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Research Briefing

The Next IT Transformation: From Delivering Projects to Managing Living Assets

To enable integration across verticals, digital businesses depend on modular architectures with business components.
By Jeanne W. Ross, Ina M. Sebastian, and Cynthia M. Beath
Abstract

Digital technologies are game changing because they make it possible—as never before—to integrate complex businesses for seamless customer experiences and digitized solutions. To enable integration across verticals, digital businesses depend on modular architectures with business components. Delivering and managing components requires fundamental organizational redesign. In this briefing, we show how a company can start to design, implement, and organize around components that enable business integration. We describe how BNY Mellon’s IT unit is transforming itself to manage components as living assets, and how the transformation of the IT unit is facilitating the company’s digital transformation.

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MIT CISR has observed that digital technologies (e.g. social, mobile, analytics, cloud, the Internet of Things) are game changing because they make it possible—as never before—to integrate complex businesses. These technologies facilitate integration in two key ways. First, they enable companies to develop customer engagement that is seamless across channels, consistent across stages in the customer journey, and informed by unique customer insights. Second, they allow companies to replace traditional products and services with integrated solutions to customer problems.[foot]For more on the characteristics of digital business success, see J.W. Ross, I.M. Sebastian, C.M. Beath, L. Jha, and the Technology Advantage Practice of The Boston Consulting Group, “Designing Digital Organizations—Summary of Survey Findings,” MIT Sloan CISR Working Paper No. 415, February 2017, https://cisr.mit.edu/publication/MIT_CISRwp415_DDOSurveyReport_RossSebastianBeathJhaBCG.[/foot]

In the last 15–20 years, attempts to integrate complex businesses focused on introducing horizontal end-to-end processes across product verticals. End-to-end processes, however, only make a company more efficient; they don’t provide access to business capabilities and data across verticals.

Modular architectures enable integration across verticals, and allow rapid innovation via component reuse.

Thus, a traditional matrixed organization cannot effect better integration of the business. It has become particularly important to solve this problem as companies introduce business services that combine products, services, and software (i.e., integrated solutions).

To enable integration across verticals, digital businesses depend on modular architectures. Modular architectures provide standardized business components that can be assembled to create new and enhanced customer offerings. They allow companies to innovate rapidly by reusing existing business components. These components provide data to a given process or product as needed without requiring compliance with standardized end-to-end processes.

This briefing examines how a company can start to design and implement components that enable business integration. Specifically, we describe how the IT unit at BNY Mellon is transforming itself to manage components, and how this IT transformation is facilitating the company’s digital transformation. 

BNY Mellon: Defining Services and Their IT Owners

The Bank of New York Mellon Corporation, commonly referred to as BNY Mellon, is the world’s largest custodian of financial assets, and one of the world’s largest investment management companies.[foot]J.W. Ross, I.M. Sebastian, and C.M. Beath, “BNY Mellon: Redesigning IT for Digital Transformation,” MIT Sloan CISR Working Paper No. 416, April 2017, https://cisr.mit.edu/publication/MIT_CISRwp416_BNY-Mellon_RossSebastianBeath.[/foot] The company’s many business units deliver products and services throughout the investment life cycle. In 2012, BNY Mellon management initiated a transformation to differentiate the company by reimagining the customer experience. This transformation calls for seamless integration across product lines, and it will ultimately facilitate integration with complementary products from fintechs and other partners. 

Providing a Technology Base 

To enable BNY Mellon’s transformation, CIO Suresh Kumar created a vision for a digital platform that will eventually serve as a single source of truth for transactions, processes, products, and relationships. Kumar describes the platform, called NEXEN, as a constantly expanding set of capabilities for building an inventory of digitally enabled business services. The architectural design for NEXEN does not describe an end state; it will evolve. 

To provide a foundation for the NEXEN platform, the company first designed a more powerful and adaptive technology infrastructure—one that separates application development from infrastructure choices. Like most big, old financial services companies, BNY Mellon’s legacy technology landscape is complex. To address that problem, the technology team has implemented a hybrid cloud called BXP (for BNY Mellon Extreme Platform) that provides a set of critical infrastructure services. Application developers can call on these technical services as needed. 

Organizing Around Services 

Even as the infrastructure has taken shape, BNY Mellon IT has been developing common business services to build out the company’s NEXEN platform. Common business services reduce redundancy and accelerate development as they are relevant to multiple financial products (e.g., opening an account, completing a payment, reconciling a transaction). 

BNY Mellon scopes high-level services to give a service leader end-to-end responsibility for a deliverable. Service leaders can break their services into smaller deliverables, each with its own service leader. The number of services and service leaders evolves as top managers identify the need to decompose or consolidate components. For example, Mike Keslar, Head of Investment Services Technology, currently oversees around fifty service leaders, down from a high of seventy-four. 

Delivering and managing components requires fundamental redesign of the IT unit and ultimately the rest of a company. 

CIO Kumar thinks of service leaders as CEOs of their services. They are accountable for the business outcomes of their service. Service leaders are measured heavily on user experience, including how easy it is for other service leaders to consume their services. 

 

[If you’re the service lead], you worry about who your clients are, how well they’re using your service, how you are recovering the cost of your team, what are the features you need, what’s coming up in your next release. You’re thinking very much like a software house producing software to be consumed.

John Weir, Head of Applications Platforms and Services

 

The service leader role is a highly desirable assignment for developing managers, but Kumar estimates that initially only 30 to 40 percent of service leaders were successful in fulfilling their new accountabilities. To compensate, senior leaders have found their roles shifting from managing to coaching and reviewing. 

 

Adjusting to a New Organizing Principle 

The services within BNY Mellon IT are highly interdependent. For example, service leaders in the Technology Services Group provide basic infrastructure services such as connectivity and storage that are essential to business service leaders. Any issues with availability or performance are immediately evident to customers using the business services. 

Common business services are developed by Lucille Mayer, Head of Client Experience Delivery and Global Head of BNY Mellon Innovation Centers, and her team. Mayer reviews the designs for all new and upgraded systems in the product lines. She identifies activities that should rely on existing common services, and anticipates needs for new common services. It can be difficult to synchronize development of common components with the development of product line functionality. In other words, the decision to insert a new common service into a business product can delay implementation of new functionality. IT executives meet regularly to address this issue and establish priorities. 

Suresh has a meeting once a week where Jim Grech[foot]Jim Grech was head of the Technology Services Group at BNY Mellon until November 2016.[/foot]and John Weir and Lucille Mayer, as well as my folks, we all share, for the purposes of assessing each other’s performance and for understanding each other’s services strategies. Unless all the services hold each other accountable, this won’t work. That constant interaction, scorecarding, and open dialog is necessary to advance this model. 

Mike Keslar, Head of Investment Services, Technology

The appointment of service leaders has made the IT unit less hierarchical and more empowered. Teams are smaller than they once were. Kumar notes that a services orientation requires a new mindset. 

I tell people, “Listen, if I meet somebody after a town hall, and I ask them what service do they offer, they need to be able to give me the name of the service, they need to be able to explain what their goals are for [the year], and they need to have an understanding of the cost.” 

Suresh Kumar, Chief Information Officer 

By mid-2016, BNY Mellon’s API store held forty-eight common business services of varying scope. This number will grow, as will the IT unit’s understanding of how to define services and develop leaders. However, the model already allows the company to increasingly deliver new products and services by assembling existing business components.

 

Designing a Digital (Integrated) Business

The concept of business services as applied at BNY Mellon is not new. For example, the financial services industry has established a capability architecture called the Banking Industry Architecture Network (BIAN). Other companies are defining their own capability architectures. The consistent idea is that a company’s capabilities (e.g., onboarding a client, launching a product, creating a dashboard) will increasingly be captured in one or more standardized components. 

We define a component—which BNY Mellon refers to as a service—as a set of steps that processes business data to produce a predetermined business outcome (e.g., summary of customer transactions, product history, data analysis, alert). Although the concept of components is not new, the growing availability of cloud services, API development, sophisticated data management, and storage technologies, as well as the growing adoption of agile methodologies and DevOps, is making componentization a realistic approach to building and reusing capabilities for integration. 

Delivering and managing components, however, requires fundamental redesign of the IT unit and ultimately the rest of a company. A reliance on a capability architecture and component design shifts the role of an IT unit from delivering projects to managing living assets. This is a huge change in how IT delivers business value. IT must abandon the model of developing software that is put into production by one project team and periodically maintained and upgraded by another. Instead, a standing team in IT designs and implements components and constantly adapts them to the needs of the company. Each component must have an owner who ensures its cost effectiveness, functionality, quality, and availability. The owner commands the resources needed to sustain and improve the component. This accountability structure is essential to successful reuse. 

Because component owners ensure the quality of the data their component processes, client relationship and product owners can call upon components they need to deliver their value propositions, and integrate the components as needed. When necessary, client relationship and product owners can create unique components (code) to supplement shared components and customize their products and processes. 

Digital Transformation Is a Walk, Not a Run

We anticipate that as companies adopt capability architectures and build components, they will reimagine their entire organizations. Figure 1 depicts the design of a company that organizes around services. There are three key roles. Workflow (product and process) owners are accountable for accessing services to complete all processes that ensure delivery of the company’s value proposition. Supplying those workflow owners are service (component) owners, who manage access to their components. They are responsible for the quality of their output. The service owners are organized under capability owners, who are responsible for providing oversight and development of related service owners. Capability owners also authorize development of unique services to supplement common services. These three roles replace traditional development and operations teams in IT with teams that support critical business capabilities—living assets. 

The transformation from project management to living asset management necessarily proceeds incrementally. A company identifies a shared business need and then makes an owner accountable for developing, improving, and providing access to a common component. It repeats that process—often. In doing so, the company gradually transforms into an integrated digital company. 

Figure 1: A Representation of Componentized Organizational Design

This briefing was produced from MIT CISR research on Designing Digital Organizations. See other digital design-related content and learn more about this research.

© 2017 MIT Sloan Center for Information Systems Research, Ross, Sebastian, and Beath. MIT CISR Research Briefings are published monthly to update the center's patrons and sponsors on current research projects.

About the Authors

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Jeanne W. Ross, Principal Research Scientist, MIT Sloan Center for Information Systems Research (CISR)

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Cynthia M. Beath, Professor Emeritus, University of Texas, Austin

MIT SLOAN CENTER FOR INFORMATION SYSTEMS RESEARCH 

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