Collaboration Inside and Out for Innovation

Collaboration Inside and Out for Innovation

Across all industries today, organizations increasingly are migrating their infrastructures to the cloud in a bid to boost agility, lower the cost of IT ownership and reduce the risk of outages.

Firms are under more pressure than ever before to innovate new products to keep up with newer, more agile firms. But before they can reap the benefits that come with going totally serverless, organizations must deal with the immediate challenge of meeting the ever-growing expectations of today’s digital-first customer.

For newer firms, this is arguably a much easier undertaking, as their IT infrastructures will have been built using modern programming languages, technologies and software development practices. They also will most likely have adopted an agile approach and be highly adaptable to changing business needs. Conversely, older firms typically have a large body of IT that lives in an entirely different world. With infrastructures made up of a patchwork of interdependent legacy applications, built on top of monolithic architectures, these firms struggle to innovate customer-facing applications at pace. But if they are to compete, established players must adopt a similar approach to their more agile counterparts.

Don’t Hate the Players

It is completely natural for technology to evolve. The problem faced by many organizations that were pioneering in their use of technology is that they have now become victims of their own success. Take the world of financial services as an example. Banks that began building out their IT infrastructure decades ago have had to adapt gradually to new technologies. But it’s only in recent years that digital transformation has become a key business objective. In the not-so-distant past, banks may have been able to get away with taking their customers for granted, as the competitive landscape lacked any real diversity. But today competition abounds, with challenger banks and fintechs bringing innovative new products and services to markets traditionally owned by the banks.

If the banks are to compete, they must seek to collaborate with the fintechs. Cloud-based open platforms that focus on open APIs are the most effective means of achieving this. By providing fintech partners with access to core systems via open APIs, the banks get to concentrate on their core operations while innovation from the outside helps them to deliver new applications to their customers.

Historically, the banks would have been fiercely protective of their IP and core systems, but in collaborative environments, it is exactly this IP that can be used to create value in a safe and secure way. This is why banks increasingly are seeing fintechs as partners rather than poachers, as they are above all technology providers that are eager to have their services leveraged by large financial institutions. Similarly, banks understand that they must become more agile and entrepreneurial to deliver what their customers want. So, working with third parties that embody these characteristics is the most effective means of doing so.

Embrace Internal Collaboration

As well as overcoming legacy systems, legacy culture must also be addressed if true digital transformation is to be achieved. The first way to do this is to align application development with business goals, showing how a focus on the former helps to achieve the latter. Here, the adoption of a DevOps mindset can bring about the right culture for increasing innovation within. Though not entirely applicable to legacy systems, which must be evolved at a much more gradual pace using a waterfall approach, DevOps can be applied when it comes to systems of differentiation—which include decision-making, pricing, analytics and risk management tools in the middle office, as these tools will need updating more often to accommodate changing business practices or customer requirements.

Creating cross-functional teams that include business analysts, developers, data scientists, QA, UAT and compliance experts means there is collective focus and responsibility for the delivery of applications. It also enables more agile development so that applications can be pushed through to the production environment continuously, rather than simply throwing a finished product over a wall with little care as to how it performs.

In recent years, IT increasingly has been seen as a business driver. As software development methodologies and practices that rely on a collaborative culture continue to mature and further prove their value, partnerships between larger organizations and disruptors will be viewed in much the same way.

This blog previously appeared on DevOps.

Mitesh Soni is a Senior Director of Innovation and Fintech at Finastra, the world’s third largest financial technology company. He is a global banking industry expert with more than 20 years’ experience driving business transformation, digital disruption, and business model redefinition. He has spent a number of years in the risk management and trading technologies space holding a Financial Risk Manager qualification from the Global Association of Risk Managers. Previous experience includes roles at HSBC, Deutsche Bank, Morgan Stanley and many others. He is also an investor, advisor and Fintech mentor with an active interest in building fintech community ecosystems. He is passionate about digital transformation, innovation and disruption through partnerships and creative investment strategies.