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From Cutting Cost to Earning Business Value..

From Cutting Cost to Earning Business Value, a Big Leap for Transformation

The following is one among the many definitions of transformation: “In an organizational context, a process of profound and radical change that orients an organization in a new direction and takes it to an entirely different level of effectiveness.”

When virtually every technology initiative claims that it is transformational in nature, how can organizations tell transformation from turnaround, which is defined as “incremental progress on the same plane”? Especially when there is no absolute measure for it.

For years, banks (as well as other types of organizations) have struggled to put their finger on the true worth of their ‘transformation’ projects, hampered not only by a lack of ROI metrics, but also because the different stakeholders did not have a clear and unanimous understanding of what it was all about.

Since then, a select breed of technology companies has broken away, promising real, measurable business value from their implementations.  This marks a departure from the earlier approach which equated transformation to cost reduction. Quick to realize that costs cannot be reduced beyond a point, these business-driven transformation partners seek to deliver much broader business value – employing cost and revenue levers in equal measure – to their customers. Their proposition goes way beyond technology implementation to include consultative, strategic input.

Business-driven technology partners bring a lot more to the table. Their transformation outlook is not focused on reducing cost, but rather, on improving a string of critical parameters such as Revenue, Net Interest Margin, Return on Assets, Time to Market, Time to Compliance and so on. In this, they are helped by their experiences with other industries that are leveraging cutting edge technology to transform their businesses. Retailing, and its use of social media, is one such example.

They are also differentiated by their ability to deliver quick wins within the overall agenda. Core transformation initiatives typically take 6-8 years to deliver full benefit, an inordinately long wait for banks wary of taking on risk in these times. These partners win the confidence and mandate of top management by showing them a preview of final results, in the form of interim achievements.

The management of legacy systems is a very important aspect of business value-led transformation. While banks focus extensively on their technology partner’s capabilities, they fail to accord equal importance to their internal challenges, which can have a major bearing on the outcome of the project. Many banks abandon their transformation plans because they are overwhelmed by the task of phasing out some legacy applications, retaining others, and interfacing them with the new systems.  An experienced transformation partner will be able to help them navigate this challenge.

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Comments: (1)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 05 July, 2011, 18:51Be the first to give this comment the thumbs up 0 likes

Our experience echoes your views in a new approach taken not only by large, but even midsized, technology partners. Under this approach, tech companies build the new technology at no upfront cost and recover their investments by charging ongoing transaction fees to their customers. By doing so, the vendors take on most of the risks and effectively let customers enjoy cost reduction “on a tap”.

On the face of it, this approach might seem akin to the subscription model offered by SaaS and cloud-computing vendors. But, that’s not so: With SaaS, the vendor owns the application cloud and provisions it for use by multiple customers without too much customer-specific functionality for any given customer.  Whereas, in the new approach, the vendor builds a new, highly-customized application for each customer that is not only owned by the customer but is also difficult to extend to another customer for contractual, if not functional, reasons.