The business world is being disrupted by the combined effects of growing emerging economies, shifts in global demographics, ubiquity of technology and accountability regulation. Infosys believes that to compete in the flat world, businesses must shift their operational priorities.

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August 26, 2008

Is Basel II Procyclical?

One theory of the cosmos holds that the Universe is currently in the midst of a rapid expansion. One day (billions of years from now, I hope) it will crash back onto itself. The crashed Universe would then take the form of a singularity, Big Bang its way back into another expansion, and then collapse again.

Sounds a bit like our financial markets doesn’t it?

The bubble, crash, repeat cycle of the economy is starting to take its toll, and many are wondering what can be done to stem this unhealthy process. Regulation appears to be one solution, and the international banking community points to the Basel II accord as a framework to better manage capital adequacy and market, operational and credit risk—curbing the boom/bust cycle.

 This may be so, and Basel II is no doubt an upgrade over the original Basel Accord, but many critics counter explanations of benefits with cries of “procyclicity”. Procyclicity is the exaggeration of upturns and downturns caused by tenets of, in this case at least, a piece of regulatory policy.

The inherent purpose of Basel II is to aid regulators in determining the appropriate amount capital banks must hold in reserve. The amount of capital cushion necessary is determined by the riskiness of a bank’s lending and investment practices. This is all well and good in boom cycles where assets are perceived and rated to be less risky than they really are (see CDOs), but in a “black swan” scenario, like the credit crunch, things can very quickly go from bad to much, much worse.

Critics point to the fact that capital requirements regulations like Basel II force banks to raise capital when the creditworthiness of their loans and investments are downgraded. Thus, when millions of subprime-mortgages and their derived securities go from high to junk ratings, banks are pushed to sell assets, issue stock, and seek cash infusions from the government. Banks are also less likely to issue new loans (more loans equals more cash needed), hindering economic growth and recovery.

Sounds depressing (literally), but it is important to remember that the root of procyclicity is low capitalization and poor risk management. In credit crunch-like situations, undercapitalized banks are forced to make rash decisions, and cutting lending is usually one such decision. Basel II works to improve risk detection and pushes for the development of early-warning systems, allowing these banks to build up adequate capital before a crunch occurs. Basel II also calls for banks to conduct “stress tests”, measuring capital adequacy in various economic scenarios.

The bottom line is that though it may have some procyclical attributes, Basel II is a regulatory upgrade which will provide a more stringent capital adequacy and risk management framework to the banking industry. It is also still a work in progress, and in late July the Basel Committee on Banking Supervision and International Organization of Securities Commissions proposed a serious of fixes to improve the regulations. In next week’s blog entry, I’ll discuss these reforms and their potential impacts on the banking industry.

For in-depth analyses of other Governance, Risk and Compliance issues, check out our GRC edition of FINsights.

August 25, 2008

Mobilizing Remittances for the Unbanked

Every year millions of people leave their home village, city or country in search of better opportunities. Often, family members are left behind and depend on periodic payments from loved ones abroad to survive. Conventional remittance programs are often expensive ($15 to $20 per transaction) and usually require a trip down to a money transfer agent like Western Union.

This traditional process works well and workers abroad are able to provide for their families back home. But I think the time is ripe for the remittances process to leverage cost efficiencies and ubiquity of mobile and internet technologies.

For years, services like PayPal have provided a web-based alternative to traditional money transfers. These work well, especially in locales where computer access is easy to come by and the majority of the population has bank accounts. But many developing countries have limited computer access at a village or small town level, coupled with the fact that the process of managing a PayPal account is complex and time-consuming.

In the U.S., services like OboPay (some of which I have previously written about, here) have emerged. OboPay offers users the ability to transfer money through SMS texting, creating an easy way to settle small debts like cab fares and restaurant bills. Though it has recently expanded into India, OboPay has yet to establish a global footprint which is necessary to provide the type of remittance services that migrant workers require.

Services like PayPal and OboPay also are limited by their dependency on bank accounts. Many migrant workers come from less affluent regions of developing countries where a large portion of the population remains unbanked (Read my post of last year on Banking for the Unbanked, here). The need for a comprehensive solution which provides services to the unbanked has created a void, which entrepreneurs world-wide are beginning to take notice of, and effectively fulfill.

In November of last year Western Union announced a partnership with the GSM Association, which represents over 700 GSM mobile phone operators. The goal of the partnership is to facilitate cross-border remittances, with the unbanked segment as a major target.

Recently, the first of these international, real-time mobile remittance services was launched by the Philippine-based company, Globe (Read the news report here). Though not truly mobile-to-mobile, the service allows Filipino workers abroad to instantly send money from a Western Union Branch to a family member or friend’s mobile payments account. The mobile account, known as GCASH, acts as a mobile wallet and allows subscribers to pay bills and manage expenses without actually having a bank account. By the end of this year, similar services are expected to be available in India, with other locales following soon after.

Similar alternatives to Western Union mobile remittance services for the unbanked are also popping up. Com2U Sdn Bhd, a Malaysian mobile-services provider has launched a remittance service which allows mobile subscribers of select regional mobile service providers the opportunity to SMS-text money-transfer requests within Malaysia and Indonesia. Once transferred, the money can be withdrawn from over 10,000 ePay facilities, no bank account required.

The ubiquity of the mobile phone is providing a powerful new medium for transactions to occur. As businesses and consumers worldwide grow more comfortable with using their handheld as a means to conduct payments, expect more convenient, global remittance solutions to be developed.

The World Bank’s Migration and Remittances website provides a groundswell of factual information on the subject.

This post on the Banking Systems and Technology site provides a look at other Western Union-GSM partnerships.

August 19, 2008

Cutting Carbon and Costs with Green Computing

The perception of Green initiatives, once considered “feel good” activities suitable for the occasional press release, have markedly transformed in recent months.  Now, organizations are keen to implement Green IT initiatives across the enterprise as going Green is both environmentally responsible and, more importantly, fiscally responsible.  Green IT efficiently utilizes computing resources meaning not only a reduced carbon footprint based on a reduction of energy requirements but also a decrease in total energy usage.  With the skyrocketing prices of energy, Green IT is a no-brainer for many organizations.

Recently, on, Bob Worrall, CIO of Sun Microsystems, contributed an article analyzing the ROI of a Green data center.  In the article, he outlined simple techniques to overhaul the data center whilst avoiding a complete redesign and reengineering project.  Using techniques like resource virtualization and the replacement of aging server racks, Sun Microsystems was able to save $1 million annually on utility costs alone!  Needless to say, the carbon savings of the server overhaul are on par with the ROI of the project.

While Green IT initiatives should not just be considered as a way to improve the bottom line, I find it encouraging witnessing Green IT as a cost driver.  Surely, as the cost savings of Green IT become increasingly prominent, interest and investment in new, Green technologies will occur.  In fact, this has been demonstrated over the past few months as interest in cloud computing has boomed (or thundered?).  Just today, AT&T has announced its entrance into the cloud computing space joining Google, Microsoft, IBM, and Amazon. 

Cloud computing removes the burden for organizations to build and maintain servers and other IT infrastructure and purchase IT related capabilities as a service.  Not only does cloud computing reduce IT costs, the practice is Green as fewer resources are used for computing.

As Green IT slowly touches every part of an organization’s technology infrastructure, the value derived from environmental technology certainly outweigh its cost.  In the end, Green IT produces a positive ROI for organizations and the Environment.

For more information on the cost savings of Green IT, check out this article in BusinessWeek about Indian companies, facing increased utilities bills, going Green as a means to reduce costs.

August 13, 2008

Keep Your Head in the Clouds

You know the drill.  Buy (probably) expensive new software, download or insert into disk drive, install, and voila you now can crunch numbers, edit photos, create videos or do any number of things on your computer.  The key words there are “on your computer”, the software is localized—yours, and will be until you delete it.

The era of “on your computer” may soon be coming to an end.  Yahoo, HP and Intel recently announced plans to build a series of research centers focused on one thing:  cloud-computing.  Cloud computing is essentially the use of the internet (cloud) as a means of providing computing power from a centralized, high-tech data center.

Though the announcement has created a buzz in the industry and the media, the triumvirate is actually slightly behind the times.  Google began its foray into cloud-computing in April of this year, with the Google App Engine emerging as a result.  Google App spreadsheets and word processors are used by you, on your computer, but hosted by a data center using cloud-computing technology hundreds of miles away.  No download necessary.

Many believe cloud-computing is the wave of the future, and will not only change the way consumers use software, but will also change the way businesses strategically approach software and IT as a whole.  In-house data-centers may soon be a thing of the past.  It will become increasingly cheaper to outsource computing power to a third-party cloud-computing data center, and the allure of variable-cost IT likely has many a CIO salivating.

Information technology is expensive and many a good business plan has been left in the drawer due to high start-up costs.  Cloud-computing opens the door for small companies, lowering barriers to entry.  It also provides scalability, growing as a business expands.  Cutting-edge modeling, analytics, and research projects all become more feasible when affordable, easily accessible processing power is available.

Though security and reliability remain issues, the technology has a strong following.  Merrill Lynch estimates that the global market for cloud computing will surge to around $95 billion in the next five years.  The thought amongst many is that once companies wean themselves off of current IT infrastructure, cloud-computing could provide the dominant means of world-wide computing power.

I find it fascinating that the ubiquity of the internet has laid the foundation for a technology that may not only change the face of IT, but may also change the way the world does business.  Companies from Uruguay to Uganda will soon need only internet access to tap into business-driving, strategic software. 

Dion Hinchcliffe provides a fascinating look at the enterprise side of cloud computing.

Computerworld provides an informative take on the future of cloud-computing.

August 8, 2008

Why ShoppingTrip 360 ?

Did you know that nearly 30 percent of shoppers around the world wait until they're in the store to decide which brand they will buy ?

Did you know that one in ten shoppers simply change their minds in store and buy a different brand than what they had planned ?

Did you know that almost 20 percent of shoppers will buy from categories they had no intention of buying from before entering the store ?

Did you know that in the United States, almost one in five shoppers leave a product they planned to buy on the shelf and walk away empty-handed ?

Those were the findings from a survey titled "Shopper Decisions Made In-Store" (SDMIS), by Ogilvy Action 14,000 shopper interviews were conducted in 700 retail outlets across 24 markets globally.

Call it Serendipity or sheer coincidence that the findings of this survey released on July 29th should have found a response on July 31st when Infosys unveiled ShoppingTrip360 to the world at large.

This video from Reuters gives a glimpse of how ST360 can help marketers know, aid, influence and shape Shopper Decisions made in-store.

Michael Fitzgerald writing for the MIT Technology Review sums it up best.

Infosys may have solved a $100 billion problem for companies in the retail business

with the Forrester's George Lawrie echoing his sentiment

if the system works as promised, he says, "this would be a huge breakthrough."

So where do we go from here ?

There is a 84 billion dollar online advertising market at play as Online Advertising braces for a likely recession.

The future is in Smart Digital Marketing that can take over "digitally" where print stops.

A great example of Smart Digital Marketing is this new high-tech retail display being launched by 7-11 that offers shoppers the ability to download free music on their MP3 players as a promotioned for a new caffeinated alcoholic beverage called Sparks.

Stay tuned to this blog as we transform Shopping, one cart, aisle and shelf at a time ....

Also read

Are you being served?

Curious George walks the aisle

If you stock they will come

Me, Myself and My Shopping

August 6, 2008

A Green Challenge: Environmentally Friendly IT

A few years back, being Green meant you participated in recycling programs, commuted to work on your bike when the mood struck, and considered purchasing a hybrid but balked after filling up your SUV for a mere $50.  Now, in 2008, Green, once a buzzword, is a member of the world’s lexicon where the environmental impact of an activity is hugely important.  Too, with rising fuel and energy costs, going Green is not only an environmental choice but also a sound fiscal choice.

While the benefits, both environmental and fiscal, are quite lucid, public apathy for going Green has always been a problem, but, with the advent of Web 2.0, social networks have suddenly emerged driving participation in Green activities for thousands of users.  An extremely compelling website I stumbled upon recently, bringing together thousands of environmental web users, is

CarbonRally, a web-based activism platform, offers individuals and groups a fun, simple, and social way of creating measurable environmental change.  However, unlike many environmental websites out there, provides users the opportunity to create “environmental challenges” where teams or individuals can compete against each other to maximize their carbon savings. 

While CarbonRally certainly brings more fun into being environmental, the social network contained within the site is an environmental idea engine where user created challenges drive innovative ways to be Green.  Who would have realized replacing just three of your light bulbs at home with Compact Fluorescent Bulbs would result in a reduction in carbon emissions by 2.1 lbs per day!

As I navigated the site, my thoughts drifted towards Green IT and how the Green movement has been embraced by global organizations.  Many organizations are on the forefront of Green IT where PC virtualization, eco-friendly data centers, and power management techniques all have been implemented on the enterprise level.  But, not much has been done to challenge large organizations to be Green. 

While introduces the concept of communal responsibility of being Green on a very small scale, I believe organizations need to work together and challenge each other to become better global citizens in an effort to reduce carbon emissions.  Like the users of, organizations need to take a cue from their customers and shareholders and actively change their usage habits and work towards being Green.  

As more ideas are generated and energy usage and carbon emissions benchmarks are mandated by, not a governing body, but rather a community of environmentally responsible organizations, being Green will not be the exception but the norm.

For more information on Green IT and Green Computing, check out Wikipedia.

If you want to learn more about Green IT check out this story from ComputerWorld Magazine.