Technology and Service Providers: Different Beats, Same Tune

Technology and Service Providers: Different Beats, Same Tune
It’s been a whirlwind week for service provider analyst days and client conferences: Friday with Genpact, Tuesday and Wednesday with FIS, and Thursday with IGATE. Each firm is trying to differentiate itself amidst all the market noise; like banks, they’re constantly resisting the grind of commoditization. And while interaction was unique and fascinating, four common themes struck me as being indicative of the massive changes going on today in banking technology. Not coincidentally, they’re all consistent with what Celent has been saying about the evolution of the banking ecosystem.
  1. Focus
  2. Realignment
  3. Security
  4. Partnership
Focus takes on different meanings for different firms, but both Genpact and iGate were very clear about where they were going to spend time and energy, and where they weren’t (banking makes the cut for both of them). FIS may seem oxymoronic because of its product and service breadth and depth, but the company appears to be making steady progress towards rationalizing a variety of disparate products obtained through acquisition. Realignment follows focus. FIS is for the first time dividing itself into three groups: North America, International, and Global Institutions (roughly the top 30 international banks). Genpact and IGATE are both focusing on nine verticals (the specific nine vary), with IGATE putting P&L responsibility with the verticals for the first time. They will both have, however, certain horizontal practices that continue to run across their verticals. Security is a key value-add for these companies; with a broader base across which to spread costs, they tend to impose attention and discipline that many smaller banks can’t hope to match. While specifics vary, all made it a point to mention their approach to security. As the issue continues to increase in importance, we think this element of their value proposition will become ever more significant. Partnership is perhaps the ultimate defense against commoditization. Each of the three firms mentioned in their first breath the desire to work with their clients as Partners. Celent has written extensively on the transition from a vendor/customer to partner/client relationship in banking, and while talking about it doesn’t guarantee execution today, it’s a necessary first step for it to be tomorrow’s reality. What will be particularly interesting is the ongoing tension between providers’ professed desire to do the right thing and regulators’ apparent wish that contracts spell out in gory detail what will be required (including who bears responsibilities for mistakes). For more, see an interesting American Banker article here: http://bit.ly/1sAAE7j. For providers, guaranteeing that they can pass regulatory muster with minimum fuss will be a key requirement as they seek to win more business. As the year continues we’ll be watching keenly to see whether other providers’ actions echo these trends, and what banks’ reactions are. As a footnote, two of the firms have taglines, one brand new, the other a bit older: IGATE: Speed. Agility. Imagination. Genpact: GENerating imPACT FIS may have an opportunity here to help define itself; right now it’s self-admittedly one of the biggest companies that no one’s ever heard of. What do you see in the marketplace? Has my quick synthesis missed a key trend? I welcome your thoughts.
Dan Latimore About Dan Latimore

Daniel W. Latimore, CFA, is the Senior Vice President of Celent’s Banking practice and is based in the firm’s Boston office. With a wide range of experience in industry and as a consultant, he brings examples from outside financial services to help banks improve their customer relationships, with a particular emphasis on the importance of technology and culture.

Dan's coverage areas include the banking ecosystem, digital and omnichannel banking, and innovation. He has a passionate interest in behavioral economics and exploring why consumers and humans make the decisions they make, and what the implications are for banks.

Dan has been widely quoted in the press, including the Wall Street Journal, American Banker, Boston Globe, CNBC, and CNBC Europe. He is also a frequent speaker at industry conferences and client gatherings, having addressed audiences ranging from intimate meetings with CEOs and central banks to keynote conference speeches in more than a dozen countries.

Prior to Celent, Dan led research groups at Deloitte and IBM, worked in industry at Merrill Lynch (where he lived in New York, Tokyo and London) and Liberty Mutual, and was a consultant at McKinsey & Co.

Dan received a Masters in Public Administration from the John F. Kennedy School of Government at Harvard, and an undergraduate degree from Dartmouth College. He holds the Chartered Financial Analyst designation from the CFA institute.

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