Beyond the Headlines–Using IT Substitution Across Functions

(Mark Dangelo is president of MPD Organizations LLC, featuring books, industry reports and articles. He is a strategic management consultant, outsourcing advisor and analytics specialist with extensive process, technology and financial results and is a frequent contributor to MBA NewsLink. He can be reached at or at 440/725-9402.)

It seems that across every headline, something negative is being communicated–presidential candidates (i.e., blue, red or green), state-of-the-financial services industries (e.g., systemic risks ), lobbying efforts, government affairs (e.g., cross-border, sovereign state), and of course, regulatory oversight (e.g., Dodd-Frank repeal).

Within financial markets, a mediocre post-recession normalization has resulted in atypical lending practices, greater regulatory oversight, tight housing inventory and bankers posting profits using unnecessary fee-based income.

It gives the impression from newsfeed communications that all is wrong with the world, especially within financial services, and as commerce-interlinked societies we are all on the brink of failure–too much debt, limited real growth, stealth economic indicators and very disgruntled constituents. It appears we are further losing multi-generational standards of living subjecting our children with unserviceable debt and an inability to globally compete. These doubts make it hard to get up some mornings and have faith that cross-connected markets (e.g., bond, equity, trade) along with risk-hedged currencies will not severely fall or implode eliminating $90 trillion of stored wealth within 180 million American households.

Whereas we cannot singularly solve society’s ills, we can recognize that within our collection of industries there are numerous, but less publicized, changes occurring that will have a profound impact on profitability and market perceptions. Specifically, if we examine how technology (i.e., software hardware, services, AI, people) is provisioned, creation and deployment of compartmentalized solution building blocks for greater value, and even the retirement of legacy systems to streamline operations and increase margins, we find that underneath there are cohesive advancements.

Within market repositioning’s and technological innovations, it is very likely that mid-market and community bankers may outperform their much larger counterparts in the next five years if they embrace the principles of substitution dynamics being delivered as a result of three intersecting trends–widespread public cloud adoption for rapid adaptability, data availability using secure analytical cloud tools, and hyper-connectivity to interconnect and leverage investments.

It is at these broad intersections that offer the greatest opportunities of operating efficiency and improved decision making against larger capitalized competitors. Moreover, these three trends also are complimented by greater machine automation of complex, cross-platform tasks (and now supported by streaming connectivity which feeds cloud growth), hyper scale transformations and endless data managed by emerging analytics.

Where large financial institutions and lenders have traditionally capitalized on first mover advantages and investment intensive mega-trends (e.g., back-office automation, end-to-end integrations and football-sized server farms), mid-sized institutions were left to pick and choose emerging opportunities due to serial and laborious methods of promising implementations. As mobility took hold and data availability has grown, the need to leverage asset investment spawned faster provisioning solutions, cross enterprise data linkages and methods to find nuggets of data necessary for an accurate representation (and prediction) of how consumers and homeowners behave. And with available cash reserves on the decline as earning shrink and growth of all types slows, financial enterprises need to have greater impact with their 2017 budgets.

These new, compartmentalized, building block solution sets have changed the “delivery math” when it comes to market influence and domination. By making choices of what is needed to satisfy prioritized requirements, mid-tier financial institutions can quickly assemble and integrate complex, cross-domain apps and services without traditional years of lead time once demanded. An abstract illustration of the key components and critical benefits possible by utilizing a substitution strategy (i.e., assembly of solutions, both loosely and tightly coupled, regardless of department or internal standard–e.g., build, buy, preferred vendor, et al), is shown here.

How can substitution of deployment, integration and investment leverage play a role with rapid adoption of process-driven technology to as a means to compete? Sometimes referred to as substitution dynamics, use of assembly swaps as a principle of complex problem solving has been around within the scientific communities for decades. By applying these principles to technological and financial behavior advances since the millennium change, we can realize vast competitive advantages to address cybersecurity, regulatory relief, bespoke demographic growth, operational efficiencies and how to profit from the endless digitization of everything.

Mid-tier and community banks are actively seeking a reprieve from regulations designed for much larger institutions and acceptance and incorporation of substitution assembly provides alternatives. Rather than being bogged down with methodological biases, substitution assembly can provide repeatable rapid results, while meeting current and transitory consumer demands for efficacy, trustworthy and, in the current Millennial slang, “sick.”

Additionally, with rapid changes taking place across consumer preferences, enterprises are finding their best options are to deploy layered solutions across the cloud not only for provisioning, but to adopt to a look and feel spanning an increasingly mobile consumer and emerging instant payments. Increasingly sophisticated cloud offerings coupled with provisioning shifts, are accelerating breadth and depth of services–a fundamental transformation from building infrastructure to consuming IT as a service. Two rudimentary projections on the growth of cloud solution providers shows that server and storage consumption of all hardware at 65% and 60% respectively with the former having a GAGR of 23% and the latter having a CAGR of 47%.

Factoring in all capabilities of maturing cloud offerings, its progression is being propelled by cutting-edge hyper-connectivity solutions, allowing a virtual woven “fabric” of capabilities (e.g., hardware, software, services)–maximizing resources, delivering cross application automation and independent non-legacy infrastructures. With cloud economic models being refined using hyper-connectivity, astute institutions will find efficiency and capability across a spectrum of sophistication, machine learning and appliance defined. Yet, the larger opportunity for many institutions will be the application of risk and its treatment using third-party offerings designed to isolate potential contaminations and exposures.

So how will data availability continue to evolve and transform financial services offerings? There are many new and evolving answers–customer efficacy, market share, margin improvement, bespoke delivery, risks, profitability, segmentations, adoptions, compliance and hundreds of others. It has been written before that data (and analytics of data) are indeed the new financial currency. Yet, like currencies, the exchange rate on segments–internal, third party, cloud metadata, predictive, streaming–all have value at the same time representing inherent losses demanding a hedging strategy. To find the precise value for a given market is why there is apprehension and horror at trusting the results. However, when properly blended with two other trends of hype-rconnectivity and cloud services, confidence intervals can be expanded and insight gained beyond merely seeking the white spaces across dark data .

There is a reason why I believe mid-tier and community institutions will have the greatest chance to exploit the aforementioned advancements: they have limited choices due to high complexity necessary to address market, consumer and regulator requirements. Larger institutions continue to discount external advancements due to hierarchical decision making, approval cycles and amour-propre.

As budgets and initiatives for 2017 are carved out across business units seeking improved market staid, I wonder which institutions and leaders will embrace changes? To cite an overused cliché, “we haven’t seen anything yet.”

(Views expressed in this article do not necessarily reflect the views or policies of the Mortgage Bankers Association. MBA NewsLink welcomes your contributions; articles or inquiries should be submitted to Mike Sorohan, editor, at