The Financial Services Blog

My colleague, Falynne Smith recent wrote a blog on her New Year’s resolution to not waste paper which inspired me to add my thoughts on the paperless office here.

This past year I went from always working in an office environment to working in a virtual environment for the majority of my time.  The first thing I started noticing was that my home was getting smaller and smaller as the PowerPoint decks began to pile up.

I also noticed that I was buying a lot of paper and toner.  So I started eating the Xerox Global Services “dog food”..in other words – I transformed the way I did business — just like we are helping our customers transform the way they do business.  I stopped printing everything from habit and began bookmarking links and reading online.  I can honestly say that I have gone paperless. There are no reams of paper in my home that are opened.  I have a standby in the event of an emergency – but I have not printed in months.

The result has been interesting – to say the very least.  The first and most obvious – was the decrease cost of operating.  I am saving a substantial amount of money on personal printer toner and ink cartridges as well as paper.  I also manage my time differently.  If I see something interesting – I bookmark it and I go back and read it rather than printing it and then possibly forgetting about it at the printer.

There’s a really interesting article from Businessweek in 1975 about the “office of the future” which I think is an interesting read 35 years later on so many levels.  It predicted the data processing revolution and the future of office automation with computers.  It’s obviously time to take what we have done with computers to another level – perhaps to the “paperless office”.  Will it ever happen, and if not – what is the next level of automation we should expect?

“According to a recent Accenture survey conducted by the Economist Intelligence Unit, 72 per cent of business and IT executives at major corporations believe the economic crisis has actually brought a greater acknowledgement from business unit managers of just how important IT is in supporting and developing the business.”

Maybe there is a silver lining to the recent Global Economic disaster of 2008-2009?  As tech savvy as we all are – it’s ironic that some of the largest and most profitable financial services organizations have some of the most outdated and mismatched technology due to multiple mergers and lack of sufficient focus on upgrading IT.  It looks like that trend may be coming to an end – I can hear the IT guys cheering now.

I wouldn’t be surprised if a lot of this realization didn’t come to the surface during the restructuring exercises put in place this year to test the stability of the financial services institutions.  Lay-offs can only go so far in managing the bottom-line.  And, let’s face it, from a public relations perspective, firing people isn’t “the way back” to gaining respect and instilling trust. 

It’s a brave new world out there and many feel the message coming out of Washington is that we need to “spend our way out of this recession”. Perhaps the financial firms need to spend their way out of inefficiency in order to be more profitable in the long run?  Will budgets for IT spending increase substantially in 2010 and beyond?  As long as the majority of the banks do take the initiative and follow through with the investment, the others will have to do the same to remain competitive. 

The other very direct point the President has been making over and over again – regardless of the ongoing debate over global warming – is his vision on sustainability “The nation that leads in clean energy will lead in the global economy.”  When you tie these two topics together, you get “Green IT” – and there are certainly a lot of different areas of opportunity there just within the document space alone to improve on the Green IT front. 

Who is the CTO/CIO of the future?  They are one heck of a well-rounded business person with a grasp on everything from carbon cap legislation to mergers and acquisitions.  It’s a whole new world, are you ready? These kids are!

Record 2009 DOW, sinking dollar, continued market correction – what a day! Higher earnings for many companies are being attributed to cost cutting by some of the “talking heads” watching the market today.  As a proof point, some of the companies leading the DOW didn’t even have international revenue to report.  So what’s the deal?  Restructuring.  And there are two main areas impacted by restructuring: (1) Increasing commitment to technology to streamline operations and boost business processes and (2) reduction in force (lay-offs).

There is a lot of talk about how companies have been restructuring as a result of the crisis of 2008/2009 and evidently that restructuring is paying off. Unfortunately, some of the restructuring is reflected in our 10% unemployment rate. 

I dream about a world where whether or not the market is up or down, companies take a holistic and consistent approach to managing costs and streamlining infrastructure and technology spend in an ongoing effort to ensure cost effective business process management.  Not just when there’s a crisis or when the government is ordering a restructuring to determine whether or not a company should remain independent- just a business-as-usual approach. 

Well, the good news is that I am reading more and more about financial firms (in particular) maintaining their focus on their core business competencies and outsourcing “the rest” to those who can do it for them in a cost effective and more efficient way. There are so many areas within the business process where costs savings can be easily realized.  I don’t expect a financial firm to be focusing on client account lifecycle management (for instance) – that’s why companies like Xerox spend a healthy amount of money on research and development every year to create technologies and solutions that address those areas and make them more efficient.  

Regardless of market ups and downs, technology and innovation rule the economy. Today’s competition isn’t just fueled by who has the most profitable customers, but by those who have the most efficient and cost effective focused organizations.  One without the other cannot survive. There will likely be structural and cultural growth pains as a result of outsourcing technology and business processes– but it will be well worth it in the long run for our economy and the future of business.

I’m not naming names, but you gotta love the last 24 hours on Wall Street. The Dow breaks 10K yesterday and earnings week survives scrutiny with no really scary surprises, thus far.  That said, in the last 10 years we’ve hit 10K fifteen times on the way up, so we shouldn’t necessarily get that excited.  What am I excited about?  Watching the financial CEO interviews and hearing how they sum up the past, as well as how they see the future.

Many of the CEOs of the financial firms have become more media friendly in recent months in an attempt to build a more transparent and friendly face for the industry with shareholders, clients and the global public. To further build off that theme, today the McKinsey Quarterly released a video of public-relations expert Richard Edelman exploring the new landscape of corporate reputation and trust. 

He talks about mutual social responsibility and the value to the shareholder beyond the basic balance sheet approach Wall Street has taken to date. Brand and corporate reputation is going to have a greater impact on a company’s bottom line than it has in the past.  The increasing need for transparency and communication will be key in successfully engaging with the public and fostering a trusted brand.

He addresses a firm’s “rating” reflecting less about the dollar value of the deal it just won — and more about what the deal does for the common good.  The good news there is that banks, for instance, have been financing deals in the municipal finance realm for years which contribute to infrastructure items like bridges, tunnels, roads etc. All they have to do now is talk about what they do in a different way. 

He also speaks about how tech firms have pretty much stayed out of the fray and maintained good reputations through the recent crises (according to the Edelman Trust Barometer). To me, I see a natural partnership between technology and financial services companies in terms of tech enabling the future.  Much of how we look at the world through our business at Xerox has always been about social responsibility and doing the right thing.  In the future, I believe that many of the supplemental benefits that we provide to clients, like sustainability benefits, will be more prominent drivers of customer satisfaction and demand from both our clients, and their clients.

Edelman defines the “credo” of the trusted few: “They have a set of principles that are quite clear. [It’s] the way that they behave. It’s not just about making the quarter, it’s about how they’re going to interact with society. It’s a really quite clear commitment to a stakeholder model as opposed to just for the shareholder.”

Sounds good to me…should be interesting to see how it plays out in 2010 and beyond.

It kind of all started with “reengineering” in the 80s and 90s. Many careers were built on a manager’s ability to cut costs out of the expense lines, and many of the areas that were identified as ripe for cost savings back then were outsourced. Problem was, the determining variable for these decisions was often -unilaterally- just cost savings. However, “cheaper” often came at a price more costly in the end on the customer attrition side of the equation when outsourcing equated to lower quality. Today, the “restructuring” teams (reengineering is so passé) are thinking more along the lines of: faster, smarter, cheaper. Those three variables must be in place for true BPO (business process outsourcing) success. Many analysts believe that the recent economic crisis has helped fuel the push towards BPO. So when you think about “faster, smarter, cheaper” you have to consider the technological maturity of the marketplace. Outsourcing no longer just implies moving operations to a location where people are paid less. It means leveraging advanced and innovative technology to enable an organization to release “non-core process areas” from its strategic focus in a manner that actually improves the function of that process area. That improvement can reap some very attractive rewards: (1) increased customer satisfaction; (2) cost savings; (3) faster time to market; (4) reduced error rate.

Financial Services firms across the board (banking, investments, insurance) cannot afford to take their eye off the ball in 2010 and beyond. The playing field has narrowed and the clients have become more tech savvy and impatient in a word wired for immediate gratification. The focus must be on delivering the right product or service to a customer through a streamlined channel which fosters the very best customer experience. Everything from account opening through to on-boarding/fulfillment and ongoing customer service/support will require speed, accuracy and security.

Faster, smarter, cheaper…it’s the name of the game…..

I wasn’t surprised in late 2008/early 2009 to see that some financial institutions were suffering from “analysis/paralysis” when it came to making a substantial investment in enhancing infrastructure – even when those changes guaranteed cost savings and innovation in return.  Knowing the politics and the culture of many of the banks I couldn’t imagine anyone wanting to sign their name on the dotted line in such an uncertain economy.  I was also aware of all the behind the scenes restructuring being implemented by consulting firms in an effort to ensure bank stability during stress-testing.  It was kind of a flashback to the re-engineering days of the 90s to hear of all the teams of consultants roaming the halls looking for fat to trim. 

Now that we are (allegedly) nearing the end of this recession and poised for a recovery, will the findings/actions of the restructuring teams coupled with the hopeful outlook break the analysis/paralysis?  According to a recent McKinsey study, maybe…..

Basically, many of the companies (across industries – not just financial services) in the study have moved out of crises mode and into planning mode – with, of course – a lot more trepidation that in the pre-crash climate.  It stated that for the first time in a year, “more respondents expect their companies’ profits to rise than fall in the near term. Product development and long-term planning are high priorities for many companies, and most are optimistic about their prospects in the longer term”……”Nearly three-quarters of the executives expect their companies to be in a stronger position in five years than they were before the crisis. The executives also think that their industries will be more consolidated and innovative—but will grow more slowly.”

It certainly has been an interesting 12 months.  I have a lot of admiration for my former colleagues in financial services that have held down the fort during the global economic crises. It will be interesting to see how those who carry the torch (for the new world order in financial services) direct their efforts for innovation and productivity investments in 2010 and beyond.

Like many people, I was very disappointed to hear today that the World Economic Forum (WEF) bumped the United States down from #1 to #2 in their ranking of the world’s most competitive economies.  However, if you think about it, it’s been a year since the fall of Lehman Brothers and the subsequent implosion of the market in Q4 2008.  I remember hearing the financial news “talking heads” implying a potential repeat of the Great Depression was imminent and all kinds of horrific visions of doom and gloom were being painted for viewers every hour.  So, if you think about it, going from #1 to #2 in this environment hardly feels so bad compared to what we were potentially facing in late 2008/early 2009.

The DOW broke 9000 in July and remains steady and rising (I hope).  There are those who believe that the worst of the recession is over.  We all hope that‘s true. So, who was blamed for the move from #1 to #2 on the WEF ranking?  Banking, of course!  The report states that the “crash” of the banking system left the US exposed to long-standing weaknesses. You could debate it all day – but there were many variables that contributed to the crash.  Further, we saw immediately how significantly the crash impacted the remaining global economy.  What happens here sets the wheels in motion for the rest of the world.    

On the upside, what can we learn from this critique in order to regain our position?  The report states: “The WEF applauded Switzerland for its capacity to innovate, sophisticated business culture, effective public services, excellent infrastructure and well-functioning goods markets.”  Well, if you think about where we seem to be headed as a nation (if all goes well and as seemingly intended) many of those attributes seem to be covered.  In terms of a capacity to innovate, I think that in times of crises, innovation is often born through necessity.  The financial services industry seems to have pulled through the recent crises and is ready for a new era. Perhaps enhanced innovation, coupled with an awareness over the need for increased sustainability, will result in companies looking for ways to do more with less — and for the right reasons.  Will 2010 and beyond mark the beginning of a new (and improved) era in financial services here and abroad?  I don’t think we have a choice.

There’s a new buzz word on the street “SDO” Strategic Document Outsourcing – and it’s certainly getting a lot of buzz.  The market may be up – but the pressure is still on for the foreseeable future for everyone to cut costs out of their operating budgets and move their communications into the 21^st century. 

I recently read a Gartner, Inc report that addresses the surge in interest around SDO across industries. “The global economic recession, the accelerating trend to nonprint media communications, an increased focus on core competencies and pending U.S. federal legislation are key drivers leading to the increasing adoption of SDO.”

Before you make any assumptions about the SDO world – understand that it encompasses print and electronic publication of customer communications including content creation, multimedia presentation and incoming-document processing.  That’s a huge space and it crosses many different functional areas (marketing, operations, compliance etc.).  I guess this means that marketing people are going to have to start talking to their colleagues in operations and technology – should be interesting.  So, you say you want to build a marketing portal where all of your sales and direct marketing teams can source and automate the marketing process using consistent and relevant communications?  That can be done – it’s an “IT buy” – so get your CTO on speed dial.  More and more companies are doing it to streamline and create efficiencies that are long overdue, and savvy marketers are right on top of the trend.  I know a senior marketing exec in a large financial services firm who spent 20+ years in the advertising business.  She recently went over to the “client side” and the first thing she did was implement a marketing portal. I wondered how she could have thought to have such an operational view of marketing coming from an advertising agency.  Then I realized- sure she came from an ad agency – she knows where the budgets are buried.  She created her own in-house agency mechanism without having to use an agency or pay by the hour!  Brilliant!

SDOs are unique and have created their own niche market.  Traditional printers – print. SDOs provide: publishing workflow automation, image capture (paper and electronic), content management, document composition and archiving, on-site facilities management, print procurement and product fulfillment, and response analysis and campaign analytics.

InfoTrends refers to it as “integrated document enterprise”.  Whatever you call it – it’s changing the way companies look at their overall document management and the processes that support that management.  Here’s what InfoTrends has to say, “In their relentless efforts to reduce costs and become unique market leaders, organizations are increasingly looking at document outsourcing as a strategic opportunity. Nevertheless, the savings and efficiencies delivered through traditional document services are no longer sufficient. Investors are demanding improved returns and increased gross margins regardless of top-line revenue growth.”  Ain’t that the truth?

I recently read a McKinsey & Company report entitled, “Document Management: A hidden source of value”, from the Spring 2009 McKinsey Quarterly.  The study stated that some financial services firms may spend as much as 0.5% of their revenues on document management – I have actually seen a number closer to 10% in other studies.  It is going to vary by company.  It laid out all of the issues surrounding the mismanagement of documents specifically associated with marketing: 1) outdated materials being used, 2) brand integrity risks, 3) materials being printed ($$) and never used.  We’ve all seen this – and it always seemed to be pretty wasteful – but how do you manage it when you have many disparate groups producing and using documents throughout an organization — globally?  Is this something you can really get your arms around as a marketing manager?  Evidently, yes.  The insurance company in the study created a document advisor group that basically centralized and managed the flow of documents.  They reached their target cost savings for integrating the document function by 150€ million over a three year period with a 15€ million investment.  Nice work!

The net benefit of centralizing and managing document output and input are pretty obvious.  I really think the issue is that this responsibility is never assigned to any one group– so just in its own nature of being a disparate function across an organization – its impact is not always realized.

Imagine how much this could mean to a large multi-product financial services firm.  If an insurance company could save on their document volume management – consider what cost savings opportunity exists beneath many of the behemoth financial services firms that are currently merging and purging business units?    Imagine the potential for brand management, legal and compliance management — the overall cost reduction that could be achieved with a centralized document management function.  Xerox has been doing just that for companies with the Document Advisory Service for years. 

Any analyst today will tell you that financial services firms are looking to outsource as much as they can. Gartner, Inc. for example, issued a report this past April stating that as companies look for ways to cut expenses and capital costs during the economic downturn, interest in strategic document outsourcing has grown.  I think we are more likely going to see an uptick in awareness around these types of opportunities for document outsourcing as marketing groups continue to look for ways to maximize their spending and reduce unecessary costs.

If you’re like me – you watched with bated breath today to see the Dow break 9000. Let’s face it, you can’t help but be very optimistic this week with so many financial firms posting better than expected revenue numbers for Q2  – both are hopeful indicators that we’re making progress.  Obviously, beating Wall Street’s expectations is a bit more of a moving target than the usual “quarter/year-over-year” revenue comparisons that are made in a healthy market.  Regardless, we will take what we can get – it’s been a tough 15 month + months in the market. 

As is often the case in a down market, many firms were able to turn their numbers around by reducing expenses and operating costs to offset their numbers.  If it works – I’m all for it!  Thinking back to a down market in 1989 when I was an intern in a global bank (that still exists) I remember the outlawing of ordering lunch for lunch meetings –and cakes for birthday parties in an effort to reduce expenses.  I remember thinking – why wait until you are low on cash to realize the waste in an organization?  Throughout my career, I have been known to be a bit of a supply closet scrooge – not allowing my staff to order all the unnecessary office supplies offered through those gazillion page office supply catalogs.  I remain true to my conservative spending nature – every penny counts.

As CEO, Ursula Burns mentions in the Xerox Q2 Earning release, “In this cost-conscious environment, our clients are responding to Xerox’s managed print services that reduce document costs by up to 30 percent, and to the value we provide through innovation like the Xerox ColorQube™ solid ink system that cuts the cost of color pages by up to 62 percent”.  “Xerox’s value proposition along with the breadth of our offerings for businesses of any size, expanded distribution, and global account management gives us confidence in the strength of our long-term competitive position.”

The more I think about that quote – the more I realize just how incredibly relevant our Managed Print Services offering is to financial services firms in any market.  Ironically, I have never worked for a bank that had me on an MPS solution platform.  I always had my own printer – in an office, in a cube- it didn’t matter.  It’s no surprise that so many large financial services institutions have looked across their enterprise in the last 15 months for large “low hanging fruit” opportunities – and have found MPS to be a major value add in reducing costs, improving efficiencies, and reducing environmental impact.  (You know I couldn’t resist a reference to sustainability here). OK, so I admit it- whenever I heard talk of an MPS solution being discussed [prior to joining Xerox], I – like everyone – pushed back and said things like, “I have confidential documents that cannot go to a shared printer”, or “walking back and forth to a shared printer is going to waste too much time” all fairly pathetic excuses to resist change, I must admit – now that I have been educated in the space by my Xerox colleagues. 

Key Corp is a great example of a firm that saw the light, and they aren’t looking back. I suspect we will continue to see the trend towards maximizing infrastructure spend with solutions like MPS across the industry whether the market picks up or not – because it will just become the standard – as it should be.