So, in order to succeed, each financial firm needs to develop propositions that make sense for clients and which permit the delivery of profit to the shareholders. This usually means finding and delivering a differentiating characteristic to a client. Differentiating characteristics can come from only two sources - finding a new product or service that no-one else has thought of or finding a way to deliver an existing product or service in a way that no-one else can. This can be simplified into a matrix of 'The Four "Ps"':
Product - product structure is different from others
Price - it is cheaper
Place - it is delivered into a market where no-one else is
Promotion - it is promoted to clients in a different way
This may not look familiar because it doesn't reflect the complexity of relationships that exist in the industry. It doesn't need to for the purposes of defining a context for technology. The structure of financial intermediaries (FIs) is shown as the combination of back, middle and front offices which is increasingly how modern financial services firms are viewing themselves. Links to external connections include all connections, in its broadest sense, to other ‘suppliers' in the investment chain. This might include depositories, regulators, counterparties, qualified (and non-qualified) intermediaries, exchanges, market reference data vendors and other agencies - anyone with whom the firm has a relationship, other than a client, and whose objective is to help the firm get its product to its clients. While pertinent to later discussion, the internal granular structure of the FI below (back, middle and front office) is irrelevant at this stage. Each box in the triumvirate essentially has input and output, whether that be electronic, paper-based or verbal. In between the input and the output, each function must add value in some way to make the delivery of the four Ps effective. That is their one and only function. It may seem simplistic to be stating this in an article such as this. In order to understand the context of technology, the reader must come out of technological tunnel vision back to basic principles.
We should also be clear that, in the twenty-first century, what constitutes technology is changing. Where we would have separated out the content from the delivery mechanism in the past, now content is an integral part of any technology solution. In fact, when PCs were first invented it was common for people to have no idea of what they could do with the box even after they had it. It was effectively a solution looking for a problem to solve. These days, life is very different. The need to deliver content drives solutions just as much as problems and business issues. It is a different way of looking at business processes that reduces financial services in particular to a giant computer network whose objective is to deliver content from one point to another where that content is in some way enhanced, amended or simply recorded demonstrates a typical model designed to form the basis of a technology solution. Its interesting that there are no lines between any of the boxes at this stage. The positioning of the boxes tells a great deal about the attitude of the firm towards its clients and towards those with whom it has a relationship. One the one hand, this model can evolve positively by reminding us that the client is the key to the whole and the relationship management is the point guard of that principle.
Everyone else may have one's own roles and responsibilities but they are ultimately subservient to the survival objective - without that client, none will exist for long. However, and unfortunately much more common, this model is used negatively to define roles and responsibilities that must take place before, or as part of, any service delivery to the client. This latter interpretation leads to inward looking technology solutions. The model itself is a silo type model but is useful because it allows many overlays to be created. Overlays can reflect different processes within the business, for example tax documentation, where some elements play no part and some are mission-critical. The overlay model can identify both content as well as routing mechanisms which together make up the most modern thinking for such systems.
So, we see that managing technology in a financial services environment is no easy task. It is certainly not as simple as buying software as many more factors and approaches need to be taken into account.
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1. How to use technology in business
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