopt – usually the process starts from the “as is” situation including the future picture. Banks are missing knowledge on how the relevant vendors approach the market regardless of their existing way of work which could be crucial to the evaluation process. This brings to a process where the banks are enforcing their existing thinking paradigms on the vendor which could lead to huge gap which is not necessarily true. on top the bank does not have the proper skills and knowledge to understand the answers he is getting from the vendor.
  3. Feature function Vs. holistic view – along the same lines of the above, in most cases the banks would try to evaluate the software vendor on a feature functional basis, which sometime just from different terminology or specific vendor design it seems he does not fit. On top they are missing the big picture and holistic view of the software package which could bring added value in the long term which is very hard to see when dealing with feature functional analysis.
  4. Missing future operational model – in too many cases I see that during the analysis the aspect of “how will I operate the new solution” which covers day to day operation by the bank team, future innovation and maintenance is either missing or done as a minor topic compared to the feature functions at hand. This is a huge mistake as replacing core solution is something very expensive and risky you want to know it would last and be comfortable beyond the near future. There are many packages out there that knows how to fulfill a specific need very well however are impossible to adapt and support the unknown of the future and very hard to operate.
  5. Lack of Time – on one hand each bank will tell you how important the process is and that they have to take the right decision , however when you look at the time they provide for it, and more important how they split the time you find that the vendors do not have enough time to really take the bank through all the important aspects of its software. most of the time is spent on internal processes within the bank , the vendors are given unrealistic time frame to put together demos and presentations which leads to a non optimal process.
  6. Lack or lacking POC process – POC could be called in different manners but the essence of it is evaluating the desired software in a deep manner prior to making a decision to buy it. In my experience many banks either skips this process or do it wrong which means they buy something they don’t really know how it would look and operate. Doing a POC is a crucial step (even though most sales people won’t like this statement) and banks must insist on doing it as it could tell them a lot about all aspect of the solution.
  7. Poor implementation partner – another aspect which is totally crucial is the implementation partner. You can have the best software package in the world but if you make mistake in picking the implementation partner the end result and the process of getting there could be a nightmare. The evaluation of the implementation partner is done in most cases in a very superficial manner, usually banks will either ask the vendor to be responsible for the implementation (“as he knows his software better than anyone”) or they go for the big names as they have their brand, the workforce power, it would be hard to blame me that I picked them, and I have a good company to sue…. However in most cases these are the wrong choices and a much deeper analysis and evaluation has to be made by the SI partner.
  8. Fight Vs. Partner attitude – this is the most puzzling aspect to me which is the emotional side of the process, I often see that during the process the different stakeholders at the bank are getting quite aggressive in their behavior which comes from clear reasons like : fear from the change, political aspects and commercial however in too many cases the whole lingo and atmosphere is changing from partners to rivals. When you consider taking a software package to your core, which will be there running your most important processes and escort your day to day for a long period of time, you want to have good and pleasant relationship with the vendor. Also the stress, anger and aggressiveness is in most cases blinding and jeopardizing a good evaluation process for all the wrong reasons.

I guess there are more reasons however these are the main insights I captured in my global experience which I feel is happening mainly from lack of awareness and “force of habit” , changing it could save so much risk, cost and time in evaluating software packages.

In my next post I will try to share my point of view on how it should be done taking into account the above points.

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The Real Value for Customer Behind the Cloud Story

In my previous post (which was long time ago) I questioned the “promise” in the cloud mainly from the “what’s new” standpoint. However as I’m continuing to hear and deal with this topic on the daily basis I was wondering why we see such a huge trend /hype around the topic not only from the vendors but actually from the customers (the enterprises).
It seems that today most of the big companies has included the cloud in their strategy even though many of them not sure where exactly and what kind of cloud solutions they can leverage. Why is that?

searching for the wrong

My “mistake” was searching for the answer on the technical and functional side of things, why? Because I am a technical and functional expert and also because this is what the marketing people in the market are telling us, they share how fast you can setup your enterprise functionality, how easy it is to introduce new functionality inside the enterprise and of course how innovative and appealing you can be with your customers all will be done by adopting the new thing called cloud.

However as I searched and searched I found that the true value is not really there, of course there are examples where cloud offerings can be up and running faster for organizations, however this is in very specific and in many cases simplistic cases and the real reason for it being faster is not necessarily the fact it’s on the cloud, but because it is ready made, standardize and the customer (the enterprise) is willing to adopt it as is. You can get similar result doing on premise if indeed the vendor will provide already made solution in which the customer will be willing to adopt as is, so where is the value?

To make a long story short I finally found the true value customers (enterprises) see in the cloud story, that makes them so eager to include it in their IT strategy so aggressively, and it is the cost model and the way it is counted as investment. It seems that the cloud story solved three of the major problems CIO’s and CEO’s had for years:

  1. one is to approve huge amount of money up front on an IT project which included the hardware, software and services side, with very problematic capability to defend or explain the ROI (Return On Investment) to their board.
  2. second problem was the fact they were not sure if they would be there to enjoy the credit as in such projects you approve the investment now (and take the heat) but see the fruits in 2,3 and sometimes more than 5 years later. This time period is sometimes too long for a CIO or CEO.
  3. And the third problem was the way it is recorded in the books and as a result in the financial results the company publishes every quarter.



The cloud magically solves this how? Because you “just” lease the IT solution instead of actually owning it. This difference is called “CAPEX vs OPEX” which are both terms coming from the financial accounting area. In very simple terms (you can read more about it if you are interested) it means that CAPEX (Capital expenditures) is a spend on actual asset you own and it is counted with its full long term price in the books Vs OPEX (operating expenditure) which is a spend “just” on the operational cost of a certain function. Similar to buying a car Vs renting it, if you buy the car you pay its full price and you recognize this investment up front + the operational costs that comes with it, Vs renting you just pay operational cost as you use it (increased of course as the relative car price is included in it) which makes it much more appealing. With this approach one you don’t need to pre-approve the full amount so the cost seems more reasonable and easier to approve, second you potentially can gain the credit of doing the right thing much faster , and of course the way it is counted in the books is significantly better in the financial reports which removes the IT project from harming the nice numbers you want to show on a quarterly basis.

As an Architect, solution expert and someone that deals with actual content (technical/functional) I understood that once again what dictates the way we call things and also the way we implement them is directly impacted from the business practice and we definitely need to be aware of that if we want to remain relevant in front of our customers whether we like it or not.

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The Cloud is the future – REALLY ????

Working in the technology industry for more than 15 years I’m used to different trends coming and going which represents attempts of all sorts of entities with different interests to enter or penetrate a specific domain to make more money. What I find always “funny” is how fast you can generate a “community” of people becoming followers and believers in the new trend just because it is new, “someone said”, or just because “everyone does that and this is where the industry goes”. In principle one could argue what’s wrong with that? And I would say nothing if it is not disrupting your day to day job , and provides value.

Well I believe that the “cloud” is one of these examples where someone created a buzz word, and suddenly it became “the most important thing in the software industry” and I ask REALLY????

I waited with this blog for quite some time as I also wanted to make sure I see the full picture before I make any decisive statements, however going deeper over and over again I’m sorry I don’t see the big promise in the “cloud”. It might be that I am inside the cloud and don’t see due to the fog inside 🙂 , or is it the case of the Emperor’s new clothes that no one really see anything but plays along with the game as he is afraid to look like a fool???

From my discussion with many people around the world working in the business I feel this is the case. In private discussions I have with people from different companies (software vendors, big global banks, small/medium SI’s) , line of business and roles (sales, developers, consultants, and more) I always hear “yes you are right we also not sure what’s new in the cloud and whether this is really the future” however as soon as the discussion comes to official streams and in the headlights every one clapping their hands and say “yes”…..


What is this “Cloud”? well I always love to use the Wikipedia as a source to check different terms, usually it provides a very good definition and if not it shows you the fact that this topic is quite vague or so specific no one care about it enough to write…. In our case here is the definition which I find quite interesting:

Cloud computing is a colloquial expression used to describe a variety of different types of computing concepts that involve a large number of computers that are connected through a real-time communication network (typically the Internet).[1] Cloud computing is a jargon term without a commonly accepted non-ambiguous scientific or technical definition. In science, cloud computing is a synonym for distributed computing over a network and means the ability to run a program on many connected computers at the same time. The popularity of the term can be attributed to its use in marketing to sell hosted services in the sense of application service provisioning that run client server software on a remote location.

The way they describe it articulates my point in this blog which is “cloud computing is a jargon term without a commonly accepted non-ambiguous scientific or technical definition” meaning, people in our industry talks about the cloud like they all know what they are referring too however most of the people are not really sure what it means….

In most of the cases when people refer to the cloud in the IT industry they mainly talk about two main things:

  1. Hosting – this is the capability to provide hardware resources to companies that prefer to lease their servers instead of buying and maintaining the actual hardware. The hosting started from the web hosting for web apps and grow to providing a server capabilities for any purpose, especially with the evolution of the virtualization technologies thanks to VMware that enables servers to be virtualized over a unified hardware and AMAZON that found a nice cost effective model to provide servers for any kind of usage.
  2. ASP/SaaS – Application Service Provider also called “on demand software” and SaaS meaning software as a service which basically means providing specific software application in a hosted manner without the need to install it on the customer servers and use it in subscription model of some sort. in this case you should ensure the software has multi tenant capability if you want to be attractive.

Both of the above (Hosting and ASP/SaaS) are very old concepts running for years, so what is so new?? What is the innovation everybody is talking about? When I look at most of the claim to be “cloud based solutions” out there I do not see anything that provides any revolution or even evolution from just the old way of providing hosting services (maybe chipper with AMAZON but that’s it) or ASP/SaaS based applications like kind of solutions.

Some people confuse the “cloud” with the different concept called the “Grid” which was introduces also many years ago to represent a way to run software over different computers in an on demand manner, meaning a specific software could exploit the memory and CPU power of different computers in which you can plug and play dynamically without being installed on these machines. The Grid promise was that you can make use of computing power available like use the people PC’s when they don’t use it that could enable running high power processes in a low cost model making use of existing capacity. This is definitely not “cloud” and one should not confuse (or let others confuse him) about it.

So if “Cloud” is just a nice name for hosting/ASP/SaaS, Is it really the future? Is it really so “game changing” for us as individuals or as companies? Of course it would save some money in the short term on hosting but what is there more? Where is the vision?

In my personal view “the cloud” trend is actually very disrupting to serious work needs to be done in the IT business (across industries).The fact that such minor topic with no real value gets so much attention from customers, leading software vendors, analysts and the fact that it is sold as the solution to everything even though it does not, takes the focus and energy/resources from working on the real challenges that require attention.

It also introduce so many problems and challenges you need to deal with (security, privacy ,technical issues, and more) due to the fact you must become “cloud” because this is what the industry is saying…

When people ask me “don’t you believe in the cloud?” I usually say there is nothing to believe in, it is just a nice term for hosting and cloud based apps are just nice term for SaaS/ASP both exists and valid for the kind of usages they always enabled which are non-core fairly simplistic applications for individual and businesses.

Do I see the need to transform on premise solutions to “cloud” ? my answer here also would be a big NO, as I believe that IT capabilities in today’s world which will be greater in tomorrow’s world is a competitive advantage in any industry therefore should be close as much as possible. Do I believe developing, managing and maintaining software should be easier, faster and chipper? big YES but you don’t need cloud for that.

I would love to hear your point of view and maybe you could show me aspects I missed.

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