Business IT Alignment and the 3 ‘R’s – Rationalisation, Regulation and Ring-Fencing

Posted on : 24-06-2011 | By : john.vincent | In : Innovation

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Delivering IT within Financial Services organisations doesn’t get any easier. Just as technology services look to simplify and commoditise through maturity and new innovation, along comes a whole bunch of hurdles to overcome driven by economic, social and political circumstance. For many years we have talked about the alignment of Business and IT but never before has it so been important to step up the engagement to a seamless, symbiotic relationship.

Organisational objectives such as Cost, Risk, Quality and Agility and the associated measurements thereof are scattered liberally in the SMART’s of support functions throughout the industry. And yet, couple that with what is often a disconnected business strategy and a culture of short-term meritocracy and it doesn’t take too much intellectual wisdom to realise that something needs to change. Sound familiar ?

So let’s look at some of the current challenges facing business and technology leadership.

1) Rationalisation – by definition “The process of reorganizing and overhauling a company’s operations, policies, and anything else needed to make the company more efficient”. Within FS we’ve been undertaking this for a number of years. Indeed, objectives have been set top down throughout the technology organisation with a year on year increase in weighting. Headcount has been reduced, delivery organisations merged, Capex spend limited, contracts renegotiated, services moved to “best shore” locations etc… However, this only goes so far before a new approach is required and of course, you can’t “shrink yourself to success”.

2) Regulation – as we meet with different organisations one thing is very clear – the increase in regulation and their impact on business and underlying technology services is a constant challenge for organisations. We’ve already been through numerous regulatory and compliance implementations in the past and it isn’t slowing down. We will need to understand the implications of Basel III, Dodd-Frank and FACTA ( Foreign Account Tax Compliance Act ), to name but a few. All of these are being introduced for good reasons and it is vital that the business and technology organisations are closely aligned to determine what are the key implications for systems and processes.

3) Ring-Fencing – it is a matter of opinion as to whether the Independent Banking Commission went far enough with its interim report around future requirements to segregate the business activities of investment and retail banking. What is clear is that again business and technology organisations need to jointly determine the impact now that it seems almost certain they will be endorsed later this year. In order to facilitate ‘retail ring fencing’ there will need to be significant operational and systems changes that would need to be undertaken by each individual bank. As the Commission sets out, there are some functions that should not be ring fenced (related to investment bank) and those that should (relating to retail banking) – the challenge is that there are many shared services across universal banks that service both these areas and would need to be separated if retail banking activities are to be ring fenced. The greater the costs and complexity of ring fencing operations, the longer such changes will take and the more potential for disruption to everyday banking services.

Many organisations will have advanced thinking on the 3 ‘R’s but it is worth taking time to consider certain aspects.

In terms of Operating Model, we feel that the following dimensions require special attention:

Business Alignment : is the model in terms of governance and process connected throughout the organisation to the business consumers of services ? Often we have committees for Run The Bank and Change The Bank investments, but do changes in business activities in terms of scope or volume have a predictability in terms of the associated changes ? Understandably there is a large amount of sunk or fixed cost but it is important that the actual “existence” of all technology assets is understood and coupled to business value.

Service Agility : how efficiently can services be reconfigured as a result of an external change in circumstance ? The focus around costs has led many Financial Services technology organisations to realign operational services from a vertical to horizontal model for internal synergies. Clearly some services are common and therefore this rationalisation move makes sense. However, there is also a risk of making any future Ring-Fencing requirements more complicated and costly. Considering the Business Alignment imperative in conjunction with Service Agility should be the cornerstones of future operating models.

Strategy and Architecture : all organisations have a strategic roadmap for technology and services. However, there are two important questions to ask. Firstly, how mature are we in terms of Enterprise Architecture and the governance thereof ? Often, EA is a pseudonym for Infrastructure or Application Architecture. True Enterprise Architecture considers all aspects of an organisations business activities and can drive innovation, reduce risk and deliver efficiencies if placed in close proximity to the strategic business model.

Secondly, how far out does the strategy look ? In a recent conversation a senior banking leader discussed the need for FS organisations to look much further ahead, akin to the way that Shell does it’s Scenario Planning. Is it feasible to look 5, 10, 25 years in advance ? Conventional wisdom says not in terms of technology… but by considering all environmental, political and economic influences and overlaying the technology aspects then the different paths can be drafted in terms of “Signals and Sign-Posts” for the future operating model.

Risk Management : Disaster Recovery and Business Continuity Planning are well embedded and typically mature with FS. The journey to Service Recovery is understood. However, similar to the Scenario Planning, an increased awareness and vision is required throughout the organisation in terms of the myriad of external impacts to the world we live in and subsequent organisational response. We don’t have to list the surprises of the past 5 years…can we predict what’s next ?

Sourcing : where are services sourced from, whether internal or external, is driven by a number of factors including culture, compliance, cost and innovation. As we think about a more long term and holistic operating model, not just about technology or operational services, how does the way we deliver services mirror the 3 ‘R’ influencers ? Shared Service models or Joint Ventures may be key providing they have the correct construct in terms of commercial, flexibility and partitioning of delivery. Technology advances can help in this, with cloud computing well on its journey along the “Gartner Hype Curve”. The ability to source services in a more on-demand / scalable way provide choices for application provisioning for business consumers, notwithstanding the well known attention areas.

In summary, perhaps it’s time to step back and think about the future. The 3 ‘R’s are, of course, only the basic foundations.

Are you suffering from Complexity Drag?

Posted on : 24-06-2011 | By : jo.rose | In : Innovation

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You have bought in the different software you need to run your business processes. Your system experts have pushed them to their limits as you have expanded.

To protect your critical production systems, you sensibly now have a series of environments (system integration testing, pre-prod, prod, etc.) which allow software upgrades to be fully tested and accepted before hitting your production environment.

However the various systems you now have are complicated with many inter-dependencies and your many environments have varied topologies. Even stopping or starting a small element or whole environment required specialist knowledge of the underlying systems.

When a required upgrade for some of your third party software comes in, it is a major event and the decision to deploy it through the environment chain is a big one. The system experts are now heavily involved throughout the deployment process. Even after their initial configuration work, their knowledge of the different configurations and dependencies within each environment is still required at each stage.

Instead of improving your systems or developing the next big thing, your system experts are now stuck in a constant cycle of pushing out software updates through the whole chain.

Stuck in a constant cycle

Stuck in a constant cycle

You are suffering from complexity drag. The effect when the greater complexity of your systems puts an increasing drag on future work. Further improvements or developments are slowed or stalled as your team is increasingly tied up with maintaining your current systems rather than driving forward necessary change.

Would it not be nice if your system experts could wrap up their systems knowledge and the necessary control along with a software update into a ball and then then just pass that ball up the chain with minimal further involvement?

Liberated experts and empowered users

Liberated experts and empowered users

The challenge is to move from the old model with its substantial knowledge silos to a more devolved system where knowledge is shared out and control delegated out to those that need it. This would empower gate-keeper users to maintain their own domains and push out any expert-approved updates themselves.

This can be achieved through use of a holistic system which encapsulates a repository of system knowledge including a store of all software and their updates. Each user can then receive customised views and control of the systems they require (as defined by the system experts), all of their actions can be centrally audited and the experts can be alerted in real-time to any problems.

Now that a lot of the support and maintenance work has been delegated to the relevant gate-keeper users and safe in the knowledge that they maintain close control of the entire system, the system experts are finally liberated to get on with those business-enhancing things that they were always meaning to do.

Contributor: Andrew Porrer – Technical Director – Heathwest Systems (
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