Wisdom of (this) crowd?

Some interesting themes already emerging from the other commenters, but I feel obliged to throw in my own 2c.

Trust - do we really trust the banks or the telcos? I think not. Their behaviour (both historic and recent) does little to endear trust. The transformation that's going on around us is towards user centric trust, where people control their own expression of (digital) identity and how this relates to the transactions and communications they participate in. The telcos, banks (and government) will end up providing the substrate for this, but we move away from a need to trust centralised entities.

State - the telcos have traditionally been unconcerned with state (except in their billing systems), and the banks were all about state - the 'books and records of the firm' IP based telco infrastructure now means that the telcos have a surfeit of compute and storage capacity (in the low grade data centres we used to call exchanges) where the network has been built around a scaling factor of IO. The banks on the other hand are right now in a place where they have to care more than ever about transport/network issues in a world of HF/algo trading. This pushes the two together, and the obvious consequence is a stateful network aka a pub/sub architecture.

Infrastructure - as the telcos adopt IP based infrastructure and the banks are more reliant than ever on their data centres and networks then it clearly becomes harder than ever to distinguish between them on these grounds. The thornier question is whether either type of organisation can differentiate on their infrastructure or some qualities it possesses? This is almost certainly a race to the bottom, where all of the infrastructure becomes a cheap commodity capable of getting bits from A-B with optimal throughput and latency.

Services - if organisations can't compete on their infrastructure then they have to compete on the value they can add on top of it, in the form of services. The back offices of banks will be hollowed out because they can't differentiate on what they do there (and emergent service providers will undermine in house IT in terms of cost, quality and/or business agility). The 'bank' then becomes a pure service company in terms of the products it synthesises, markets and sells. This is where the differentiation persists against the 'telco', which sells communication services rather than financial services. The disruption comes from the (M)VNO style model, because it's no longer necessary to own infrastructure (or have a strong balance sheet) to be a 'bank', it's simply a question of having the right skills and relationships, along with a bit or regulatory hoop jumping.

In a world where bits are bucks and bucks are bits, anyone who can stream relevant data to customers when and where they need it, makes money. So it's all about messaging - data streams in real time - using standard ubiquitous infrastructure.

The difference between bank messaging (transactions, queues) and telcos (conversations, streams) is disappearing. But both are less important than the emergence of 'pubsub' as the dominant pattern for messaging.

Pubsub means "publish subscribe" - when 'subscribers' get information updates sent to them instantly and automatically by 'publishers' that they are 'interested in' aka 'following'. Pubsub first appeared in broadcast networks, and in cases like market data in finance. Today you can see it on the web - Twitter is an obvious if at times trivial example. Previously people would go to web sites to check up on them, and search for information that had changed. E.g. is that book I wanted in stock? is there any news from Tehran? Now, this information is sent to you. What is more, it can be aggregated, filtered and revised for easier consumption: "tell me about what is going on in Tehran, but only from these news sources ...".

The key innovation of pubsub, at web scale, is that anyone can 'follow any source of information'. This happens without the publisher - the information source - necessarily caring. It's subscriber driven - consumer driven in other words. Consumers will get a complete personal picture of everything that they care about, presented in a format suitable for their consumption. Only when they really need to, will they contact the publisher. This massively lowers costs of the right publishers reaching the right consumers, and of people being able to react to ANY event that can be described as bits, bytes and bucks on the web.

Publishers and consumers won't just be people and businesses - they will be digitally enabled phones, clothes, cars, toys, bots ... anything that can connect.

All this will create new business models based on services that get paid bucks to send EXACTLY the right bits, perfectly filtered, personally tuned, to exactly those that need those bits, when they need them. Moreover this will happen without the providers of bits having to know who is receiving them, or vice versa. This 'communication without introduction' is a sort of perfect disintermediation not seen before at popular scale. (the closest thing may be TV but that's not the same).

The service providers that win in the space will be those companies that can be trusted with identity of the publishers and subscribers. They may not be banks and telcos. They may be Google, Facebook and their ilk.

Cheers,

alexis

To put it bluntly: my bank and my phone company are the only two companies I (at least in principle!) trust to reliably confirm my identity and to make payments on my behalf. They should *own* single sign-on - the whole OpenID/OAuth space. I'm amazed they haven't yet - I should be "Andrew Walkingshaw at O2 UK", tied to a physical device I've always got with me.

(So as I said on Twitter, what's the difference for consumers? Not much!)

Ok, so some thoughts from my world, the boundary between molecules and electrons....

Perhaps you should expand your idea into a triangle. The corners would be Banks, Telcos and ...Physical Assets

There is a constant exchange occuring between the entities, and as we progress, the volume of exchange is only going to increase. as is the meta-data around everything.

Specific example: Shell has a gas field in Holland that has just come online. It is the most automated gas field ever built and has a spin-up time of 5-10 minutes. Push a button - 5 minutes later you are delivering a quanta of contracted gas. This spin-up time is faster than the spin-up time of most gas-fired peaker plants.

Now, these gas molecules are sold almost exlusively to power generators. Thus the molecules are actually physically "converted" to electrons. The electrons are then carried over wires and sold to end users, that use electronic payments from their bank carried over telco wires (or the same wires if using broadband over powerlines) which is processed by the power company and then pays Shell. And of course each step of the physical, telco and financial supply chain is monitored and logged and increasingly meta-data'ed.

So this then raises some interesting questions:
- Who's the Bank?
- Who's the Telco?
- What's the most valuable thing on the table?
- Are gas molecules, or electron potentials also currency units, thus the whole thing is really a Forex transaction?

So if you really want to throw some fun in there; could I hedge the payment risk in a contract denominated in World of Warcraft Gold or Linden Dollars?

Also, with respect Rod's comment:
"What seems to be happening with increased M2M communication is that production oriented industries remain vertical but get more distributed - so monolithic companies go away in favour of functional specialists but we still have largely vertical organization of these "organs" into a cohesive vertical body. In information oriented businesses we have seen some disruption of newspapers for example but the "community" still organizes itself vertically (bloggers on particular subjects for example)."

I think the underlying factor is 'inertia of delivery'. If your entire supply chain is electronic (banks, telcos, bloggers, etc) there is little incentive to build long term linkages as the energy needed to initiate delivery is almost zero and you can stop delivery instantaneously as well. Now, when you shift over to the physical world that is obviously not the case. As such there will always be a lag in the 'nimbleness' of the heavy assets side of the coin. However, there are segments that are becoming very nimble and natural gas in a well connected network of multiparty pipelines (EU and US) is one example. Once the gas crosses a certain boundary it becomes cached and then converted to an electronic instrument. Trades occur, and then at the end of the period there is a physical settlement process. Its not entirely un-heard of for someone to produce gas on Monday and then pump the exact same molecules back into the reservoir on Tuesday, but a little bit wealthier.

Ok, its not all fully thought out, but its a thought. I think you need to expand your thinking to include the physical boundary. If for no other reason than in times of crisis confidence claws its way down the Maslow 2.0 of: Derivatives (financial, telco-ish), to Currencies to the base of Commodities/Molecules (Gold, food, guns etc).

And as RFID, smartphones, etc progress every physical asset will be fully represented digitally.

...and I'll join Tony at the W&C for the 6th Paradigm explanation...

Wow some great ideas (and some pending!) - thanks, very much in line with the direction I was thinking.

thinking.... thinking....

Sean

I dont know about the 6th paradigm...you may have to explain that to me across at the Walrus & Carpenter one evening, liberally assisted with London's Pride. Also ...whats the difference between a bank and a telecom company? Thats obvious. the big difference is that Telecom companies dont securitise american home loan mortgages and resell them so many times that they become so complex that they need gizillions of micro processing cycles to produce (that takes days!) some risk measures and valuations that the CEO of Merrill Lynch cant even understand!

Back to your concern...

The differences between a bank and a telecom are blurring in the internet economy and business operating model. Certainly at the front of house both companies core products are different. But the further down the application process stack the operations, processes, applications, customer interaction models and connectivity are all most the same. All of this has been driven by advances in communication technology, ubiquitous connectivity and pervasive on-line services. Lets compare and contrast a financial services company, say an electronic broker with British Telecom.

The process stack comparison:
1. Front Office: both manage millions of realtime events be it prices, orders, trades, users or telephone calls, customers (maybe not my company...)
2. On-line customer account management - with attendent compliance issues, KYC, URU and identification/authentication requirements and services, account management
3. On-line payments - (and also offline payments), account funding, credit and debtor issues.
4. On-line security and customer confidentiality issues (PCI for credit card issues), fraud detection/prevention.
5. Customer statements - online (maybe multi-language)
6. Customer support - realtime chat, call centres, technical support.
7. eMarketing - SEO, PPS, google ranking targets, sales lead management etc
8.....i could go on....

Each of the above layers could be abstracted enough to make them a business vertical agnostic application service.

Final point. One of the big crossovers of technology that's very recent is the proliferation of software vendors selling complex event processor engines into Banks. Back to the idea that banks need to process millions of events. A number of the CEP vendors have pedigrees in the telecomms space e.g. Streambase, Apama. Streambase say that one of their clients is the CIA - and one could make a good guess its probably for monitoring telephone calls or internet traffic (or blogs!). So when you abstract businesses to fundamentals e.g. "big event processors" then the definitions of vertical stacks breaks completely if you start to apply technology like CEPs. Infact CEP would make a great SaaS offering.

Hope the there arent any tumbleweeds.

What seems to be happening with increased M2M communication is that production oriented industries remain vertical but get more distributed - so monolithic companies go away in favour of functional specialists but we still have largely vertical organization of these "organs" into a cohesive vertical body. In information oriented businesses we have seen some disruption of newspapers for example but the "community" still organizes itself vertically (bloggers on particular subjects for example).

First of all, I cannot believe you are turning me down in order to do this event. Especially since your plenary talk is exactly what I want you to talk about. Maybe you can pull a Phil Collins at Live Aid move and perform in Amsterdam in the morning and then fly on the Concorde to Boston to speak at my event in the afternoon. We are the world after all. I suppose I'll have to settle for replaying the tinny live streaming version.

On a serious note, I am forwarding your topic to Bob R., who did a lot of work on the telecom - financial services meld in the early '80s. I promise to think about it too. My instincts tell me that when technology levels the playing field, then certain elements of defining the vertical become more important or need to be more specific. The classic concept that if everyone can use Yahoo finance to get the same information, then how do you differentiate your business and what you're doing with it? It may mean that intellectual property becomes a bigger issue and it probably is what underlies the trend to patent methodologies and processes rather than stuff. I hope that helps and that you meet 6 endowment CIOs there.