As many of us—including Warren Buffet, so I don’t feel so bad—have watched our investments tank over the past year, we’ve wanted to ask Wall Street, “What Were You Thinking?!” I really wonder if the right question might be “How Were You Thinking?”
In the past, many financial services firms had been more focused on streamlining and automating processes (e.g., approving loans) to do things faster, cheaper. While process improvement for cost reduction will remain important for every business, the financial services industry in particular seems to be shifting its focus from automating processes to improving key decisions. Rather than making lots of [poor] decisions more efficiently, they’re looking to make key decisions more effectively. And that’s just what business rule technology does: it makes better business decisions easier. Shifting thinking from automation of the entire process to thinking in rules—thinking about the business rules, logic, and calculations behind key decisions is something I’ve seen clients in many industries have great success with.
You might think that with all the problems in the financial world that investment in technology may be slowing—and in certain segments, it surely is. But we’re seeing continued interest from the financial services industry, especially in the areas that are growing as a result of the Wall Street fiasco, specifically the mortgage default business and risk management programs. TowerGroup forecasts that information technology spending for mortgage default management in the United States will grow at an average rate of 15.4% from 2007 through 2011, from $301 million (USD) to $534 million. 15.4%!! Whether it’s mortgage defaults, real estate, insurance—the remaining financial services firms need to make smarter decisions and they have to be accountable for those decisions. By thinking in rules, they will be able to bring the “better” back to “better, faster, cheaper.”
Highly regulated, frequently changing, and filled with complex calculations, business logic in the financial services world has long been a perfect fit for business rule technology. As the financial services industry makes dramatic changes in how it makes decisions, it has a fantastic opportunity to use technology to further improve business decision management. How financial services firms apply technology to improve decision making could very well drive whether they survive or thrive in the new economy.
I’m hopeful that with better managed decision logic, financial services firms will come back bigger and stronger. My 401(k) and I are counting on it.