The services industry – technology services and business process services – is going through unprecedented disruption. Customer needs have changed significantly – hyper personalization of products, rapid product innovation, digitization of core platforms, compliance with rapidly evolving regulatory standards, and open ecosystems are some of the key trends in the marketplace. Service providers have added and strengthened capabilities – from consulting to design to Intellectual Property (IP) – to offer end-to-end solutions to clients.
Customer needs of greater efficiency and speed have compelled service providers to add IP assets as part of their overall solution offerings. For Run services, the focus is on simplification and process automation to drive efficiency while forChange services, IP assets are helping support rapid turnaround times for product testing and launches. Solutions which leverage IP assets have also helped service providers respond to the pricing and margin pressures from customers.
As the line continues to blur between traditional product and service providers, the expectations of-linear growth are increasingly being applied to the service industry as well. Though the decoupling of revenue growth from a commensurate growth in number of resources has been discussed for several years, the Indian IT industry has shown signs of this non-linearity only very recently.
According to NASSCOM, the industry hired 9,470 employees against $1 billion revenue earned in IT& BPM in FY17-18, which is the lowest in 5 years1. Increased focus on IP assets – in AI, Automation -are expected to make this non-linearity even more evident in the coming years.
Strategic approach to IPs
As service providers add IP assets, the challenges in transitioning the business model are significant. In addition to core capabilities of product management, product development and product sales, issues such as culture and organizational structure also need to be addressed. The Indian IT Industry has taken varied approaches as they transform their business models. Some companies have created separate units to handle products and platforms while some have in-house teams that manages them.
Irrespective of the strategic approach, IP creation and IP-led innovation is unanimously a key focus area for all the providers. Identification and creation of IP assets is complex – especially in environments that are traditionally service-oriented.
In the ensuing section, we elaborate on 5 different approaches to IP Creation that have been tried within the Banking, Financial Services andInsurance (BFSI) industry by Wipro.
Business Models for IP creation -A BFSI perspective
Co-create with customers and monetize as IP
The Financial Services industry is full of regulatory compliances that every trading and investment company needs to adhere to. In order to do that, Asset Management Companies (AMCs)generally use Investment Compliance Systems, which ensure the monitoring of business activities in line with trading regulations and laws enforced by global regulatory bodies. AMCs need agile Investment Compliance Systems to improve responsiveness to complex regulatory rules, faster Time-to-Market (TTM), lower compliance costs, and reduction or elimination of the need for audits.
Another trend that is increasing in the market is the desire of financial services companies to monetize their investments in software solutions that they have previously created. Seeking to leverage this trend, Wipro partnered with a largeUS-based Investment Management firm to“productize” an existing software solution. The IP asset that was created was called WinTrac and went live in April 2017. WinTrac is a Pre- and Post-Trade Compliance Solution that is built on a metadata-based toolkit framework that permits modularity and customization. It has an extensible reporting framework and a flexible architecture that enables future proofing and faster TTM for adherence to regulatory changes.WinTrac also lowers cost of compliance, scales to complex asset types and orchestrates a more effective pre-trade and post-trade compliance for AMCs.
The advantages of taking this approach to IPCreation were an enterprise solution that could address the complex needs of a large Investment management firm, and a referenceable implementation that could be leveraged to penetrate other customers.
However, product managers need to be wary of real challenges that will prop up while taking this approach. In addressing the requirements of the anchor client, extensibility of the solution must not be compromised. A wide spectrum of possible customer segment needs to be kept in mind to create a ‘core product’. The inevitable tradeoffs of core product vs client implementation need to be carefully navigated. At the same time, while product development will be the primary focus inthe initial stages, product management aspects of analyst buy-in, technology partnerships also need to be actively cultivated for a successful go to market strategy.
Co-create with external partners along the value chain
This is a tri-partite approach to IP creation. A US-based insurance provider was facing challenges in terms of overall business growth. They hired a management consulting firm to analyze their business and suggest a strategy to turn the company around. The firm suggested the insurance provider target the Small & Medium Businesses (SMB) segment for growth. A sign of how different players in the services value chain are changing, the consulting firm also wanted to participate in the upside of this new business model. Since the consulting company lacked product development capacity, it engaged Wipro as a downstream partner to help the end client launch this business model. An arrangement was worked out where Wipro would be responsible for
product development, the consulting partner would take ownership of the GTM – product marketing and positioning.
The challenge here was unique. As the number of customers that the insurance provider could target shifted from tens to thousands, a digital solution to target and onboard customers was critical for success. The Digital Small Commercial Insurance (DSCI) product was conceptualized. DSCI is a digital solution accessible to agents and end customers to assess the risk profile of the SMB segment of customers. It uses a limited set of questions, and data from various sources to create the risk profile. The value proposition of DSCI focused on cycle time reduction in policy underwriting from 2 days to 15 minutes per policy, thereby leading to growth in new business.
The perceived advantages of this approach were bringing together various aspects of the value chain – industry player, business innovation partner, and technology development provider – to create the solution. Each player was supposed to leverage its own competencies for the creation of the new business. However, the interdependencies, expectations and hand offs between the various players in the solution development process need to be tightly managed. A specific example is the articulation of business requirements for the product development team. This is a critical step in the product development process, and alignment on level of specificity is key to success. Another aspect is the sustained funding needed till the product can become operating cash flow positive. Costs such as product marketing and technology debt costs are important to understand to secure funding till the overall business becomes viable.
Co-create with internal units
A multi-million opportunity across an identified set of customers led Wipro to develop an organic IP in the E-KYC space. Wipro identified an American multinational investment bank to work with as an anchor customer. Wipro’s E-KYC story was a classic case of cross-functional collaboration between the BFSI business unit, Wipro’s homegrown AI and Automation platform HOLMES, and the Digital Operations & Platforms (DOP) service line. BFSI brought in the domain expertise while HOLMES brought in the all-important cognitive aspect to the E-KYC Solution. DOP was responsible for the operationalization of the solution.
In this case as well, an approach integrating domain, engineering and operations expertise is a unique aspect that full-service providers can bring to bear to creating IP. It enables outcome or BPaaS models to deliver solutions to clients. At the same time, it creates a forum where the tradeoffs between the three competencies can be proactively managed. However, since multiple internal units are involved in product development, an overall alignment of objectives, actionable and accountability is very important to create a successful business. Unless managed proactively, issues such as, the operations unit desiring to use the best available market product to offer business services, the technology teams unwilling to acknowledge the potential cannibalization impacts of a BPaaS model on an operations unit, could be the hindrances to the successful creation of a product.
Co-create with start-up ecosystem
Rapid growth in online and mobile banking, as well as empowered customers embracing digital touchpoints, is fueling the need for investments in digital transformation. To leverage the latest technologies and optimize cost efficiencies, banks are looking at an end-to-end digital offering.
Wipro has conceptualized and created Omnikonnect – an omnichannel collaboration platform that addresses all enterprise collaboration needs without compromising compliance and security. The core collaboration engine of Omnikonnect comes from Moxtra, a startup that offers a rich heritage of collaboration experts. The platform is scalable and built such that it can be used across geographies with adaptation to local requirements.
Wipro partnered with Moxtra to develop vertical use cases on top of the core platform. Necessary domain and product management capabilities from Wipro complimented the technology expertise of Moxtra in this space. Wipro’s IP asset was Industry Specific Collaboration Templates & Workflows and Reusable Connectors.
The advantages of this approach were speed to market and lower cost of entry. The availability of Moxtra’s core platform meant that Wipro did not need to invest in the core technology, and Moxtra was able to leverage Wipro’s sales-force and customer real estate to limit customer acquisition costs. The aspects that need to be managed here are cultural and IP ownership aspects. Startups tend to act much faster than large companies, and expectations of selling a single solution as opposed to selling a portfolio of solutions need to be rationalized by both parties. At the same time, guidelines or principles of IP ownership between the two parties need to be established upfront for a successful partnership.
Mergers & Acquisitions
Mergers & Acquisitions is another approach to add IP assets to the business. In 2008, Wipro acquired US-based Gallagher Financial Solutions. The flagship product NetOxygen is a loan origination and processing software, which is designed to handle all aspects of the lending process for all channels and loan types.
When an IP asset is acquired, a conscious decision must be taken on integrating the entity. While Gallagher Financial Solutions is now called Wipro Gallagher Solutions, it still functions as an independent entity. This is because the speed and rules of the product business are different.
It is also important to conduct a thorough due diligence of the product being acquired. There are many examples of failed acquisitions in the M&A landscape where an incorrect judgment of capabilities leads to the system integrator (SI) further investing a significant amount of resources in making the acquired product sellable, to an extent that had the company invested as many monetary and non-monetary resources in-house, they would have developed a better product organically.