An interesting change in behaviour that a software manufacturer like NAVAX Software can observe among its existing and new customers since the topics of changes in customer behaviour, digitalization, automation, new technologies and increasing, if not excessive, regulation have been determining everyday business life.
But it's actually the old argument: "IT follows business" vs. "business follows IT".
While financial service providers "used to" specify the exact customer-specific processes to their service provider when changing systems and made sure that the functionality of the old application (whether developed in-house or purchased), which had been expanded over many years and adapted "with a lot of jewelry on the nightgown", was reproduced "in new" as unchanged as possible, a different behavior can now often be observed.
Open to challenges: tried and tested, just not for me yet
Many financial service providers are prepared to cut off one or two old habits. They allow themselves to be confronted with processes that have been tried and tested by other customers of the service provider. The statement "We've always done it this way" invites them to question it in future and to do it differently, more modern, leaner and more efficiently in (almost) every case.
The unique selling proposition of a financial services provider is derived less from a specific IT functionality and more from the (personal or digital) communication with the customer, the ability and willingness to take risks, the convenience of the customer journey from offer to contract creation to regular processing - or consideration of special factors (early redemption, deferral options, etc.). The overall image that the customer has of "their" financial service provider is decisive for the "match", the customer experience and, as a result, their loyalty to their financial service provider.
The same applies between the financial service provider and "their" service provider. New technologies, integrated, largely freely configurable workflows, a modern IT architecture that allows "open finance", the use of third-party providers, e.g. FinTech solutions via modern interfaces (technologies), different operating options ("cloud computing") that increase security despite new attack scenarios, all this gives new freedom - quite independently of the current hype topic of artificial intelligence.
The flexibility of a modern product standard
The "standard software" of a modern manufacturer, its "product", is much more powerful and efficient today than it was years ago. In the sense of a "no-code approach", users are able to map their specific requirements using a Business Process Modeling Notation (BPMN) and a supplementary Decision Modeling Notation (DMN).
The contrast is becoming increasingly blurred. Individualization becomes possible in the product standard - and creates a win-win situation between software manufacturer and financial service provider (bank, leasing or factoring company or captive) - and their private and / or commercial customers.
So what does this mean for a project in which the financial services provider is looking for new software that suits them?
Short time-to-market with reduced risks
Ideally - and this is the case with NAVAX Software - a reference environment with standard settings can be made available to the financial services provider within a short period of time. The proof of concept then takes place: requirements and existing functionality are compared in a scoping phase. The "what", the result, rather than the "how", the path, is discussed together. Processes may change or be dropped, or new ones may be added. In terms of subsequent implementation, this requires not only the switch to (the handling of) a new IT system, but also a further transformation if necessary: employees are generally relieved of routine tasks, but have to take on new, more quality-assuring, controlling or administrative tasks, e.g. the validation and calibration of the risk policy, the mapping of (new) offers via the product engine and calculation services.
It would be unusual if a standard product could cover "all" requirements. However, the proportion of individual gap closings is reduced, especially if a business case is used to prove the benefits. On the other hand, the software manufacturer will endeavor to incorporate the solution into its standard product - either immediately or to protect the customer's intellectual property (IP) at an appropriate later date. Individual gap closing (with necessary individual development, e.g. expansion of the data model and its capabilities) is therefore quite opportune if the business case is attractive.
In an implementation project (switch to new software), a change control board should keep a close eye on the wish list, which can only be satisfied by a non-standard gap closing, as it is the follow-up costs that weigh on the business case: the software manufacturer has to maintain and further develop the individual solutions (separately), the financial services provider has to test the functionality separately in user acceptance tests and, if necessary, system integration tests when adopting new releases, and so on.
A number of gaps will often have to be provided for the go-live of the new software when migrating the existing business. However, gaps that are not absolutely necessary should only be closed at a later point in time (e.g. in a "Wave 2") after the basic functionality has already been introduced - and is running.
Back to the standard
It is interesting to note that even in long-standing business relationships, financial service providers are questioning previously desired individual developments and pushing back towards the standard.
This is certainly due to the increasing complexity of the business and the desire to reduce this as far as possible by means of - possibly no longer justifiable - customization. As is often the case, the reasons may be a cost factor: individual maintenance and servicing, additional tests for release changes, rapidly changing or increasing regulatory requirements (DORA), etc.
However, perhaps the standard software has evolved, covers the - formerly individually developed - functionality or offers other options that can now be used but have not been regularly tested.
"IT follows business" or "business follows IT"?
The principle of "IT follows business" remains a central paradigm in IT management. It emphasizes that IT infrastructures should support business requirements rather than dictate them. The challenges lie on the side of the software manufacturers, who should position themselves with a modern modular IT architecture and a future-proof IT stack in such a way that they achieve maximum flexibility and interoperability in the spirit of open finance.
As financial service providers can only implement what their IT enables, the "business follows IT" view retains its power. The balance is crucial, with flexible technologies, a workflow-based approach and maximum administration and configurability (in the product standard) to efficiently support and customize business processes being the decisive factors.
This means that one thing can be achieved with modern solutions: Individualization despite stick to standard.
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