Client Insights, Consultant, IBM Center for Applied Insights
In this post, I will explore some interesting facets of the mobile money market in India such as market opportunity, regulatory environment, market participants, and the way ahead for the market.
Market Opportunity: The Indian economy has shown strong growth in the recent years, making it a USD 1.3 trillion economy. It is predominantly a cash economy with more than 65% of all retail transactions (total transactions are estimated as USD 410 billion per year) being conducted in cash. According to Reserve Bank of India(RBI), the central bank of India, more than 57% of the electronic transactions happen through credit and debit cards and the rest through Electronic Clearing Service (ECS) and Funds Transfer.
In India, 40% of the population remains unbanked. In contrast, it is estimated that more than 70% of the 1.17 billion people in India own a mobile phone. Moreover, this subscriber base has been increasing by 20 million customers per quarter. Hence, with a huge mobile subscriber base and a very small percentage of the transactions taking place over mobile, the potential for mobile money to take off and replace cash is immense.
Regulatory Environment: Government and the Reserve Bank of India are the nodal agencies which formulate regulations pertaining to mobile money. The Indian regulatory system has been gradually allowing the expansion of new products and solutions aimed to take advantage of the vast opportunities in this space.
RBI recognizes that individual banks need to work in conjunction with operators, mobile devices and payment technologies. In 2009, it mandated that a bank account is needed to send money but in 2010, it allowed ‘Other Persons’ (non-banks/NBFCs) to issue m-based semi-closed instruments with certain conditions and caps on transfer amounts. As a result, banks started offering mobile banking services. Further in 2010, it allowed semi-closed instruments to be used for bill payments and ticketing services, also, and permitted issue of co-branded instruments.
In late 2010, an interbank system had been set up in India enabling instant money transfers between bank accounts via mobile phones. NPCI's Interbank Mobile Payment Services (IMPS) is India's first instant fund transfer facility in the retail payment sector. It provides an inter-operable infrastructure for the banks and facilitates real time money transfer facility to their customers through the mobile channel. The unique feature of this system is that banks can choose any mobile banking application of their choice. Interestingly, IMPS can be made available in all forms (SMS, USSD, thin client, thick client) and hence it can support the transactions directly from low end mobiles to high end mobiles.
Market Participants: As compared to mobile money deployments in other emerging economies like Kenya, Philippines and Uganda, the Indian market is at a very nascent stage in terms of market consolidation and volume of transactions. The Indian telecom market is quite fragmented with fifteen different mobile operators providing service to more than 900 million subscribers. Among them, BhartiAirtel, Reliance Communications and Vodafone together hold more than 50% of market share.
BhartiAirtel has recently launched its mobile money services across India, offering services like payment of utility bills, mobile recharges, purchase at retail outlets, person to person money transfer, etc. Only Airtel customers can use this service and transfer money to other customers on Airtel.
My Mobile Payments Ltd (MMPL), a mobile payment service provider, had recently announced the launch of ‘Money-on-Mobile’ (MOM). It is a M-Wallet service which permits a mobile phone subscriber to purchase a wide range of goods and services using the mobile phone instead of paying by cash, cheque, debit or credit cards. It offers services like mobile recharge, utility bill payments, purchase of bus and movie tickets, to name a few. It claims to be India's first operator and bank agnostic mobile payment system.
The way ahead: As outlined in my earlier post, though the opportunity is huge and growing, companies need to address security apprehensions associated with mobile payments and build the awareness of the technology and the product.
India’s unique demography is an important factor to consider while taking strategic and marketing decisions during the ‘launch’ and ‘scale’ phases of mobile money deployments. Some of the notable factors are:
- It is estimated that 60% of the 1.17 billion population lives in rural areas most of which suffer from a lack of basic infrastructure and education. Companies generally face significant challenges in building the infrastructure and consumer awareness in these areas.
- Also, more than 50% of the Indian population is below the age of 25 years. This segment of population embraces new technology more readily but at the same time, it is a lot more value conscious and has little loyalty to a brand.
Besides offering regular services like person to person transfer, utility bill payments, mobile recharge etc. other useful revenue streams can be explored too.
- The internal remittance market – The internal migrant population is estimated to be around 100 million people. This market for internal remittance is estimated to be around USD 8 billion to USD 12 billion.
- Government payments market – Government of India offers a number of subsidy and support programs like Mahatma Gandhi National Rural Employee Guarantee Act (MG-NREGA), fuel subsidy, fertilizer subsidy and public distribution system which is estimated to be around USD 40 billion. A lot of it is wasted due to leakages and fraud in the distribution system. To ensure that the intended recipients do get their payments,mobile payments can play a very crucial role. The Indian government’s ‘Aadhar’ program to provide a unique identification number to every citizen of India would further lend support to the rapid uptake of financial services and transactions over mobile.
I look forward to your comments and observations. Please click “Add a Comment” below or “More Actions” to share this with others.
Consultant, IBM Center for Applied Insights
In this post, I shall try to have a closer look at some of the important questions pertaining to interoperability: what do we mean by mobile money interoperability, what are the arguments for and against interoperability, and what practical steps can be taken to achieve it?
The mobile money industry has witnessed a remarkable activity in the recent years. There are more than 165 pilots in the mobile money segment in emerging economies, mostly being run by MNOs, banks and other financial institutions. It is now possible to find two or more deployments in many Sub-Saharan African and South Asian countries. Yet, only a very few of these deployments have been able to achieve significant scale. In a recent survey of 52 mobile money service providers, the GSM (Groupe Spéciale Mobile) Association identified 11 service providers that have more than 1 million registered customers. This has led many to make a case for implementation of interoperability in mobile money ecosystems so that customers are more inclined to use mobile money and the deployments can achieve scale by increased customer adoption. Let’s try to explore this important concept further.
Defining mobile money interoperability: Interoperability occurs if different systems are technically able to work together. For mobile money, interoperability can happen between handsets, networks, financial processes and retail processes etc. The Consultative Group to Assist the Poor. (CGAP) has proposed a framework that categorizes interoperability in three levels: platform, customer, and agent levels.
- Platform level interoperability – It permits customers of provider A to make payments to customers of provider B. They may also transact via any mobile network operator channel and switch operators without having to switch banks. For example, M-PESA allows consumers to send money to any phone. In South Africa, MTN offers subscribers not only MTN Banking’s application but also access to their First National Bank, ABSA, Standard Bank and NedBank accounts. WIZZIT works across all mobile networks in South Africa.
- Agent level interoperability - It permits agents of one mobile money service to also serve customers of another service, in other words, agents having non-exclusive partnership with operators.
- Customer level interoperability - It permits the customers to access different mobile money operators from one SIM. Also, it permits the customers to access mobile money account from same handset, regardless of SIM
The debate around interoperability: Market participants and regulators have not reached a consensus about the need and benefits of interoperability. Some regulators believe that interoperability is the way to go as the market matures and operators try to scale up. For example, governments of Ghana and India have mandated interoperability in their countries. Some regulators have taken a neutral position and have allowed market forces to decide the course. The Bank of Zambia prefers, but has not mandated, that mobile money solutions be interoperable. It is encouraging interoperability through the development of a national switch. Others feel that interoperability will erode the competitive advantage of market leaders and its implementation may not result in sufficient addition in subscribers to justify the investment required. For example, a report by GSM (Groupe Spéciale Mobile) Association suggests that the business case for implementing interoperability is unlikely to justify the initial investments of implementing it.
How to achieve interoperability: Though industry leaders seem to agree that interoperability is a key issue, they have different views on how it can be achieved. There are two broad approaches to achieving interoperability:
- Standards – In global mobile telecommunications industry, Global System for Mobile Communications (GSM) has played a key role in setting up the standards and allowing the users to roam freely across various markets. Another example of common standards aiding the development of industry relates to SMS, where standard development in Europe led to a huge growth in SMS usage. Mobile money industry is still in its early stages and has not agreed to a set of common standards across all the elements described above. I believe it is unrealistic to take an entirely standards-based approach to interoperability. Standards are consensus based and take a long time to develop. Since a number of standards exist, it is unclear whether common standards can also impede the fast growth of mobile money industry; some of the players would have to wait before launching their services and many might have to migrate to common standards with significant costs and time. As the industry develops, a flexible approach based on experimentation would be needed. It will take time but governments & industry players should do what they can to monitor & promote standards,without holding back growth.
- Bilateral Agreements – Bilateral agreements, both commercial and technical, have become quite common. To develop compelling product offerings and to scale up, the market participants are experimenting with various business models and forging partnerships with other MNOs and financial institutions. For example, MasterCard and Telefonica announced a joint venture using the MasterCard Mobile Payments Gateway to lead the development of mobile financial solutions in 12 countries within Latin America where Telefonica’s Movistar® brand is present.
With respect to the timing and extent of interoperability, maybe the real answer lies somewhere in between. The timing and extent of interoperability needs to be specific to the state of market and needs to be continuously assessed. A report by Mobile Money for the Unbanked (MMU), suggests some valuable recommendations:
- Regulators should carefully consider the costs and benefits of implementing interoperability at an early stage of market development.
- Even when the enabling regulatory framework is in place, market should be monitored on a continuous basis to assess the need of further intervention.
- In the absence of interoperability regulations, monopolies and competition should be assessed periodically.
- Regulations should focus on ensuring that interoperability remains feasible at low cost to provide appropriate incentive to service providers and benefit users.
Have you ever been blocked by interoperability issues? What steps are your companies taking? I look forward to your comments and observations. Please click “Add a Comment” below or “More Actions” to share this with others.
Today, I’m going to take a different approach to, hopefully, give you a glimpse into how mobile money can change users’ experiences. This is an imaginative piece (all characters are fictitious) where I’ll try to highlight the concerns, joys and satisfaction of a mobile money user from the hinterlands of India in the year 2015. It highlights the importance of an effective and trained agent network, importance of sufficient face-time for new customers, interoperability issues, and benefits of mobile money for a typical user.
Today, I woke up late at 5 am, startled to already be a half hour behind schedule. My mobile phone in hand, I kept checking the time and rushed to get ready. I can’t afford to lose half a day’s wage, US$6, if I report late to work even by half an hour.
At work, Sultan, one of my best friends, asked me for a loan of US$15 which he needed to pay the school fees of his daughter. I checked my Airtel mobile money wallet balance and instantly transferred the amount to his mobile money wallet. For a nominal fee of 10 cents, it was worthwhile to help a friend.
Thinking back, I remember the last time I loaned Sultan US$10. I had to walk down 2 Kms to the nearest branch of State Bank of India to transfer money to his account. That was when we met Harpreet, the sales agent of BharatiAirtel mobile money services at the bank. He introduced us to the new mobile money services. Until then, I had a basic feature phone and could not understand much of technology or features of mobile money in the first go. Harpreet was patient; he explained the service, its features, its tie up with banks, charges and benefits for us for about 30 minutes. I was particularly wary of the notion of holding money in mobile – how secure could it be? What if I lose my phone/SIM or someone else makes use of PIN delivered to me? Harpreet demonstrated everything and explained it in detail to clear our apprehensions. This convinced both of us, me and Sultan, to subscribe to the service on our Airtel SIMs. He even gave us the contact details of two local agents in our locality who can help us cash-in and cash-out, as required.
The first few days in using this service were difficult. I forgot some of the steps of using various services; user interface of the application was not so convenient, etc. I remember approaching the local agent and was so relieved to see that he could help. He was very well trained and he helped me from time to time in using the services more efficiently. One challenge I faced in the beginning was that the agent used to run out of cash. This was a major let down for me and I had to walk a Km to get cash from another agent. Over the last two months, though, I feel the service has improved a lot.
Since then, I have been using this service quite frequently. I have used it to make recharges on my cell phone, make and receive money transfers to/from my friends, send money to my family, check bank account balance, withdraw and deposit cash at the agent and even pay my electricity bill. The list keeps on getting longer! Here again, the agent is proactive enough to let me know of the new services and discounts offered by the service providers.
For me, it’s a hand to mouth situation, given my meagre salary. I work in New Delhi but my family lives in a distant village in Orissa, more than 1000Kms from my place. With this service, I can transfer money to them on a real time basis and with minimal charges. Earlier, I used to transfer money through post office or hand it over to someone who would be travelling to my place. It took a few days for the money to arrive and I was charged about thrice as much. I am quite happy that this service enables me to send money to my family as and when they need it.
One challenge I faced initially, while transferring money to my family, was that my family was using the mobile services of Vodafone and Airtel was not allowing money transfers to non-Airtel subscribers. Sending remittance to my family constitutes 80% of my transactions and this was a major handicap for me. Either, I had to take the services of Vodafone or my family had to take the services of Airtel. Due to this, I was not able to transfer money to them for a couple of weeks. I consulted some of my friends and they advised a workaround solution they had been using. However, I was not convinced and instead, asked my family to take Airtel connection.
I have genuinely recommended this service to my fellow workers at the construction site and taken four of them to Harpreet to sign up for the services. For this, Harpreet gave me bonus talktime on my cell phone. It is a nice incentive for sharing my experience.
I finally got free from my work at 7 pm this evening and received my daily salary. I transferred the entire amount to my family since the monthly rent was due on their house.
Though it is tough for me to survive in this salary and work condition, mobile money has surely made the journey a bit simpler and convenient.
I look forward to your comments and observations. Please click “Add a Comment” below or “More Actions” to share this with others.
Special thanks to Geert Van De Putte and Tim Appleby from IBM Software Group for their help with this post.
Like other industries, retail has its own set of unique security challenges. Loss prevention is a significant component of that challenge. The latest National Retail Security Survey
stated that in 2011, U.S. retailers lost $34.5 billion to retail theft – combining employee theft, shoplifting, paperwork errors and supplier fraud. That accounted for approximately 1.4 percent of total retail sales last year.
Today, the checkout/point of sale is the nexus for retail security. Here, the four most important flows for a retailer converge – cash, inventory, electronic payments and customer data. All sorts of different security incidents and fraud can happen at this point – self-checkout fraud, shoplifting, counterfeit coupons, employee theft and compliance in theft, and the theft of customer data through compromised equipment.
As the boundaries of retailers extend beyond the traditional brick and mortar of their stores, additional security concerns come into play. There is fraud around online ordering and home shipment, portal security issues for retailer websites, supply chain security associated with contamination, theft and low quality, and even stealing intellectual property (if retailers have their own private labels).
On top of all of this, retailers are also transforming their business with emerging technologies that all have their own unique security challenges. These include new payment technologies like mobile point-of-sale and in-aisle purchasing, e-receipts, RFID and near-field communications, video and social analytics, mobility and multi-channel access and social networking.
All of these are increasing the number of contact points between the customer and the retailer – pushing out the security boundary further and further. Retailers are struggling to create a better, deeper customer experience and, at the same time, mitigate the potential risks to the organization.
The threat landscape and new technologies are creating a need for an integrated security environment. Are retailers up to the task? Are they approaching physical and information security in new, united ways? Is loss prevention being included in more and more technology conversations? Are retailers moving away from being purely reactive?
We gained a bit of insight into this as part of the IBM 2012 CISO Assessment.
There were eleven retail respondents from four different countries (France, Germany, Japan and the U.S.). Their answers compared to the overall statistics from the survey shed some light on the issues:
- Retailers realize that information security needs more attention – 8 of 11 see increased leadership attention from two years ago, and 9 of 11 expect increased budgets over the next two years.
- They are making progress – all of the retail respondents indicated a slight (7 of 11) or a dramatic (4 of 11) improvement in their information security position from two years ago.
- However, they currently don’t have the information security organizational structure to address the changing landscape – only 2 of 11 have a CISO, 2 of 11 have a budget line item, 4 of the 11 have a security or risk committee and 5 of 11 use a standard set of metrics.
- Internal threats and mobility are top concerns – 6 of 11 respondents indicated mobility as their top technology concern. Internal threats were ranked the highest overall security threat with 5 of 11 ranking it #1.
- Retailers will be focused on employee education and using managed services to improve their security situation over the next two years.
Another statistic that highlights the fact that retailers know the importance of information security but are struggling to address the changing technology environment comes from IBM’s Global Workforce Study
. Overall, 49% of respondents stated that they have “completely addressed” their mobile security concern. For retail it was only 22%. However, 73% of retail respondents expect to make significant investments in their mobile environment in the next 1-2 years, signaling they know it is an issue.
Retailers are not only responsible for protecting their own information, but they are under considerable regulatory pressure to make sure they protect customer information as well. They are faced with a diverse array of threats and technologies that are creating new potential vulnerabilities. They need to have the right security organization and capabilities that unites information and physical security, risk, loss prevention and others into a holistic approach. Retailers realize this, but they still have a way to go before they’ll be confident in their capabilities.
Feel free to contribute to the conversation. Are these the right security challenges for retailers? Will it take more than just technology to address them? How do you think they are addressing this important issue today? Do retailers have a harder go at it than other industries because of the nature of their business? Let us know what you think.
Consultant, IBM Center for Applied Insights
As a former marketer myself, I know that marketing is often marginalized within enterprises, particularly those with strong scientific or development organizations. Marketing is often viewed as being responsible for the “soft stuff” that looks pretty but doesn’t have any real impact on the business. I’m here to tell you that this view is wrong, and if you don’t realize it quickly, your competitors will.
We recently surveyed 362 marketers from around the world, across more than 15 industries, and found that Leading Marketers’ enterprises had 40% greater Revenue growth and twice the Gross Profit growth over the past 3 years when compared to the rest.
What exactly is a Leading Marketer? I’m glad you asked. We identified 2 essential traits of effective marketers: “Effective Engagement” and “Intelligent Investment”. Essentially we defined Leading Marketers as those who had a high level of responsibility for engaging with customers across channels as well as a sophisticated approach to investing marketing resources.
We then looked at publicly available financial data and found that when we correlated that to our segmentation of leading marketers, a clear trend emerged: Leading Marketers’ enterprises performed better financially.
So how, exactly, do you develop a Leading Marketing organization within your enterprise? Like most things in today’s world the answer is complex but grounded in the principles of Marketing 101. It can be as simple as the 4P’s or as complicated as developing a collaborative relationship with other functional areas within the enterprise. I’ll be blogging more about this topic and other insights from our study over the coming weeks, but get a sneak preview by reading our executive report, How Leading Marketers Outperform: Effective Engagement and Intelligent Investment.
If there is a particular topic you’d like me to talk about, please login and leave me a comment, below.
Client Insights, Senior Consultant
Center for Applied Insights
There has been a great deal of recent press stating that Platform-as-a-Service (PaaS) is “the future” of cloud. With a PaaS model, the user retains control of the application data, capabilities and updates, while the provider manages the software and infrastructure beneath that application. A lot has been made of the potential value of the technology – making the entire application lifecycle more efficient and less risky, while opening the doors for new organizational constructs and increased innovation and differentiation.
In its latest cloud hype cycle, Gartner placed PaaS at the summit, stating that it will be a transformational technology in the next two to five years. However, Gartner also said that PaaS is one of the most misunderstood aspects of cloud platforms. Adam Wiggins, one of the founders of cloud application platform provider Heroku, thinks that the PaaS market is just getting started. Finally Frost & Sullivan recently reported that “the platform-as-a-service market will be the next area of keen competition for cloud innovators, as the infrastructure- and software-as-a-service spaces have been commoditized.”
All of this may be true. A lot of enterprises are just getting started experimenting with and testing PaaS implementations, and it may take a number of years for widespread adoption. Technology adoption rates are always difficult to predict, but I think we can say with certainty that PaaS is a hot topic, with great potential, and much more will be written about it.
Consultant, IBM Center for Applied Insights
A couple of weeks ago I wrote a blog post discussing our
recent paper that links Leading Marketers with financial outperformance. In our study, these Leading Marketers had 40%
higher revenue growth and twice the
gross profit growth. Naturally, the next
question you’d ask is “how do I become a leading marketer?” And that’s exactly what I’m going to talk
about over my next few posts.
To kick things off, we found that Leading Marketers engage
with their customers across a variety of channels. These leading marketers are more likely to
have integrated inbound, outbound and offline marketing programs in some or all
channels. They are more likely to use
interaction optimization technology in all of their channels. And they are also more likely to adjust
offers in real-time across all channels.
In short, they create a “System of Engagement” that allows them to
engage each customer as an individual, across multiple channels.
So if leading marketers are creating a system of engagement
to deliver targeted messaging across channels, what specific tactics are they
using? To answer that, we looked closer
at mobile and social channels.
Essentially, a number of tactics within these channels can
be considered “table stakes.” Everybody
has a mobile version of their website and delivers mobile e-mails. Everybody has a social networking page on a
site like Facebook and most engage in micro-blogging (Twitter). But there are some specific, innovative
tactics where we saw differences between leading marketers and others.
When it comes to mobile, we found that leading marketers
were more likely to use mobile messaging campaigns, location based targeting,
and mobile-specific ads. For social,
leading marketers were more likely to develop apps for 3rd party
networking sites (Facebook), leverage social/local group buying (Groupon), and
participate in location-based games (Foursquare). All of this means that leading marketers are
faster to begin leveraging emerging/trending technologies to see if they can
enhance the system of engagement. Some
of these tactics may or may not prove to be effective in the long run, but the
leading marketers get there first… not unlike the adage “fail fast, fail
often”. By being at the forefront with
these tactics, they stand to benefit when they come across something that’s
It’s also interesting to note that location-based tactics
saw greater use by leading marketers in both mobile and social. When you think about a system of engagement
that strives to deliver targeted, personalized, relevant offers in real-time,
it makes perfect sense that location-data is a key component to enhancing that
There are a number of ideas you can take away from our data,
but there’s one over-riding principle that I think is worth taking to
heart: Innovation. Leading marketers aren’t afraid of trying out
new channel engagement technologies or tactics.
They get there first and they find out what works. They don’t worry about whether a channel is completely
mature… they jump in and get their hands dirty.
This enables them to be proactive with their customers, rather than
I’ll be back next time to talk about the barriers that
prevent many organizations from becoming Leading Marketers. As always, please feel free to reach out to
me with any questions. And, if you haven’t read it yet, take a look at our
executive report, How Leading Marketers Outperform: Effective Engagement and Intelligent Investment.
Client Insights, Senior Consultant
Center for Applied Insights
Platform as a service (PaaS) is at a critical stage in its life cycle – with promising business benefits offset by lingering reservations. PaaS promises increased flexibility, lower costs and higher quality IT services, while maintaining control over data and applications. It sits squarely between infrastructure as a service and software as a service, and could prove to be the most transformational of the three main types of cloud computing.
The IBM Center for Applied Insights wanted to explore attitudes around PaaS in order to identify leading practices in PaaS adoption and provide recommendations on how to exploit its potential. We interviewed over 1,500 IT decision makers in 18 countries and a wide range of industries so we could better understand their motivations, experiences and concerns relating to PaaS. This week, we released the results of our exploration in our latest paper “Exploring the frontiers of cloud computing – Insights from platform as a service pioneers”.
The report goes into more detail on the benefits and challenges surrounding PaaS, how to overcome the challenges and what an enterprise can do to start, or continue, their PaaS journey. For a view from cloud pioneers CLD Partners, check out their post on IBM’s Thoughts on Cloud
blog. For more information about IBM’s SmartCloud Application Services launch and the study check out a recent article by ZDNet.
IBM Center for Applied Insights
What is driving these shifts? In a January 28, 2012 New York Times Op-Ed piece Made
in the World
, Thomas Friedman argues, “Many CEOs, …increasingly see the world as a place where their products can be made anywhere through global supply chains (often assembled with nonunion-protected labor) and sold everywhere.” Globally integrated supply chains are transforming traditional business models and shifting yesterday’s outsourcing choices and trade-offs.
Mr. Friedman provides a provocative perspective. But, is this really happening?
The transfer of control of a process, product, or service to an external provider can take a variety of forms. The value in strategic outsourcing can include an organization’s ability to:
- Reduce costs
- Improve services delivery
- Engage in strategic partnerships that enable innovation, growth, and desired business outcomes
Traditional strategic outsourcing has often centered on transferring services to an external services provider with a focus on cost reduction. Outsourcing models are changing in new ways - why? What is driving these shifts and what can an organization do to capitalize on these changes?
Our team at the IBM Center for Applied Insights set out earlier this year to investigate market changes, identify emerging trends, and develop evidence-based research that explores how forward-thinking companies are responding to these trends.
Our premise is that the changing global dynamic, combined with technology-driven market shifts, is creating an opportunity for organizations to move beyond sourcing primarily for cost advantage to partnering for competitive advantage and desired business outcomes. Some of the technology-fueled market shifts reshaping the outsourcing landscape include:
- New and disruptive business models are changing how business is done
- Empowered consumers are driving companies to deliver customized client experiences to build enduring loyalty
- Big data generated from multiple sources is changing how organizations make decisions and leverage predictive insights for competitive advantage
Recently, IBM conducted a survey of 97 C-Suite Sourcing executives and found that seven out of ten plan to outsource for strategic reasons like driving growth and innovation. Based on their chief motivation, we categorized these organizations as:
- Cost-cutters–27 percent outsource their IT infrastructure to reduce operations costs
- Growth-seekers–37 percent outsource IT infrastructure, application management or business processes to achieve operational efficiencies and revenue growth
- Innovators–36 percent outsource multiple parts of the business to enable transformation and innovation
What we found most interesting was the progression of objectives across these three groups. Cost-cutters indicate they want one primary outcome from their sourcing relationships: cost savings. The majority of growth-seekers want to reduce costs, but also faster time to market for new products and services, and increased efficiency and effectiveness across the entire value chain. Innovators expect all of the above–and more. In addition to cost reduction, speed-to-market, and value chain efficiency, the majority of innovators want providers to help them:
- Drive front-office effectiveness (not just back-office)
- Better anticipate and respond to disruptive technological changes or market forces
- Proactively manage risk, compliance and security via technologies like predictive analytics
- Share risks and rewards based on business outcomes
I look forward to your comments and feedback!
Consultant, IBM Center for Applied Insights
In my previous blog post on How Leading Marketers Outperform, I discussed how Leading Marketers develop a system of engagement
that drives customer value at every touch.
Today, I’m going to focus on the other side of that equation and dig a
bit deeper into what prevents many marketing organizations from becoming Leading
The first question you might ask is “why doesn’t everybody
just establish a system of engagement?”
The short answer is because it’s not easy. A look at the barriers both Leading Marketers
and others face in implementing marketing technology is very telling.
To begin with there are a set of barriers we found that are
common to virtually any technology decision: cost, ROI, and organizational structure.
If we continue looking, the additional barriers for leading marketers are ease of
use and lack of appropriate user skills.
Alternatively, we found that some others are more concerned with
alignment/collaboration within the organization – particularly with IT. In many cases, marketers may not even have
ownership of marketing technology decisions.
In short leading marketers are collaborating with IT to implement the technology framework that supports a system of engagement and are focused on issues that enable them to improve
the effectiveness and scale of their activities. The others are
struggling to coordinate effectively with IT and other functional areas within
the enterprise. They aren't at a point yet where ease of use or a lack of user skills could be a barrier.
This leads to the second question, “okay, how do
you collaborate more effectively with other functional areas (especially IT)?” This is complicated, but our data
suggests that Leading Marketers are able to collaborate effectively at least in
part because they’ve established credibility within the organization.
There are lots of ways to establish credibility, but a part
of it is being able to demonstrate the value that you bring to the table. To that end, our study found that 88% of
leading marketers attribute business results to marketing activities. They use a variety of different systems,
ranging from spreadsheets to complex software suites, but the common thread is
that they attribute results regardless of methodology.
And of that 88%, 93% of those leading marketers have a set
process in place for determining which marketing activity receives credit for
the business results. Again, the
specific methodology varies – first touch, last touch, results distributed
across multiple touches – but they have a set process in place.
This measurement allows leading marketers to invest resources intelligently.
They know what works and what doesn’t, and this allows them to maximize
the impact they have on the business and focus only on the most effective
activities. This in turn builds credibility with the rest of the enterprise. Marketers can finally speak in the same financial language as the rest of the business.
So in summary, it’s very difficult
to become a leading marketer without measuring the results of marketing
activities. Measurement not only informs
operational spending decisions, but also impacts the role of marketing within
the organization. Leading marketers’ ability to attribute results helps them
not only invest intelligently but also build credibility and the financial justification needed to construct an
enterprise-wide system of engagement.
I'll be back next time with a discussion of the overall characteristics of leading marketers and how they illustrate a road-map forward for marketing organizations. In the meantime, if you have any questions, please feel free to leave a comment!
Client Insights, Consultant
IBM Center for Applied Insights
Not many people empathize with financial markets firms these days. Yet, they are facing a one-two punch of increasingly onerous regulation combined with increased competition (a result of more demanding customers, technological change, globalization and the downturn in the global economy).
Industry experts estimate that 15-20% of the market share for wholesale and investment banking will be reshuffled in the next few years. To survive let alone thrive, financial markets firms must adapt – by changing the way that they operate.
Working with Broadridge Financial Solutions we looked into how financial markets firms are responding to this demanding environment – and specifically the changes they are making to their operating models – that is how they organize their resources, business processes, systems, information assets, etc.
The research highlighted a leading group – who excelled at both compliance and innovation. This group had five key things they were thinking and doing differently than the rest:
- Thinking marketplace first, “factory” efficiencies second
- Designing operations around client interactions, not vice versa
- Cultivating agility – and an ability to see what others don’t
- Building and use scale, but not always in expected ways
- Partnering to extend their capabilities – and their thinking
These firms have a different perspective on operations and how it contributes to the business. The distinctions between front, middle and back office are becoming less distinct. As a UK-based Chief Operations Officer at a Universal Bank observed: “We must make sure changes enhance the whole process - It’s no good having a Rolls-Royce in the front and a Mini in the back.”
The leaders are looking at how operations can positively contribute to the business – through consolidation and greater efficiency of course, but also through creating the flexibility to scale resources and adapt to market conditions, facilitating faster product development and enabling innovation.
The leaders are also more open to working with external partners – and see the positive value to be gained through collaboration, for example accessing the technology and resources of an external partner. Leaders outsource more of their business processes, in particular, traditional areas like back-office accounting, settlement and clearance and reporting systems.
Success in these areas will likely encourage leaders to forge ahead into sourcing more complex functions such as reconciliations, data management, tax reporting and corporate actions. But what they outsource is perhaps of less interest than how they outsource. The leaders outsource with a business objective in mind, seeking to get the best from their partner, whereas those lagging tend to see the potential benefits in a more limited way – focusing on cutting costs of the back office.
And importantly, the study points to these differences in attitude feeding into improved results. Those who recognize how operations can contribute to the business and see collaboration as a way of improving business outcomes are rewarded with improved customer satisfaction, faster product introduction, improved regulatory compliance and improved access to information.
So what are the implications, for firms operating in financial markets as well as those in other industries who are trying to optimize the contribution of their back offices? For financial markets firms - focus on achieving agility, scalability and customer centricity, with the potential help of external partners. Many of those currently lagging are planning to evolve their operating model over the next three years. However, there is no time to delay, as the leading firms are forging ahead, and gaining market share as a result.
For those in other industries seeking to optimize their back office operations, this study also provides valuable insights. The financial markets industry is an extreme case where technological change, globalization, market turmoil, low switching costs and significant regulatory change have come together accelerating required operating model change. But the drivers are similar in many other industries – and we are observing a transformation in approaches to outsourcing – focusing more on sharing expertise and delivering business value rather than simply efficiency savings. Increasingly, the winners, across all industries, will be those who exploit these new capabilities to the full.
Consultant, IBM Center for Applied Insights
IBM just released the results of its 2012 Tech Trends study, revealing a number of interesting insights.
The study explores how enterprises are responding to the opportunities and risks introduced by new technologies. This year, we surveyed over 1,200 IT and business decision makers to determine why, when, and how their organizations adopt four pivotal emerging technologies – mobile, analytics, cloud and social business technologies – that are rapidly reshaping how enterprises operate.
Are you in the lead, or is your organization falling behind? You can use the adoption and investment statistics we discovered to help you assess where your organization stands:
Business Analytics and Mobile Computing are already quite mainstream, with over 50% of respondents deploying. Cloud Computing and Social Business represent a coming wave, with 40% either already piloting the technologies, or planning to adopt them within two years. Moreover, planned investment levels in the four technologies over the next two years indicate that all are moving full steam ahead: 55% or more of respondents plan to increase investment in Mobile, Cloud, and Business Analytics, and 43% plan to increase their investment in Social Business. You can click on the following infographic to take a deeper dive:
Despite the foothold of these technologies and the enthusiastic investment landscape, the report cites critical IT skill gaps that threaten to slam on the brakes just as organizations are hoping to leverage these technologies for their strategic advantage:
- Across all four technology areas, only roughly 1 in 10 companies report having all the skills they need to be successful, and one-quarter of respondents report major skill gaps.
We also surveyed about 700 educators and students about these technology areas, and according to their responses, the skill gap is poised to get even worse:
- About one-half of academic respondents report major gaps in their institution’s ability to meet the needs of the IT workforce.
Security also continues to be a major concern. In fact, Security is rated as the #1 barrier to adoption for mobile, cloud and social business, and the #2 barrier to adoption for business analytics.
What can you learn from those making the most progress applying these technologies for strategic advantage?
We asked respondents to rate the four emerging technologies’ importance to their businesses and also to rate their enterprises’ pace of adoption relative to competitors. We identified an elite group of Pacesetters who are forging ahead faster than others – despite the adoption hurdles – and who are using emerging technologies in more strategic ways.
If you want to get your organization onto the technology fast track (or keep it there), there are a number of interesting lessons you can take from the Pacesetters. We found that Pacesetters are more likely to exhibit three distinguishing traits that help them capitalize on the potential of mobile, analytics, cloud and social technologies. They are:
- More market-driven
- More analytical
- More experimental
So, how are Pacesetters managing to stay ahead of the competition? As it turns out, they’re very experimental in their approach to developing IT skills. Rather than wait until there’s clear business demand for new skills, Pacesetters start building skills ahead of time: they are nine times more likely to experiment with technologies that don’t yet have a clear business application, and twice as likely to proactively develop skills to meet anticipated needs.
To learn more about the study results and how you can follow the pacesetters’ lead in technology adoption, you can check out the complete IBM 2012 Tech Trends report
and a variety of other resources.
Don't miss the paper's list of concrete recommendations for becoming Pacesetters. We invite you to join in the discussion and let us know what you think about the study and its recommendations!
Client Insights, Senior Consultant
Center for Applied Insights
In 2012 we saw significant data breaches across multiple industries and governments impacting millions of users. Will 2013 bring more of the same? Is this an uncertain future we will have to live with? Can we accept degraded privacy and security and billions of dollars in lost revenue, damage, reduction in brand value and remediation costs?
Last year, a number of major security themes were part of this uncertainty – cloud, mobile, social media, big data, compliance, advanced persistent threats, physical infrastructure security, and the changing nature of information security leadership. None of these issues are going anywhere. In fact, into 2013 and beyond these issues are only going to become more important and will become the concern of more and more enterprise leaders.
All of these disparate issues come together in a new infographic from IBM. It knits together the pressures CEOs are feeling to deliver transformation with limited resources, the changing role of information security leaders, the threat landscape and the best practices to address that landscape. It connects enterprise priorities with information security practices, achieving innovation while dealing with risk.
In 2012, the IBM Center for Applied Insights released a series of security-related pieces that focused on a number of these important issues. We looked at the changing role of the CISO and other security leaders in our 2012 CISO Assessment. We also published a series of best practices for security leaders through our eight article Security Essentials series. In 2013 we will continue to provide insights on information security.
What does IBM think the future of security will look like? IBM security experts and leaders have developed lists of ideas for 2013 and beyond. Highlights include:
- Enterprise security organizations will become more independent and work with the audit committee and risk officers more.
- Data scientists will increasingly analyze and correlate security data as well as unstructured business data to reduce the risk of breaches.
- Threat data will be shared more readily between the government and private sector, and amongst private sector companies.
- Organizations will begin monitoring the information shared on social media back channels to detect threats earlier.
- Compliance will remain a strong security driver and will be weighed against the rise of a risk-based approach to security.
- Because of data, identity and monitoring technologies, cloud security will go from "mystery and hype" to "secure and move-on".
- Mobile devices (the device, network and applications) will be significantly more secure – more than laptops are today.
- The type of data collected and inspected to detect advanced threats will increase in variety and volume.
Keeping these ideas, trends and emerging issues in mind, information security leaders must rise to the challenge of creating a future that isn’t like today. By using their best practices to connect with and support enterprise-level goals they can create a better, more secure, future.
To download a copy of the infographic below, click HERE.
Susanne Hupfer, Consultant, IBM Center for Applied Insights
Our director, Steve Rogers, recently interviewed Paul Brunet, IBM Vice President of ISVs, Start-ups, and Academic Programs, about his perspective on the 2012 Tech Trends study. Whether you're an IT or business decision-maker, an academic, or an IT practitioner, you may discover valuable insights and recommendations in their broad-ranging conversation.
IT and business leaders:
Why are CEOs regarding technology and skills as top concerns -- now outranking even market and economic forces? Why is it crucial to leverage emerging technologies for competitive advantage?
Paul discusses four technology areas -- mobile, cloud, social business, and business analytics -- and contrasts adoption and skill levels in mature and growth markets. He covers challenges to adoption -- such as security, skill gaps, and integration -- and explains why security is a business imperative. IT and business decision-makers may also be eager to learn more about the elite "pacesetter" group identified by the study, who are unlocking competitive advantage by being more market-driven, experimental, and analytical.
How can academia better monitor the needs of the enterprise and teach relevant skills their students will need upon graduation?
Paul also examines how using sandboxes and collaborative spaces can encourage experimentation, skills development, and collaboration across universities and practitioner areas.
Where should you be expanding your skills? What traits are IT leaders looking for today?
Paul and Steve talk about the importance of integrating business along with IT skills.
You can check out the full podcast here.
(24:16, 22.2 MB)
David Jarvis & Susanne Hupfer
IBM Center for Applied Insights
There are four pivotal information technologies that are rapidly reshaping how enterprises operate: mobile technology, business analytics, cloud computing, and social business. All four of these technologies are potentially disruptive, and they also come with unique security concerns. Many people fear the security implications of employees bringing their own mobile devices to work, or storing mission critical databases in public cloud environments. Fear shouldn’t drive organizations away from these potentially transformative technologies. How are organizations overcoming their fears? How are they breaking though the “security wall”?
Recently IBM released the results of its 2012 Tech Trends Report, which looks at the adoption patterns of these four technologies. It is based on a survey of over 1,200 professionals who make technology decisions – the respondents came from 16 industries and 13 countries. As part of the analysis, three different types of organizations were identified:
- Pacesetters (20%) believe emerging technologies are critical to their business success and are using them to enable new operating/business models. They’re also adopting ahead of their competition.
- Followers (55%) agree that these technologies are important and can provide critical capabilities and differentiation, but they generally trail Pacesetters in adoption.
- Dabblers (25%) are generally behind or, at best, on par with competitors in terms of adoption. They’re less strategic in their use of emerging technologies, namely citing greater efficiency or new capabilities in selected areas.
One common thread across all three of the identified groups is that security is a significant area of importance and concern. In fact, 62% of respondents cite security as one of the three most important areas facing their organization over the next two years, with 27% rating it number one. One interesting aspect is that, the less mature an organization is with respect to the four strategic technology areas, the more security rates as an area of importance and focus. Seventy-seven percent of the Dabblers cited security as a top-three area of importance, versus only 49% of the more mature Pacesetters. Why is that? Perhaps the Dabblers don’t fully understand, or trust, that there are security technologies, policies and practices that can ensure a more secure approach overall. Or perhaps they lack the experience the Pacesetters have.
“Security and privacy are not always treated as first-order problems. Things are deployed and made widely available without regard for security and privacy. In a best-case scenario, security and privacy are thought of as add-ons. Worst case, they’re ignored completely.”
– Dr. Eugene Spafford, Professor and Executive Director of the Center for Education and Research in Information Assurance and Security, Purdue University
Besides being an area of significant importance, security is also seen as a significant barrier to technology adoption by the survey respondents. Information security is ranked as one of the top two barriers to adoption across the four technology areas – more than integration, inadequate skills or regulation and compliance. Overall, security is the biggest barrier for a majority of respondents for mobile (61%) and cloud (56%) adoption. Security is cited less often as the top adoption barrier in social (47%) and analytics (31%). As shown by the dark blue bars in the graph below, there isn’t a huge gap between the groups (9-11%) when it comes to security concerns, but, in general, less mature Dabblers see security as more of a barrier than the more mature Pacesetters. The exception is analytics, which has the lowest adoption barrier. Perhaps Pacesetters better understand the potential risks in implementing advanced analytic systems.
Another part of the security wall blocking the full realization of the benefits of the four technologies is that organizations’ current IT security policies aren’t sufficient. The figure above generally shows correlations between viewing security as a barrier to adoption (dark blue bars) and inadequate security policies (light blue bars). The Pacesetters are more confident across the board, with a majority saying that their security policies are adequate. The “adequate policies gap” between the Pacesetters and Dabblers ranges from 13% to 32%, a fairly wide margin. This tells us that organizations that have the right security policies in place are more confident, and less likely to see security as a barrier. For the others, there is a gap between their fears and taking the steps needed to address those fears.
Another tool organizations are using to attack the security wall is skills development. A majority of the respondents know that security is an issue and are working hard to boost their confidence. Overall, 70% of organizations are planning to develop or acquire skills in “mobile security and privacy” and “cloud security” – the two technology areas where security is seen as the biggest barrier.
Security is tightly intertwined with the four technology areas discussed. You shouldn’t pursue cloud, mobile, social or analytics endeavors without also focusing on needed security technologies, skills, policies and practices. The more you focus on policies and skills, the less likely you will see security as an impediment. Treat security as a business imperative and make it a priority. Design security in from the start of any project. Doing this will increase confidence and help to tear down the walls that are slowing the adoption of important, transformative technologies.