Today, SAP announced a strategic shift: Its financial services entity will become a separate firm.
German investment company Dediq and SAP will form a separate financial services firm, which will be jointly owned by the two companies. The new firm is meant to take up its operations in the second half of 2021 and “fully focus on accelerated innovation in core FSI areas, such as commercial lending, retail banking, core insurance, as well as insurance finance and bank management” — with a significant investment in new cloud solutions.
While little detail is available at the moment, a few potential benefits for the financial services industry (FSI) are already visible.
- The new entity “will get full autonomy to set its strategic direction,” but “it will, at the same time, be a strong member of the SAP family.” Thus, depending on the governance of the new firm, it could serve its customer base more nimbly.
- A more exclusive focus on SAP’s financial services application portfolio — not on SAP’s entire software portfolio — could ensure laser focus on the needs of the financial services industry.
- If the new entity moves beyond using the cloud as a way of effectively delivering its software — if it targets what some call a financial services cloud — the industry could get a new source of broad and flexible business capabilities.
But a few open questions remain.
- What role will Dediq play now and later on? Dediq describes its investment criteria on its website. Likely, Dediq determined that SAP’s FSI entity meets these criteria, otherwise this partnership would not have come into existence. Dediq also describes what it will bring to the table: Its expertise for “spin-offs from enterprises” can help establish the new firm. But what will Dediq’s role be later on? Will it be “entrepreneurial expertise,” “management capacity and capital,” or the “necessity of strategic realignment [that] offers potential for operational improvement?” It is Dediq’s role — and its existing expertise with financial service software and cloud-based solutions — that will determine the success of the new firm and the level of satisfaction of its customers. Dediq could also end up being just a source of capital and go-to-market resources.
- Will the new firm merely become a platform to execute SAP’s already existing FSI plans and strategies? Or will it assume a new role: to provide a platform that banks and other financial institutions can use to quickly and flexibly support their business needs?
The answers to these questions will determine whether the benefits of this plan materialize.
Right now, there’s little detail available. More information is needed to assess to what extent this new direction will help financial services firms become more successful in the future — be it with their business goals in general, with increasing their transformation speed, or with making transformation initiatives more successful than in the past.
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