The Bankwatch

Tracking the consumer evolution of financial services

Technology is quietly impacting middle class roles beyond manufacturing

There is a general sense among many, myself included that a transformational and structural shift in employment is occurring because of technology impacts.  However it has not been well defined and usually manifests in the shift of labour from established economies to emerging economies such as Mexico, China and those of other emerging Asian countries who exhibited labour costs at 1/10th of established economies.

But there is a bigger story.  If it were just a question of labour cost that would be a relatively fleeting change as emerging economies production costs equalise.  Labour costs do not represent structural change.  There is some structural shift towards robotic manufacturing but that’s beyond this piece.

We each can feel the difference technology makes.  We individually naturally gravitate to online self service for everything.  Product comparison, payments, purchases, news, information … everything.  But this was a consumer based benefit.

The shift to consumer empowerment occurred as a simple outcome of exposing web based functions to consumers. But as banks well know that consumer shift produced enormous internal problems because legacy systems were not designed to work with web based server systems.  Call centers were stretched to provide the support required to fulfill the new consumer expectation.  Additional technology staff were required to manage the additional requirements placed on the legacy systems, as well as the new server based systems supporting internet.

Shifts in technology infrastructure to support the consumer shift have been a long time coming, but it is here now.  Google, Amazon, and IBM representing the big three are investing enormous amounts ($3bn – $10bn each) annually to create cloud based data centers that offer enormous capacity.  Then layer on companies such as Softlayer recently purchased by IBM, that also offer software capabilities (SaaS) and now the heavy lifting to provide backend services for internal staff starts to become more aligned with consumer self service.

Trouble on the fringes: How the cloud will commoditize the upper middle class | Gigaom

Software-as-a service applications took off because of the allure of self-service and speed. Led by the growth of the customer relationship management (CRM) category, SaaS applications have slowly penetrated into every other functional area of the enterprise – enterprise resource planning, collaboration, marketing automation, HR, and accounting, to name a few. Small and medium-sized businesses were the first ones to adopt SaaS applications because of the ease with which they could peruse the editions, and start subscribing to them with nothing more than a credit card.

A simple way to think about this is Salesforce.  It’s a cloud based service that does not require highly paid sales folks to sell it.  It sells itself by being an easy to use interface that new users can decide on by themselves.

Coupled with “in-app” demos, and easy access to pricing on the website, the roles of these sales reps are rapidly being relegated to routine “order taking” administrative duties, as opposed to strategic solution selling.

as SaaS platforms have matured, the user interface has become front-and-center in many of these applications, and users are able to learn even the most advanced features in a matter of days due to the intuitive nature of the UI.

Lastly the referenced article notes the middle class areas that are impacted by this shift.  So we can now add those roles to manufacturing as those impacted from technology.  As Lance Crosy of Softlayer notes, cloud technology shifts technology from a fixed cost to a variable cost.  I would add that variable cost is significantly less than the relative old style in-house or co-located data centre cost, and hen you layer on the lower HR cost the structural shift begins to take shape.

Written by Colin Henderson

February 2, 2014 at 22:59

Posted in Uncategorized

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