Q. Why is digital sovereignty a key success factor in the data economy?
Data increasingly is the core of value creation in all industries. As a result, data must be considered a corporate core competency that cannot be outsourced without losing control of an organisation’s business model. This doesn’t mean confusing sovereignty with self-sufficiency.
The key point is not who runs the IT, or if technologies are made or bought — but rather the bargaining power of the digital suppliers. For example, they have immense power if very few of them control the market, especially if switching costs are high. This scenario can have severe negative effects on both a businesses’ sovereignty and margins.
By contrast, in a decentralised digital world, every market participant is both provider and consumer. This means every enterprise becomes a cloud in the sense that it sells data and digital services to its customers — with that, it becomes a sovereign in the digital economy.
The global data volume is expected to double every two to three years — the majority of this data will not be created in clouds and traditional data centres, but in factories, vehicles, transport routes and cities. Physical infrastructures become the digital “platforms” of the 21st century.
This data is mostly under the control of the enterprises that build and run these infrastructures, and it has enormous value. For example, the data of connected vehicles has been forecasted to have a monetary value of US$750 billion by 2030.
However, to translate this into a key factor for success, it’s crucial that companies not only control their data, but also control its monetisation — the
data-driven business models that drive revenue and margin. This is the real meaning of the term digital sovereignty for any enterprise.
How can we shape an architecture of the digital world where each and every business is sovereign?
This is the logical next step in the evolution of the digital world. The history of IT has been, among others, a sequence of gradual liberation of applications from the platforms they are running on, from the hardware, the operating system and finally from the entire operating environment. What remains is the dependency on the respective cloud platform.
Now, it’s foreseeable that this last barrier will be removed. For example, a range of projects within the Cloud Native Computing Foundation are working toward this goal. The aim is to enable any service to interoperate with any other service in a seamless and completely secure way, regardless of which platforms those services run on — in a cloud, at the edge or in a data centre. This would be the step towards a truly open, federal cloud, with far reaching positive consequences for fair competition, digital sovereignty and innovation.
All major IT and cloud providers agree that the world will be hybrid and decentralised — that’s the reason why many of them are actively involved in Gaia-X.
Q. How can brands take the value they need from the data they hold? And how does that fit with the end edge to cloud ecosystem?
Digital sovereignty can be seen as both an end and an “end to a means”. A decentralised industrial age opens a window of opportunity for companies to be leaders in this era if they make the right decisions now.
In order to take value from this data, companies must establish a foundation that enables them to capitalise on digitisation in the short term without becoming dependent on individual digital platforms, and while remaining open and compatible with upcoming architectures.
The goal of digital sovereignty is not to avoid the big cloud platforms, but to leverage them in a sovereign way. Enterprises should aim to match the structural advantages of the leading cloud platforms e.g. becoming like a cloud in a network of clouds in which every market participant is both provider and consumer of services and data.
Becoming like a cloud has three structural advantages that fit with the end edge to cloud ecosystem: network effects; agility, speed and efficiency; and consumption-based pricing and ease of use.
Q. What opportunities does this decentralisation bring to banking businesses?
The opportunity decentralisation presents in banking is wide ranging. On one hand, applications built on decentralised technologies such as distributed ledger technology, for example blockchain, could allow whole processes such as borrowing and lending, marketplaces, mortgages and insurance to be re-imagined.
The other aspect is how by decentralising the deployment of services, banks can ensure that the service and supporting data is closest to either the point of generation or point of consumption. A great example here would be leveraging AI to derive insight from data as it is generated. For example, making risk decisions based on weather conditions and driver behaviour when insuring a connected car. This will likely drive technology investment in banks as they look to leverage placing services in the right environment for the need — whether at the edge, in their own data centres or on a cloud. To support this firms will need to ensure that they have suitable security models in place to protect their digital assets no matter where they reside.
Alongside this, firms will need the ability to manage and orchestrate these services so that the underlying location no longer matters.
The benefits for IT infrastructure companies in this space will ultimately be in providing technology and services that help banks both manage decentralised or distributed technology, as well as helping link all of the underlying data — no matter where it is created or consumed — via a data fabric. At the edge, in the core and across many clouds.
Q. What are the main hurdles still holding financial companies back when it comes to IT infrastructure investments?
In my experience, the main hurdle is a combination of building out a compelling business case and ensuring a successful execution. Building out the compelling business case to secure the funding required to deliver on the investment.
Those organisations that have been successful in securing IT infrastructure funding are those that are able to tie the investment back to a business initiative or driver. The ability to actually execute and “get things done” is often a hurdle for many firms. Being able to “get out of their own way” to deliver IT infrastructure investments is often easier said than done.
Many firms will often plan for very ambitious targets and will fail to deliver as they haven’t fully understood the effort required to enable successful delivery, or have instead aimed to deliver a fully polished offering when a minimum viable product (MVP) would do instead. Finding the time to deliver IT infrastructure investments can be hard when firms have to juggle an already busy calendar to deliver changes, such as new products or functionality, that are often even driven by the business or are driven by regulatory compliance requirements.
Q. How have you seen the financial services industry change with Covid-19, and what new trends are you seeing emerging in the sector that could reshape it in the post-Covid age?
The change we are seeing is that there is a bigger focus on digital — both as a distribution method, as well as a business model.
In the former, it’s about enabling more functionality in “digital’ channels such as web or mobile. Being able to open products, service your accounts, engage with the firm easier, instead of needing to resort to visiting a branch or contacting a call centre.
In the latter, we’ve seen a change in that firms are looking to become more digital at the core. Leveraging data to drive it into insight. Investing in AI to drive more value from that data, as well as to help better serve both customers and colleagues. Adopting new technology practices such as driving the infrastructure as code and using automation. Opting for a cloud experience, like elasticity and consumption economics, where they can help them better deliver for peaks in demand as well as manage costs better.
Finally, the industry is also seeing an increase in the usage of contactless when it comes to both card and mobile payments, which we expect to continue as a habit going forward.
