QUESTIONS

Questions

Questions

Question 1:

The concept of trade-offs is arguably one of the paradigms of operations management whose importance has increased most during the last years. It is not that the concept is particularly new. It was central to the founding works of banking strategy and has been implicit in most of the work on the subject since then. Banks, it was argued, could no longer compete only on a cost and productivity basis but rather along multiple “competitive objectives” such as quality, delivery dependability, flexibility, variety, lead-time, and so on.

Given that, for all practical purposes, banking systems are “technically constrained”, focusing on a narrow set of competitive objectives will give levels of performance far superior to those possible with a broader set of objectives. Superior performance in one competitive objective is gained primarily by lowering performance in another. The implication of this is that devising an appropriate “positioning” of an operation's competitive objectives (that is, their relative importance) should be the initial task of manufacturing strategy. Subsequent studies investigated the ways by which operations management should recognise this characteristic and adapt their resources and procedures to be consistent with this positioning.

Investment decisions, and technology decisions in particular have become increasingly deliberate processes. Technology decisions are now being viewed as truly strategic, encouraging financial institutions to review their value propositions(Valdez, 2006, pp.90-120). Any able provider, consultant, or IT manager demands to know a financial institution's focus before making recommendations, especially given the emergence of business process optimization and customer relationship management. Ultimately, technology choices are usually made through a series of trade-offs viewed through the lens of an institution's focus and related priorities.

A recent wide-reaching trend boils much of this analysis down to one major trade-off: "Open Best-of-Breed" vs. "Integrated Single-Source." Totally separate from the debate over outsourcing, this more pervasive trend reaches so wide that most industry executives, consultants, and vendors have polarized into one of these two opposing camps.

Open Best-of-Breed

Solutions built with open architecture and transparent standards leveraging best-of-breed applications are compelling at first glance. The freedom and agility it gives a financial institution is extraordinary, particularly when viewed against a history of mainly proprietary efforts in banking technology.

With the "openness," an institution can leverage any number of "best-of-breed" providers and technologies to put together a total solution uniquely suited to them. Surely, the integration takes hard work, but the possibilities! Managing costs and performance is critical in this view because the costs, performance, and associated risks come in many forms.

However, this view not only allows for innovation and marketing to differentiate an institution, it also gives the institution critical leverage with technology providers because of the portability - their eggs can be in so many baskets. The only requirements are a sound technology strategy and a highly disciplined management team to sort out which of the many possibilities will take priority given finite resources.

Integrated Single-Source

Solutions primarily built around a single, totally-integrated technology or provider sound less compelling at first glance. The possibilities are often much more ...