On March 11th, the Weissman Center for International Business at Baruch College hosted Ismail Amla and consulting firm Capco in a presentation billed as “Managing a Large Consulting Firm: Challenges and Opportunities." As Partner and CEO for the firm’s North American business, Mr. Amla is intimately familiar with the operations and strategic direction of his firm. Capco is known to have a niche in financial services consulting. The executive spoke at length about the opportunities and threats faced both by his own firm and his clients.
After defining consulting for the audience as a focus on “the end consumer” and where a client sits “in the value chain,” Mr. Amla offered insight into the strategic resources and competing forces within the consulting industry. He explained that the consulting industry of tomorrow depended upon a broad base of talented employees. Mr. Amla described Capco as “a place where employees can and should truly be themselves.” Consultants provide access to wisdom and experience, as opposed to information, the Capco executive explained. However, the Capco executive acknowledged that it was very difficult to differentiate oneself based on wisdom and experience alone. Mr. Amla added that clients expect Capco and its competitors to serve as “partners” as opposed to strictly “consultants” when hired on projects. He predicted that the growth of the consulting industry would principally turn on client transformation as opposed to strategy, or the decisions and actions related to gaining or sustaining a competitive advantage. He stressed that social media, crowdsourcing, and machine learning also presented new sources of competition to consultants that could potentially offer much cheaper services to firms.
Mr. Amla first focused on the impact of what he called the “computer-brain interface” on the future of financial services. He cited the recent technology of chip implants that assist quadriplegics and help the blind recover partial visibility. This technology, the Capco executive explained, could dramatically expand the demographics to which the firm’s clients could sell its products and services. Mr. Amla also stressed the importance of analytics to the growth prospects of financial services institutions. He also discussed the future ability of three-dimensional hieroglyphics to project the image of what is seen by the retina onto a television screen to offer insight into the buying habits and needs of consumers. Mr. Amla spoke of other predictive analytics that could help financial institutions better understand consumers regarding their borrowing, saving, and spending behavior. He also mentioned special DNA analytics that provide information about consumer susceptibility to disease. Mr. Amla pointed out that such information would be invaluable to insurance underwriters in pricing premiums according to risk. However, the Capco executive added that the Food and Drug Administration has since shelved this technology due to ethical considerations. On the other hand, the Capco executive mentioned the potential of Google Glass to provide an unprecedented amount of knowledge and data to consumers about banks themselves. He predicted such technology would force financial services institutions to reshape their business and how to serve their customers.
Although this advanced technology hasn’t yet become available in the mass market, Mr. Amla presented these technologies as opportunities for a financial services industry that has historically been decades behind other industries in the adoption of modern technology. He mentioned, for example, that the recent innovation of banking on smart phones came almost twenty-five years after mobile phones were introduced to the marketplace. In particular, large banks including JPMorgan Chase and Citi face the operational issue of modernizing legacy accounting information systems written in much older computer programming languages such as Cobol. In some cases, system designers who are no longer around wrote legacy systems in languages from the 1950’s and 60’s. It has been very difficult for today’s programmers to move these systems into the modern era. In fact, Mr. Amla revealed that the projected cost of modernizing information technology is so great that institutions such as Deutsche Bank have proposed sharing the cost of updating this infrastructure across institutions.
The Capco executive discussed other issues facing financial services companies in the coming years. Mr. Amla acknowledged that banks are institutions in which consumers have the lowest level of trust. He stressed that they need to make more of an effort to connect with consumers as they rebuild a relationship with them. Mr. Amla particularly praised the efforts of TD Bank to strengthen its relationship with consumers, which have included encouraging consumers to “bring their dogs,” operating seven days a week, and offering convenience services such as counting spare pennies and coins. Consistent with modernizing IT infrastructure, the Capco executive also underlined the need for banks to transform their technology, manage data, and “industrialize processes”. Taking into account their ability to “relate to consumers,” use of modern technology, and data management competency, Mr. Amla interestingly predicted that Google and Facebook would ultimately become players in the financial services industry. The Capco executive added that financial services will likely look different in the future than they do today. The need for an ATM or bank branch, for example, may be diminished by electronic and internet media.
During the question-and-answer session, Mr. Amla made additional points in response to audience inquiries. One audience member asked what was the future of virtual currency such as the bitcoin. The Capco executive commented that the concept of a virtual currency was “brilliant,” but acknowledged that resistance to it was also “massive.” He predicted that virtual currency wouldn’t take hold “this decade,” but would probably gain traction eventually. In response to a question regarding information security, Mr. Amla significantly suggested that information security was a greater threat than nuclear war to the United States. His comment underlined the need he cited for financial services institutions to transform their technology.
The Capco executive summarized that the long-term problem plaguing the financial services industry has been too many barriers to change relating to systems, processes, and people. In addition to their late adoption of modern technology, banks have stubbornly failed to view their consumers as people (with the notable exception of TD Bank). Recently, Mr. Amla mentioned that a banking client of his requested his assistance with introducing a new mortgage product. Mr. Amla answered that his client was asking the wrong question. “You need a way to help people move homes,” he said.
Capco and Baruch College recently collaborated in the publication of The Capco Institute’s Journal of Financial Transformation. The Weissman Center for International Business at Baruch College is a sponsor of the Zicklin Graduate Accounting Society (ZGAS).