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Enough ink and even more pixels have been spilt on handwringing over the Infosys fracas. So I am switching to a more positive view of information technology (IT) services providers this week. Samir Dhir, president of Virtusa, spoke to me recently for this, the last instalment of the series of columns I am writing on how IT services providers see the new digital era. Given Virtusa’s recent acquisition of the services arm of Polaris Consulting and Services Ltd, a company focused almost exclusively on serving the banking, financial services, and insurance/investment (BFSI) sector, most of the conversation gravitated around examples in the BFSI world. This BFSI grouping is the largest single consumer of India-based IT services, and so this column easily applies to almost all Indian IT services vendors.

What is evident to me is that the common thread that runs through most IT services organizations’ response to disruptive change is a return to the roots of India’s software services industry: working in small teams to provide bespoke, or custom made, software applications for their clients.

Dhir feels that the rise of robotic process automation through the use of bots will soon cause a crossover into a world where application programming interfaces will be the single-most important way for organizations to continue to change their enterprises. The BFSI world is beset by constant change, caused mainly by three vectors. The first vector is change forced by competitive pressure in the industry. In the final analysis, at least in the commercial banking industry, interest rates, and therefore revenues, are a given, and banks have to be able to push down costs on the back end of their business in order to remain competitive. This will mean that the traditional ways of cost cutting by offshoring repetitive work will soon give way to automated bots. While bots do indeed take away jobs from humans, the creation of such bots itself is, nonetheless, still a computer programming exercise accomplished by humans. 

The processes themselves may be repetitive but each bank has a slightly different way of performing each of these processes, based on both their legacy core banking systems—of which there are many, as well as organizational quirks within each bank. The recording and rewriting of these processes into bespoke bot solutions for each bank requires that the computer programmers be “full stack" professionals, namely that each individual programmer has to be almost on par with a banker when it comes to the knowledge of how his or her specific banking client operates, just so that they can actually build bots that work.

The second vector is regulation, which is a constant the BFSI sector has to live with. And what is most constant about regulation is that it continually changes. Each regulatory change requires the financial services client to tweak its IT back end so that it can comply. Governments the world over are focused on better ‘know your customer’ or KYC regulations, and every bank needs to have the ability to expose its customer data to governments. At the other end of the KYC spectrum are attempts to safeguard private data. The BFSI world is in a race to meet the European Union’s General Data Protection Regulation, which will be mandatory by 2018 for all financial institutions that function in Europe. Privacy laws in other parts of the world will doubtless follow a similar pattern. Constant regulatory changes cause several ongoing rewrites to the programming code in place at these banks and will forever provide work for IT services firms.

The third vector lies in understanding the banking customer and his or her choices. Most of the “disruptive" technology in BFSI lies in changing the customer experience. Customers today have grown used to near instantaneous responses from their banks and financial advisers. Hardly anyone I know visits a bank branch anymore; they would much rather complete their banking transactions on the internet using a smartphone or a similar device. Fuelling this disruption is the plethora of fintech solutions in the market, each one of them singularly more effective at fulfilling a customer need in a niche area than what today’s banks can manage. This means that the adoption of fintech advances into mainstream BFSI needs to be lightning quick because customers will vote with their feet if their banks are unable to give them the service levels that these disruptive technologies can provide. 

Dhir gives an example of one of his clients, a very large American bank, which has more than fifty independent fintech vendors working at various points of the bank’s interfaces with customers. Dhir feels that IT services firms will need to co-exist with these fintech upstarts, and learn very quickly how to create bespoke solutions for financial services companies by partnering with the fintech “disruptors". The same bank faced a lawsuit a few years ago in its invoice and trade financing business where pilferage can be very high. Dhir’s teams are working on a solution to incorporate blockchain technology, which I have explained in an earlier column, into most aspects of the bank’s trade financing. Given the tamper-proof nature of blockchain, this technology will at one fell swoop cut out fraudulent activity. This demands that the IT professionals working with the fintech solution vendors and the bank need to be experts at both the technology and the trade financing process.

Today, technology can tell if a person is lying just by how she modulates her voice. Given that speech recognition is the next frontier in customer interface design, this constitutes a future opportunity in fraud detection. Dhir also spoke of the rise of “robo-advisory" services, some of which use artificial intelligence to make investment recommendations to clients. He says that these are new and largely experimental at this stage, but expects that these will begin to become mainstream in a few years, and will require integration with the back end fulfilment and trading systems at many brokers and other investment houses. 

Stage left: exit the sewing machine operators. Stage right: enter the old cast—fitter, master, cutter and tailor.

Siddharth Pai is a world-renowned technology consultant who has personally led over $20 billion in complex, first-of-a-kind outsourcing transactions.

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