If you look at it from a long-term perspective then we are actually talking about some pretty sustainable trends.  In that sense I have not changed my strategy in any fundamental way since 2000. For us in the financial sector the key defining trend is the internet and all its implications.  

 

In this longer-term framework, we can identify a number of major waves. The first wave is automation: the emergence of the computer. Then in the 70s there was the miniaturisation wave, which vastly increased the penetration of technology, to the desk and even to the homes. And the third wave was the network. Before, if you had a computer—I had one back in ‘79, a simple machine with a tape-deck for storage—you could do some computing but that was it. The network emerged in parallel with an increase in computing power, also because the network itself is reliant on computing power. Suddenly we could start connecting computers to each other; and for us that meant we could start connecting our branches to central computing systems. That’s why in Europe at least we started calling it ICT, as opposed to IT.  

 

The fourth wave came about with the emergence of HTTP and the first browser Netscape, and later Java. This was a crucial breakthrough. That’s when interfaces began to emerge at the application level. Standards were adopted that suddenly made it much, much easier to access information from different systems. This wasn’t rocket science; it was basically akin to defining the distance between railway tracks, or agreeing on which side of the road we should drive on. By setting those standards we created an explosion in the use of technology. Before that wave it was hellishly expensive to try to link different systems to each other. In the past you had all these closed, proprietary systems that just could not communicate to each other. But once the abstraction was made at the application layer, it opened up so many possibilities. And it’s a process that still continues today. Think about it, even today you cannot use a fixed phone for SMS. Technically that’s easy to explain, but for users that just does not make any sense.   

 

Today you could say we’re in the fifth wave, web 2.0, which in a way is simply a continuation of the fourth.  Again it’s about creating standards.  While the fourth was about communication at an application level, now it’s about social networks and multimedia. Take Youtube: it is basically a platform for delivering video, combined with search and social networking functionality, and they end up creating this enormous global community. Wikipedia is a similar story. They’ve defined a process, a methodology for organising and publishing information, and they end up creating this self-organising factory of information. In the middle ages, knowledge was in the head of a genius like Da Vinci; then later came the universities, large closed systems; and now this platform appears that is collating all the world’s knowledge. Also, with that social aspect you’re able to coordinate work on a much, much larger scale. Thousands if not millions of people are able to work together on a task. In the past real collaboration was limited to the geographic location. Sure, you had the telephone, telex and later email, but that still didn’t allow for real collaboration on a task.  But now you can, it’s a bit like plugging yourself into the matrix, and boom, you’re able to work together with millions of other people around the world, people you don’t know, whose language you may not speak.  What makes it a possible is a set of standards, a common approach to doing things.

Open source is a manifestation of that same evolution. Open source can be an ideology in some ways; it has a particular take on intellectual property and is based on free, voluntary work, but the core principle of open standards is what really matters here. The internet’s continued evolution is a phenomenal process. Think about it.  We’re putting the world’s population on the internet; billions of people are coming online. And more, we’re putting all our computing power on the internet too. I probably have about 100 devices; the average person in this country probably has about 25 devices: a mobile phone, a GPS, a TV, household appliances, etc...  Now all these people, with all their devices, are coming online; that’s an exponential growth curve that dazzles the imagination. The first order of development we can still get our head round—for example, managing the energy consumption of your household appliances—but what we can’t predict is what this new ecosystem will spawn.  

 

But we still have a huge amount of work to do in this first phase. Especially in business—organisations move slowly.  It isn’t simply about buying new technologies. Too many companies simply bring in new technology hoping that something will come from it, organically. But a fool with a tool is still a fool.  Buying smartphones is easy but redesigning your organisational processes is so much more difficult. It isn’t about the technology as such; it’s about technology in context of your business model and processes. For example, bringing in Blackberry phones is not fundamental to our business, but if a logistics company integrates wireless communication technology the impact on its business could be pretty significant. They’ll be able to do real-time and permanent optimization of their routes. Similar things can be said about the taxi business.  

 

But most companies don’t seem to be looking at it this way yet. Most bring in technology without thinking through the impact on their business model and processes. For example, when Google first exploded on the scene some of our IT guys here argued that we needed Google for accessing our internal data. But if you think about it, there are some fundamental differences to using Google on the internet and searching for a document in a company environment. When you search using Google you usually know very little about what you are searching for. Also, there are millions of documents in that system. As a result your search will deliver a myriad of different sources, but that doesn’t matter, because you knew so little to begin with. But in a company context you’re usually looking for a very specific document. You can’t use an older version, or a document that is partially relevant; no, it needs to be exactly right. That’s why you need a lot more meta-information in a company information system.  Blindly implementing Google in your internal information systems could end up being destructive. That’s why you need think these things through; you need to steer it more, and that’s where the IT division comes in.

Today the IT organisation is taking on two quite distinct forms: one is about managing the infrastructure, making sure it remains manageable, that systems can talk to each other, that the underlying technology is future proof.  It’s bit like building and managing the road network; there is no logistics business without a road network. The other role for IT is concerned more with understanding technology in a business context, and that means talking to the business lines, understanding and rethinking their processes.

 

An example: in a Ryannair aircraft you don’t see much fancy technology for passengers, but in all likelihood the company is a very sophisticated user of technology in managing their operation, to keep costs so low.  It’s about linking the technology to your business model and processes. But companies tend to be too focused on what the user wants, when instead they should be thinking about their business model.  

 

It is a challenge, and in a way it is becoming more challenging.  In the past few years the user’s expectation has skyrocketed. Most companies do not have the budget to meet those demands.  Today your average user spends a lot more on personal technology—a big screen TV, a personal laptop, a smartphone, videogames—than the average company could possibly afford. And the quality of that personal technology is superb.  The technology industry is shifting to the consumer side, to entertainment, and creating amazing products.  The result is that the average user is accustomed to 5-star conditions at home but needs to cope with youth hostel conditions at work.  And that creates tension, also because you tend to have a somewhat apathetic IT department that is pushed into a purely logistical, support role.  That’s the advantage of the external providers like IBM or Cap Gemini; they’re able to talk to the business level, higher up the value chain.  Too often IT does not have that position in the organisation.  But even if it does, then still it will need to confront user expectations, because ultimately that ought not to be the priority.  The first priority should be exploiting technology to improve the business model and the company’s processes. Especially in times of crisis, you need to focus on the basis.  

I’m not sure.  I am hearing about some pretty bizarre developments.  For example, take the use of collaboration tools to make decisions.  There is evidence now that if you let communities of experts use those tools to make decisions, then you end up with better decisions than if you were to rely on the traditional management hierarchy.   These tools use the classic social media features like rating and voting.  Experts are involved anonymously; they then start making propositions, which are subsequently commented on, rated and so on, until you get a decision that is based on the collective intelligence or knowledge of that community.  That’s a pretty radical concept.  If you apply that to a company context, then to what extent will we still need managers?  

Of course not, not in decades; although we are experimenting with these tools in our innovation process, specifically in the idea creation phase.  That way you create a much broader funnel for idea collection and generation.  It’s much more powerful than your traditional idea box.

The outsourcing model is changing. The classic model is to offshore routine tasks to low-cost regions like India or South Africa. It is basically a form of organisational outsourcing—you move a part of your organisation to a lower-cost region.  But this is changing somewhat.  Now you’re seeing services being offered that are far more complex, and far more specific.  Also, many of these services are offered as web services, allowing you to ‘plug’ these services into your own systems.  For example, we recently agreed to start using a highly specialised online service, a type of clearing service for specific financial assets.  To do that we do not need IT products; instead, we needed to check the security and had to look how this service could slot into our processes.  That changes the role of IT; it makes us more a facilitator of these services.  Instead of producing our own solutions we are becoming a bridge to these types of services in the network. It clearly is a different paradigm. It means organising our company’s processes in such a way that we can plug different processes or components in or out of the system as needed.  Our role will be to orchestrate those different components, to keep a measure of control over the system and to manage security obviously. Thus, that idea of an organisation with clearly demarcated boundaries is disappearing.  We operate within a network and our role will be to facilitate those connections with the network.  

 

Translation services are also going in this direction. There are services available that slot into your web systems and do the translation work on-the-fly.  This is outsourcing at the micro-level, at the level of a specific process, as opposed to an organisational level.  Salesforce.com is another example.  At this point we’re not ready to start integrating such services in our core processes—take our call centre for example—and that’s why we still produce our own CRM system.  But it is beginning to make sense for smaller satellite offices or business units.  It is all moving in that direction.  We are slowly, gradually moving from a producer role to an aggregator role. 

No, that clearly would be the wrong thing to do, because you end up with IT as a commodity again.  And there’s no money to be made in that.  IT needs to move up the value chain.  In fact, we need to stop calling it IT.  We need to merge it with business consultancy and organisational development. That way we can focus on the transformative challenges: change management. Top managers are good at articulating vision, a roadmap of where we need to go, but implementing such change is often a real challenge. That’s what we need to focus on; we need to do more business and process analysis.  If you make a car, you include the engineer in the design process from day one. The same applies to the design of business models. And IT infrastructure is also part of that responsibility; it is about making sure that the foundations are laid right. Decisions at that level can be hard to explain to the business; but they’re important.  Take VoIP (IP telephony) for example.  If you simply want better quality calls then it doesn’t make any sense to invest in VoIP.  But if you want to prepare yourself for the integration of other IP-based services later on, then it does make sense.  But that is harder to explain to your users.  We have 140 different business here, more than 400 different business lines.  It is absolutely critical that we make the right infrastructure decisions; we cannot simply relinquish that responsibility to the business lines.