Despite recent economic uncertainties and subsequent budget contractions, technology continues its steady advance. “Collaboration technology”, say its proponents, is on the verge of becoming a key element in the industry’s drive towards T+1.
The brochures proclaim, “We work closely with our business partners to ensure maximum understanding and efficiency.” The salespeople assert, “Our back offices have direct communications links to our counterparties and problems are resolved as soon as the phone is answered.” In reality, working closely with customers translates at best to a monthly meeting, while instant resolution by phone needs the additional caveat “as long as the guy we usually deal with has not gone to lunch, on holiday, or left the company”.
Collaborative technology, with instant messaging in the vanguard, is making headway towards reducing differences between hyperbole and reality. It enables users to work securely online across locations and organisations, to conduct real time conversations, meetings, share documents and timings to ensure that the right information gets to the right person instantly.
Signs of Growth
There are various estimates of the potential value of instant messaging over the next few years, but a key indicator comes from the fixed income sphere, where eight financial institutions, Credit Suisse First Boston, Goldman Sachs, JP Morgan, Lehman Brothers, Merrill Lynch, Morgan Stanley, Salomon Smith Barney and UBS Warburg, have begun to jointly deploy an instant messaging system called Hub IM, from Communicator, the company which also operates the BondHub and SyndicateHub information portals.
“This is a service that is available to all financial silos, not just fixed income, but we started there because that is where we have the most contacts,” says Gary Reifman, product manager at Communicator. “Almost a year ago, we started to roll out the service to the big banks, now we are connecting them to their customers.”
The system will allow the banks to give their clients a full address book of contacts within their organisation and show who is at their desk at any given moment. Importantly, however, users will not be able to access competitor directories. “The key requirement for the banks was to maintain control,” says Reifman. “They do not want to give out their customer lists to someone who may well be a competitor.”
Elsewhere, Divine, which offers the MindAlign instant messaging system and collaboration tool, has also just signed a deal with ABN Amro to make the system available initially to around 2,500 users spread across 17 countries, with plans in place to extend this to 45.
Reuters, meanwhile, began developing its Reuters Messaging in March 2001 and recently commissioned a research report from Gartner Consulting into collaborative technology. “When we announced that we were creating Reuters Messaging, we undertook what was a pretty large effort that cost us quite a bit of money,” says Lewis Knopf, managing director of collaboration services at Reuters. “We have been passionate about this for a couple of years and what we wanted to verify was how close the industry was to recognising that it was important.”
From the point of view of the survey, collaboration is fundamental to the evolution of business relationships within financial services. “Traditionally, collaboration was an activity that happened within the enterprise and through hierarchical structures and through the exchange of knowledge and documents in face to face meetings,” says Meta Karagianni, senior consultant at Gartner. “We are seeing this changing, as collaboration extends beyond organisations and physical boundaries to include not only internal but also external structures. Collaboration no longer impacts simply on people and applications, it now crosses the entire business chain to include different offices, continents and organisations.”
The Gartner report interviewed 28 financial service providers in a variety of geographies, from organisations such as investment banks, buy side institutions and hybrid organisations, not including those from the insurance sector. Of those interviewed, 86% said they expect collaboration to have a significant impact on the financial services sector in the next three years, 75% considered collaboration via IT as important or critical, while 50% forecast an increase in spending on collaboration tools over the next two years.
“These technologies are beginning to grab the attention of the financial services sector globally, and they are being seen as more than simply a nice to have – companies are recognising that they are a must have,” says Knopf. “They are seen as critical and their use is expected to grow over the next few years.”
Right Place, Online
One of the key findings of the Gartner report is that the presence function of instant messaging is seen as essential by 94% of respondents. (Presence is defined in the report as the ability to see who is available when a response is needed from other locations.)
Knopf gives two examples of where he sees presence providing an advantage: “The author of a research report could be seen to be online as part of a premium service to provide online commentary. Equally, look at what is happening with STP and T+1. Front and back offices have a need to deal with one another. For the back office to be able to see if the trader who did the deal is there means that if something goes wrong, there’s no danger of them playing phone tag. Two back offices in separate organisations, if the settlement stage was presence enabled, would be able to resolve any issue far more quickly if they could see who was dealing with it at the counterparty,” he says.
Alan Drennan, CEO of WiredRed, whose instant messaging clients include Morgan Stanley, Merrill Lynch and JP Morgan, agrees with the increasing importance of presence in a global organisation. “For large, distributed organisations like banks with, for example, six experts on three different continents, you need to know who is available, and whether you can communicate now,” he says. “Coupled with this, it gives the company the chance to take a snapshot and see the status of its employees.”
Coupled with the size and distribution of an organisation, speed of response has also become fundamental. “From what I’ve seen, the speed at which information becomes a commodity is now seconds,” says Chris Blaik, Divine’s European marketing director. “As a result, the ability to make decisions not just with your local trading team, but with people at different locations around your company and with partners in different companies, needs to take place just as fast.”
The Gartner report estimates that by 2003, 70% of enterprises will be using a free instant messaging system, not supported by IT departments. It warns, however, that companies need to be aware of the risks associated with free instant messaging, the lack of security, absence of auditing and logging facilities, and reliability issues, all of which are crucial to the financial services industry.
Drennan points out where the demand for instant messaging is coming from, and agrees that there are dangers of bringing commercial messaging systems into the banking environment: “There is an education going on. We have a younger generation coming into the market place who are used to commercial instant messaging and they are saying that this could be a very useful business tool. They are driving a lot of the demand, but that is bringing with it a lot of pain.”
“The key to collaboration is to minimise the risk and maximise the value,” says Gartner’s Karagianni. “In doing so, organisations need to avoid free instant messaging systems, such as those offered over the public Internet, due to the risks they introduce to the enterprise.”
Communicator’s Reifman is enjoying seeing the new technology up and running in organisations. “It is always interesting, people often use this in ways you didn’t imagine,” he says. “We have seen a lot of people using the chat functionality as a kind of running morning call or even an online voice box.”
Similarly, Knopf has been interested to see how the Reuters system has been taken up when piloted within the organisation. “We just put it out there and let it go to see what would happen,” he says. “We did not say to people that they should use it for any particular reason, usage just grew virally, by word of mouth, which is what we thought would happen. People began using it to change the way they worked within a building, within a country, between continents, to the point where it has cut down our email usage and improved the way we are doing things internally.”
Beta testing of Reuters Messaging is due to begin in June, with a view to an autumn roll out. Longer term, the company plans to tie instant messaging into all of its products. “We are embedding Reuters Messaging into our application workflows, starting with 3000 Xtra, which is about ready for beta testing. After that, we will be putting it into the applications that we bought when we took over Bridge. Just about everything that we put out in the future will have messaging as an integral part.”
Divine intends to add streaming media and whiteboarding (whereby a whiteboard can be written on by a member of the meeting who is not physically present) to its product within 12 months, and sees logic in offering a white label version of the product. “Companies have spent millions of pounds positioning their product within their brand,” says Blaik. “To then ask people to sign onto a site and throw in an application that does not represent your brand properly, undermines your expenditure.”
“When people see the benefits of what the technology can give them in the financial world, and you provide the auditing reporting on top of that to meet the regulatory requirements, it is not a very hard argument,” says WiredRed’s Dennan. “Organisations are seeing the clear benefits once they have the system in place.”