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Tuesday, June 19, 2012 by Mark McGregor
Last week at the IBM UK Impact event, I was able to sit in on a couple of excellent user presentations and wanted to share some of what I learned with you. As Neil said in his post about the Impact event in Las Vegas, it was a little disappointing that there were not more of these user sessions. We, like you, learn more about the reality of using a solution from hearing about its use in context.
The first story I wanted to share with you was from the main platform and was delivered by KPMG. The presentation, titled “A Game Changing Solution in Banking” was given by Natalie Semmes, Director of KPMG and former head of technology at UK bank Barclays. The focus of the application of BPM Natalie shared was around assisting banks with customer remediation, more specifically how to deal with the massive number of payment protection insurance claims (PPI).
By way of background Natalie reminded us that major banks in the UK spend around £1bn per year on IT. An estimated 80% of which is spent on dealing with regulatory change. In the case of PPI, following the judicial review in July 2011, the banks learned that between them they would have to repay around £7.4bn for mis-sold policies.
The traditional way for banks to deal with a problem like PPI would be to hire armies of inexperienced contractors and then set about the largely manual task of tracing customers, analysing claims, calculating liability and then paying out correct claims. Natalie cited that one unnamed UK bank currently had over 5,800 people working on dealing with PPI claims.
The KPMG approach was different: they decided that they wanted to offer a more practical and cost effective solution to their customers. They set themselves a pretty ambitious goal of having a working solution installed and operational in a customer environment within four months of the judicial review. KPMG already knew they had the right remediation knowledge, but would need to find a technology partner to work with. Following a selection process they chose IBM. The prime reasons given were that IBM was a known and trusted partner of KPMG and that IBM were willing to share in the risks. Natalie also noted that KPMG felt the IBM BPM solution would be cheaper and faster to implement.
That they achieved their goal would come as no surprise. They would not have been here today presenting their experiences if they hadnít. What might be considered surprising could be the level of benefits that the KPMG, cloud-based, IBM BPM enabled solution delivered to the client. A couple of the statistics shared included the following. The first client achieved a 65% productivity improvement (the client went from handling 1 or 2 cases per employee per day to 17 cases per employee per day).† The second client, one dealing with 40m transactions, was able to reduce the levels of repayments because of the increased accuracy of data, translating to savings in excess of £30m.
In both cases, because the solution provided a more robust QA and audit trail, the clients were able to reduce re-remediation rates from circa 10% to less than 1%. This also resulted in them being better able to justify their positions on some cases with regulators, further cutting the costs of claims.
By way of the challenges along the way Natalie shared that their biggest issues were firstly creating a team with the right cross-functional mix of skills required, and then building a real belief within the team that they could achieve an unreasonable goal. On a day-to-day basis controlling the focus of the team and staying on track were constant challenges. For those who are interested, KPMG used what they described as a pragmatic Agile/scrum approach to developing the solution.
Moving forward, KPMG see that PPI is just the tip of the iceberg when it comes to increasing efficiency within banks for dealing with regulatory challenges. They are now looking forward to adapting and growing the solution to cover many more of those challenges as they continue to add customers.
For me the key thing about this whole story is the move from selling BPMS as an application development platform and then selling implementation services, to the creation of a BPMS-based application that clients can then buy and customise, massively de-risking development. Such an approach represents both a massive opportunity for vendors and system integrators and a good indicator that end users are less interested in simply purchasing addition platforms. That the solution was cloud-based may or not be seen as key for some clients.
IBM are not alone in pursuing this kind of approach; several of the major BPM vendors are talking about it, perhaps as a result of seeing how the original laser-like focus of Pegasystems enabled them to scale faster than their original competitors. The “one to watch” though will be how quickly other consulting firms and system integrators like KPMG can package their experiences in such a way as to offer embedded knowledge into purchasable systems. Could it be that that at last western integrators are waking up to the best way of countering the lower cost labour rates from their Asian counterparts?