The results were interesting:
Research from The Economist Intelligence Unit, sponsored by Appian, finds that just over a third (34%) of IT decision makers believe that the reduction or elimination of legacy IT would do most to help their organisation achieve its automation objectives. This figure is more than double the proportion of financial services and insurance business decision makers (17%) who believe that overcoming legacy IT would be a key factor in helping their firms to embrace automation.
So, while CIOs believe that old systems will hold up their digitisation efforts, their line-of-business counterparts are unconvinced.
The report continues:
Financial services, banking and insurance sectors are more likely than other industries to identify inadequate collaboration between the IT function and business units as a chief barrier to their organisation achieving its digital objectives. Over a third (35%) of financial services and insurance respondents believe that inadequate collaboration is a top barrier, compared with 24% in government, and 26% in energy and utilities. Worse still, there is a lack of consensus within finance firms. While 44% of IT decision makers within the sector believe that inadequate collaboration between the IT function and business units is a chief barrier to digitisation, just 27% of business decision-makers feel the same.
Oh dear. That old nugget. In fact, it should be plural: nuggets.
There are two issues at play here. One is technical debt, combined with process, product, and organisational debt; the second is the lack of understanding between what the business needs to do and what IT can deliver.
On the first subject, I’ve written a lot, including on the relationship between process and technical debt.
Companies build up waste over time. Systems are implemented that no longer are fit for purpose. The obsolete structures are not in place and, as a result, those ageing systems and processes become cemented into the fabric of the company. Those who see the issue raise the alarm regularly, but they find it hard to convince those who can solve the issue to do it, because it is often high risk and high cost. As a result, the issue remains year after year, decade after decade.
I’ve argued about legacy systems and technical debt and the need to change core systems to 21st century structures, such as cloud and APIs and open banking, for over a decade. Yet the problem remains. Why? Because of the disconnect between the digital needs of the organisation and the business needs, which brings us to the second point.
I have met too many business decision makers who think the challenge of digital is just adding a mobile app. It’s hard to convince them that it actually requires a complete refresh of everything.
I describe it as starting with a digital core and building omniaccess on top; unfortunately banks and insurance companies were built with a physical core with omnichannel technologies on top. And this is not a digital transformation or technology challenge; it’s a complete rethinking of how product and service works. It is redesigning the organisational structures; the lines of business; the opportunity to rethink and reimagine products and services; and yes, to then implement the technologies that support these new processes and structures. Note, the technologies come last as this is not a technological project; it’s a systems and structural and cultural change management programme.
Those companies that end up with business and IT divided illustrate this well.
While 44% of IT decision makers within the sector believe that inadequate collaboration between the IT function and business units is a chief barrier to digitisation, just 27% of business decision-makers feel the same.
This is the key line of the research for me as there are some firms that have rearchitected their structures, so it is no longer technology versus business but technology and business.
Technology is business and business is technology.
The companies that get this have restructured and now run lean organisations of small teams, where each team has a designer and developer as part of the team. They run in a microservices architecture that is cloud-based and API-driven. I’ve seen this in some banks and insurers. In those banks, they don’t think of a technology function. They understand that technology is now the business and the business is fundamentally running on technology.
That knowledge is hard to convey to a business-based person who has spent their whole life understanding risk, regulations, and compliance in a bank, yet would interpret Apache as a native-American rather than an open-source stack for 21st century business. The same goes for someone trained in actuarial and underwriting skills, but never trained in COBOL or Python, or someone who knows everything about credit and loans, and nothing about HTML and code.
I can understand that. It’s not their job to be able to code, write HTML, or deal with technical detail. Yet, they should be able to articulate what these mean.
Whenever I walk into a boardroom, I often ask two questions:
You may say that those are tough questions to ask business people, but they are fundamental asks. If the bank is run on technology and you don’t understand what technologies the bank is running on, then are you fit to run the bank?
And I don’t expect a technical answer to these questions. I just want them to be able to explain the concepts and the conceptual differences.
If technology is business and the business is technology, then you need leaders who understand both, not half.
“At its heart, our strategy empowers our businesses to control ‘what’ is produced, while technology has control of the ‘how,’” notes Bernd Leukert, Head of Technology, Data and Innovation at Deutsche Bank, in this article.