When was the last time you spent real notes and coins or spoke to a customer service agent without going through an Interactive Voice Response (IVR) system? We are living in an increasingly digital and future focused time. Customers’ expectations are changing across all industries and sectors.
Digital in its broadest sense is increasingly becoming the primary transaction channel, as people prefer to engage with an app or email when they want, as opposed to being constrained to seeing or speaking to someone they do not know. An easy example of this is how the use of chatbots has become commonplace on internal and external websites alike. This overarching shift has led to increasingly more automation and targeted business process outsourcing, including back office functions to such an extent that it is now considered to be the norm. The knock-on impact of these changes is that organisations are getting thinner and more agile with an increasing focus on core business differentiation. It may well be an obvious outcome but as this process of change occurs, the entire employee experience and journey in an organisation will be transformed. Questions of what and how those changes to payroll, recruitment and paying suppliers will be delivered, and whether they should be built, bought or consumed as a service, are coming to the fore.
Even the seemingly mundane and historically trusted parts of businesses are not immune to disruption as innovation ripples across business operations. This is particularly prominent today, if you consider start-ups and back office systems. Instead of building their own, start-ups are opting to consume non-core activities as a service, with the ease and functionality to swap specialist providers in and out to meet their growing business needs. They can also keep up with the latest innovations from a Software-as-a-Service (SaaS) disruptor that can be paid for as a monthly or annual subscription. It is fair to say that historically in cases where a chosen SaaS has been deeply integrated in a business process, organisations have experienced friction moving to a different provider to such an extent that the benefits of the service can be limited. This is changing as the SaaS market grows and leaders of these B2B firms bring prevalent B2C operating features of both smooth onboarding and termination.
On a day to day basis my world typically involves the HR and Payroll solutions for clients but as the business and world around us has innovated it increasingly crosses into the world of payments and financial systems. The introduction of advanced technologies and changing regulations to support faster payments, Application Programming Interfaces (API’s) and ISO standards is having a knock-on effect on the wider payments services world for large and small companies. This payments services world is a place where organisations whose highest costs are typically salaries, are now looking for a single provider to take care of payroll and other similar functionality. Customers, employees and suppliers are expecting the equivalent levels of service and functionality, which drives a new push for innovation. Add to this the increasing demand for robotic process automation to replace or augment repetitive tasks performed by members of the workforce, and it soon becomes an increasingly costly and complicated undertaking for companies to provide their own payment electronic services. To do this securely and efficiently not only requires the most up to date knowledge of banking and payment regulations supported by the right technology and systems, but also makes rising demands on the processing and management of personal data and privacy projections.
The only constant is change
With all this technology change and innovation of business models, why would a business still wish to build and operate software themselves? Typically, the first thought is that individual organisations are special and have a unique set of requirements that only they know and can support. Then there is the nervousness of handing over responsibility and control to a third-party service provider and the concerns about the ability of the third-party service provider to prioritise specific requirements. This is only the tip of the iceberg but when taking a step back, it is an advancement on the whole buy vs build debate that has existed for almost 50 years in the IT industry. Over the years, much has been written on the topic and plausible arguments in favour of one approach over the other as well as the ranking and listing of important factors for consideration. However, in the software industry, the only constant is change and although some factors are still valid, other more traditional arguments might need a second thought.
Here at CGI we’ve supported clients for over 40 years in answering every combination of the scenario in a whole range of sectors and industries. We’ve not only seen and experienced the emerging technology trends but also the business models, culture and purchasing trends over the years. For example, our contributions to the payments industry include the design of the SWIFT network for international transfers in 1973, to chip and PIN card rollouts, to the design and implementation of payment infrastructures and processes using distributed ledger technologies and APIs. We provide end-to-end payment services for businesses so they don’t need to worry about the operational aspects. This change to provision of services is a natural evolution of business, as underlying technologies such as cloud and remote communications continue to advance, bringing additional options for clients. Do they build, buy or take a service?
Service vs Buy vs Build
As noted above the “build vs. buy” debate has permeated the business technology world for most of its existence and has always been challenging. There will always be pros and cons on both sides, and one could not just use a formula to weigh the two approaches. Analysing delivery time and the Total Cost of Ownership (TCO) help ensure cost-effective solution procurement or development and examining non-functional requirements guarantees smooth software installation. A careful study of maintenance and support further assures the sustainability of the solution.
The “build vs. buy decision” is often described as more of an art rather than a science. In this decision-making process, nothing is absolute. Innovations in business models and technologies (some of which have been mentioned above) over the last 10 to 15 years has moved this debate along to include a third option. This third option is “service” where organisations can decide that instead of building or even buying, they want to have a combination of the two.
Customers can have bespoke services tailored to meet their specific requirements whilst also being kept up to date with the changing regulatory and technology worlds. This choice of service also gives the organisation much more flexibility and control over costs. A big part of this for organisations stems from the difference between capital expenditure and operating expenditure. One of the key attractors of the service option is that this can be paid for by a monthly operating expense, which is typically lower and easier to budget for than the more traditional chunky capital expenditure costs. This provides an arrangement where large organisations can look to operate with the agility and focus of disruptive start-ups.
It is this transition and transformation to operate akin to digital start-ups that is so attractive and necessary for large organisations as they futureproof themselves. The extent and importance of this is regularly played back to me and my senior colleagues in our Client Insight programme. Annually, CGI leaders around the world meet with business and IT executives to gather their perspectives on the trends affecting their enterprises, including business and IT priorities, and spending, and investment plans. Our teams of experts in the different countries analyse the findings to provide a valuable global antenna for different industries.
For our 2020 survey, 81% of executives say they need to evolve their business model for digitisation. Becoming digital to meet customer and citizen expectations is the top trend across industries in 2020, as it was in 2019. However, cost control/budget pressure and optimising operations both rose in impact compared to previous years.
How organisations implement their respective digital transformations will always involve a combination of service, whether it’s the buying of solutions and building them. These options are typically not mutually exclusive and are also improving and innovating all the time. The range and combination of how these options are applied and offered will differ from organisation to organisation and sector to sector and to thrive in the digital world, enterprises must operate in an agile manner, and continuously unlock innovation at pace and scale.
When considering your next business challenge, I would encourage you to look at each of the options as having the build vs. buy vs. service discussion is a sign of a healthy organisation, which indicates that people are really thinking about the best way to advance the business.
I’m involved with these discussions everyday with clients. If you would like to explore the topic with me, please reach out and connect.