Fault Lines

Eoin Kirwan, VP, Product Management, FINEOS

In his 2011 paper “A Sea Change in Enterprise IT”*, Geoffrey Moore (“Crossing the Chasm”, etc.) offers a new mental model of enterprise IT, one that distinguishes between “systems of record” and “systems of engagement”. He posits a shift in the centre of gravity of IT budgets away from the former to the latter or, as I have seen it personalised, away from the CFO & COO towards the CMO & CEO.

He compares the investments of prior decades that created (what we would now term ‘legacy’) systems of record to the construction of America’s interstate highway system:

“The thing to register about systems of record is that they are mostly and largely complete, particularly within larger organizations. Are they perfect? No. But these systems of record are no longer a source of competitive differentiation for organizations. They are a necessary condition of doing business. Once you have an interstate highway system, the era of the great build out comes to an end, and the era of maintenance comes to the fore, and that is precisely what has happened with enterprise IT as we have known it. As a result, this past decade has been one of increasing optimization, led by IT budget cuts as funds are transferred to other uses within the enterprise, and led technologically within IT by virtualization, cloud computing, and ever more outsourcing. And that is where we stand today.”

He looks forward to a new era of investment exclusively in systems of engagement, as business embraces the digital / social paradigm. And his description of the urgency of this embrace is dramatic, but inarguable:

“What is transpiring is momentous, nothing less than the planet wiring itself a new nervous system. If your organization is not linked into this nervous system, you will be hard pressed to participate in the planet’s future.”

The record/engagement dichotomy is an attractive formulation, not least to those C-suite execs eyeing budgets for cool technology. Even more welcome is the promise that they can proceed without having to change or replace those nasty green-screen leviathans.

An attractive formulation but I think a flawed one. While there is no disputing the imperative to transform communication & collaboration with business partners and customers, the reality is that communication & collaboration without context is useless.

Business communication is about something tangible, be that (taking insurance as an example) a claim payment, a policy or coverage, a renewal or dispute, a medical service or appointment. Whether customer enquiry, quotation, negotiation or confirmation, effective engagement relies on this context, a context that resides by definition in the system of record.

An interaction may even be about a specific payment in respect of a given service provided under a certain benefit by a particular medical professional. So context is no matter of mere labelling (#hashtag). It finds expression deep in the data model of the record-keeping system itself.

While Moore acknowledges this, he under-estimates the challenge facing CIOs:

“Clearly, systems of engagement need to operate on top of and in touch with our existing core systems of record. It’s difficult, but doable.”

In fact, we have seen many insurers invest in systems of engagement that, while supposed to “overlay and complement our deep investments in systems of record”, have in practice formed a disconnected outward-facing layer.

Moore’s dichotomy fractures enterprise IT in a place where there is no natural fault line. The mandate for context creates a strong temptation to re-implement records (product rules, customer status info, etc.) in the outer layer, a duplication that can only lead to long-term cost-of-ownership headaches and short-term confusion. With customer dissatisfaction on one side and unsustainable IT complexity on the other, the CIO is damned if he does and damned if he doesn’t.

Next-generation systems-of-record will in fact being enabled from the ground up for richly-contextualised customer engagement. (Products from leading vendors already are.) These systems can support, by design, multi-channel multi-participant communication & collaboration, anchoring each interaction in the policy/servicing context which gives it meaning.

The natural fault line (if there must be one), is between these new (truly) customer-centric systems and the transport layer (comprising web, email, app, Facebook, etc.).

The appealing vista of free-floating engagement technology, liberated from having to ‘engage’ with the systems of a previous generation, may appeal to the psychology of certain C-level executives and to the zeitgeist but, in insurance at least, things are never that straightforward. As Bobby Fischer put it:

I don’t believe in psychology, I believe in good moves”.


*A Sea Change in Enterprise IT (Geoffrey Moore)

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