Going to financial extremes ... well, virtually

Hi-tech rivals are joining forces to explore the future of finance
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The Independent Online
Not so long ago, technology was deemed so central to the business of financial services organisations that they would not have dreamt of sharing it. Yet, last week the global banking firm JP Morgan announced a strategic alliance under which Computer Sciences Corporation, Andersen Consulting, AT&T Solutions and Bell Atlantic Network Integration will manage parts of its "technology infrastructure".

Basically, it is an admission on the part of Morgan that this area is so important that it cannot afford to do it all alone. "Technology is critical to JP Morgan's success - so critical, and on so many specialised, fast-developing fronts, that no one firm can be a leader in all of them," says the firm's chairman, Douglas Warner.

Estimated to be worth more than $2bn over seven years, the agreement is a landmark. As well as bringing longtime rivals CSC and Andersen together, it will see the management team formed from senior executives from all the parties. For all its innovation, though, such a move is only one approach to dealing with what all agree is going to be a challenging period for financial services.

It is generally reckoned that in the coming years competition will increase, technology will advance fast, the power of the consumer will continue to grow, while regulation will evolve rapidly. Riding over all these is an uncertain economic and political climate. This last is already being felt in the earnest discussion of replacement products or services for the 25-year mortgage.

Glimpses of what might happen are offered courtesy of a project just unveiled by Andersen Consulting, one of the partners in the Pinnacle Alliance, as the Morgan consortium is called. The Virtual Financial Services Model is, says the firm, "a high level tool that helps clients explore a number of plausible futures, determine a sensible strategic direction, and define the specific actions they need to take".

Robert Baldock, the Andersen partner who headed the project, points out that the findings are based on neither market research nor statistics- driven financial analysis. Instead, the project team used the firm's expertise - gathered through gaining more than a quarter of last year's revenues from financial services clients such as Barclays Bank, Marsh McLennan and the London Stock Exchange - to identify "the various extremes of the industry's future". The idea is that if companies examine the potential impact of these extremes they can develop robust strategic plans.

"The VFS-Model will help companies to build flexibility into their organisation and plans so that they can change quickly. This is essential, considering the pace at which the market is moving," says Mr Baldock. "Without this model, companies run the risk of investing in the wrong initiatives and finding themselves unable to catch up with competitors who innovate to offer customers new services through new channels."

The firm can already boast the support of at least one client, a leading Scandinavian insurance company, whose marketing director says the model "takes us away from trying to predict one future and allows our planning process to deal with uncertainty in a practical way". The years ahead will presumably reveal exactly what that is.

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