What is Business Platform Thinking?

Inspired by studies done by Annabelle Gawer from Imperial College in business platform thinking I discovered a very useful model of how businesses can become more agile, more innovative and can adapt faster than their competition.   The key to their success is opening up high value services through open interfaces/APIs and embracing the ‘complementor’.

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Adam Brandenburger of Harvard and Barry Nalebuff of Yale identified the role of complementors in their 1997 book called ‘Co-opetition’. They highlighted a gap in Michael Porter’s 1979 framework familiarly known as Porter’s Five Forces.   Porters Five Forces included: the threat of the entry of new competitors, the intensity of competitive rivalry, the threat of substitute products or services, the bargaining power of customers (buyers) and the bargaining power of suppliers.   Nowadays, based on Brandenburger & Nalebuff insight, Complementors are often referred to as the Sixth Force.

What are the key functions within a business platform?

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Suppliers typically react to the Platform’s request for services, e.g. in the Apple business, Foxconn is a supplier to Apple. There will typically be a few suppliers to a Platform as the core is generally stable.

Conversely Complementors innovate on top of the Platform, e.g. in the Apple business there are estimated to be >1M iPhone applications, >.5M iPad applications and >6M developers.   The complementors satisfy the long tale of demand too, something the core platform cannot afford to do.

What is a Cloud Operating Environment?

We’ve seen a multi-layered approach for Cloud, which is typically broken down into Infrastructure as a Service, Software as a Service, Platform as a Service and Business Process as a Service. What about Data as a Service, or KYC as a Service, or Reference Data as a Service – in fact, the new world is Everything as a Service where the Service & the API are king.

One of the reasons for the success of the Internet and the rapid rate of innovation has been the global use of open standards, open source, open architectures and strong collaboration across the industry. From a technical viewpoint we have seen Linux, OpenStack, Software Defined Environments, TOSCA for orchestration and Cloud Foundry as examples that have seen the emergence of a new ‘Cloud Operating Environment’.

The ubiquity of bandwidth has then enabled Software as a Service business models, where specialist services are offered over the wire. More recently this has been extended to business processes too, blending human and IT services together to provide business outcomes.

These high value services are being exposed as APIs that are the new product in what is termed the ‘API Economy’, driving new roles such as the API product manager and API developer. APIs are being built upon other APIs in a dynamic and composable manner – take the average mobile application that typically uses between 3 and 20 APIs.   APIs are being used internally within a firm, externally with Clients and with partners/complementors.   APIs are allowing the promise of business agility supported by this new Cloud Operating Environment.

How would Business Platform and Cloud Thinking apply to Financial Markets?

Internally firms continue along their shared services strategies, and leaders are opening up their platforms externally to clients, suppliers and complementors.  We are seeing shared services that include Grid, KYC, Reference Data, Database, Middleware, Securities Processing and Regulatory Reporting for example.

Others services from the front to back office, risk & finance are benefiting from these shared services. Businesses are getting efficiencies through standardisation and sharing. Over time we will see the core business functions exploiting the underlying new Operating Environment, and benefit from open APIs and the Development Operations revolution.

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What is Platform as a Service impact and whom does it impact most?

Platform as a Service is a form of middleware that can include mobile services, security services, data caches and object storage for example. These are core services developers would use to compose a new service. They will be expanded to have industry specific functions such as a KYC check, a FIX conversion, a reference data request or a single view of client service.

Primarily PaaS impacts developers & IT functions but also business leaders from a strategy and business model impact viewpoint.

Developers and end users of these APIs & services are benefiting from the DevOps (developer operations) trend too, allowing automated builds of environments, automated virtualised testing and ultimately automated promotion to production environments. The litmus test is how automated this end-to-end process is, and what controls and quality checks are performed along the way to ensure a consistent result every time.

Why now?

The reason PaaS is becoming a reality now is the automation of the underlying IaaS platform and the automation of the development processes that support a developer.  The industry is always looking to reduce cost and be more innovative, but the capital requirements, complexity and regulatory pressures are increasing this focus.   Approaches that mutualise effort and cost, standardise, automate, industrialise, globalise, increase controls, foster innovation and agility are always attractive.

The benefits of componentisation are well understood

Componentisation and modularisation allow decomposition into smaller components and also allow aggregation into larger components. This facilitates governance, the exploitation of standard interfaces, makes testing more reliable, facilitates agility, supports standard data at the edges and has the potential for greater re-use.

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Componentisation strategies wrap software assets, business functions or processes in a logical container with known interfaces, with known data requirements, known security models, known run-time characteristics etc.   Effectively there is a contract at build and run-time for these components within standard containers.   The underlying Platform’s role is to co-ordinate the operation of these components within containers.

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These components can be shared and aggregated together: APIs of APIs.   For example a new client portal could build upon a java service, a database service, a reference data service, a client privacy service and a reporting service.   The new developer would be empowered to use these APIs and Services to rapidly structure their new offering.

A New Marketplace and a Run-time Platform for Components

There are a few emerging examples of this Platform as a Service becoming a reality in the Industry.   IBM recently announced a cloud marketplace and a sophisticated enterprise grade PaaS runtime (BlueMix) running on IBM’s Infrastructure as a Service layer.

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Examples services already operational within the BlueMix PaaS environment include the following:

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eCo Financial Technology, Platform Thinking and Cloud Services

These new services underpinned by a new a Cloud Operating Environment will enable developers & businesses to tackle new challenges and innovate faster in the marketplace. Examples of this change are mentioned in Ian’s Blog post from May 31st 2014, where he explores the impact of appliances, hosting and BPO. eCo Financial Technology is offering a workable methodology and process for the mutualisation of software costs which are complementary to the platform and cloud thinking approach.

What is for certain is there will be a lot of innovation, new competition and rapid change over the coming years driven by Cloud & Business Platform Thinking.

About the Author

Andrew Graham is an Executive Architect in IBM’s Global Financial Markets business advising Clients on architecture and innovation as it applies to the wider financial markets industry.   Andrew resides in London and can be contacted at Andrew.Graham@uk.ibm.com

References

http://www.ibm.com/cloud-computing/us/en/marketplace.html

http://www.ibm.com/cloud-computing/us/en/paas.html

http://www.imperial.ac.uk/AP/faces/pages/read/Home.jsp?person=a.gawer&_adf.ctrl-state=17i5iq3i4f_3&_afrRedirect=2688079295960346

Gawer A 2009, Platforms, Markets and Innovation, Cheltenham, UK and Northampton, US, Edward Elgar Publishing Limited, ISBN:978-1-84844-789-9

http://www.jetsongreen.com/2009/12/shipping-container-projects-of-2009.html