Thursday, May 04, 2017

HPE Reference Architecture for VMware vRealize Suite on HPE ProLiant DL380 with HPE Service Manager

Executive summary 

To remain competitive, organizations are looking for unprecedented agility and efficiency. Budgets for IT are now funded by line of business, which means IT needs to be agile to provision workloads faster. For some, public cloud is the answer; for others who demand higher levels of security, regulatory compliance, specific SLAs, advanced automation, and more efficient ways to track their IT resource consumptions, private cloud is increasingly the de-facto answer. However, architecting and optimizing a private cloud can be complex and requires cross-domain expertise that might not be easily available. Hewlett Packard Enterprise Reference Architectures can help.

This Reference Architecture document provides a step by step guide to building a private cloud with automation built upon the VMware® vRealize Suite running on HPE ProLiant rack-mount servers using VMware vSAN for cost optimized storage backend. In addition, it includes integration with HPE Service Manager and HPE Universal Configuration Management Database (UCMDB) to speed up incident management of cloud services.

VMware vRealize Suite is a leading cloud management platform for creating and managing hybrid clouds. It consists of a set of products to help speed up deployment of a private cloud, quickly set up the private cloud environment to enable cloud service deployment, facilitate Day 2 operations with the ability to create Anything as a Service (XaaS) services, as well as monitor and automate management of provisioned cloud services.

VMware vSAN is a scalable distributed storage solution that is simple to deploy and manage. Because it is built into vSphere, vSAN can be enabled quickly with a few simple steps and managed using vCenter. Storage capacity can be easily added to existing hosts in the vSAN cluster without disruption to ongoing operations.

The HPE ProLiant DL380 Gen9 server is designed to adapt to the needs of any environment, from large enterprise to remote office/branch office, offering enhanced reliability, serviceability, and continuous availability.

HPE Service Manager and HPE UCMDB enables IT to collaborate and quickly identify and resolve service outages.

The combination of VMware vRealize Suite with HPE ProLiant rack-mount servers, VMware vSAN, HPE Service Manager and HPE UCMDB creates a private cloud solution with flexibility, efficiency and agility that responds to business needs.

Target audience:

This document is intended for IT architects, system integrators, and partners that are planning to deploy an enterprise grade private cloud using VMware vRealize Suite and HPE Service Manager software on HPE infrastructure. Document purpose: The purpose of this document is to demonstrate the value of combining VMware vRealize Suite for private cloud deployment and HPE Service Manager with HPE UCMDB for incident management using Hewlett Packard Enterprise servers and storage to create a highly manageable and highly available solution that meets the needs of the business, IT personnel, and the user community.

This Reference Architecture describes testing performed in January 2017.

See: http://h20195.www2.hpe.com/V2/GetDocument.aspx?docname=a00003395enw 

Wednesday, May 03, 2017

How Automation will change the face of Indian Banks

Today, I had to visit a SBI branch near my house. I had three banking tasks: Deposit a cheque - which was a payment received from a Postal Savings account to the bank account; Transfer funds from the bank account to Public Provident Fund Account and update the passbook to know the bank balance.

This task in a public sector bank branch took nearly 60 minutes of my time, and I had to interact with 3 clerks and one service manager!

This experience made me think on how the upcoming digital transformation will change the face of Indian Banks. As an example, the same task that took me an hour today could be done in few minutes on a digital platform and without any human intervention!

Indian banks operating in conventional systems use tedious human oriented process. I need to fill out a form - where all information is filled out twice - one copy for the bank, one for me! The form is then verified by a clerk and then re-verified by a service manager, and then it takes 3-5 working days for money to move from one account to another!

With automation, 60% of jobs in bank branches can be eliminated. Traditional jobs like passbook updating, cash deposit, verification of know-your-customer details, salary uploads are also going digital increasing job redundancies. Most of the work done at branches will be done by IT systems, and Indian banks are at the inflection point where technology will rapidly improve efficiency and replace humans from performing mundane clerical jobs.

Banking sector was among the big job creators in recent years, but in next 3 years, Banking sector in India will see a decline in number of jobs. Just like ATMs that eliminated the need for bank tellers, new banking apps will eliminate most of the clerical jobs in any bank.

Not all Branch Jobs will be Lost

While I was at the bank, I two elderly gentlemen who wanted my help in getting a "service token!" These long time users of bank accounts are still not comfortable with using digital technologies. Even simple 'self service token generation' is a tough task for them.

India as a society is still not ready for a 100% digital banking. Lots of Indians are digitally illiterate, and the complex banking rules and forms intimidate them. Therefore these users still prefer to sit across the table with a bank employee and get their banking tasks accomplished.

Size of this customer segment is still substantial, but will decline rapidly. This implies that Indian banks will operate branches for a long time to come, but for banks to be relevant and profitable, the total value of transactions per employee will have to increase. This implies that a lot of back end jobs will have to be automated, and moving customers to digital platforms.

The nature of Indian customers has slowed down the transition from people-driven to IT driven processes. However, technological development has not slowed down and constant innovation in technology has made online banking easier. This has also led to a slowdown in the hiring of  branch staff at banks, though banks are hiring people with IT skills to drive automation.

HDFC bank for example, saw staff strength fall from 90,421 in December 2016 to 84,325 in the quarter ended March 2017. At the same time, it has expanded its network to 4,715 branches, from 4,520 a year earlier, ATMs to 12,260 from 12,000.

Hire Younger Talent

As banks brace for the digital revolution, Banks will have to infuse their workforce with a lot of younger talent - who are more comfortable in embracing new FinTech solutions. Large public sector banks will be forced to re-balance their workforce by offering voluntary retirement scheme for older staff and usher in a younger, digitally savvy talent pool.

Major Savings is in Backend Processing

Banks can save lot of costs by automating high cost operations such as loan processing. Today with high speed data analytics & AI tools almost 95% of loan requests can be processed automatically, thus eliminating expensive human labor - which also aids in speeding up loan approvals - which inturn helps improve productivity.

A team of 400-500 programmers can automate house loan approval process & that will eliminate 10000's of jobs at banks. Artificial intelligence & data analytics can replace loan underwriters, the IT systems can underwrite loans on the spot. This increases employee productivity in a big way, while reducing operational costs.

Similarly, routine tasks like salary processing will get automated. In fact all low-end back office jobs in banking sector will be automated.

This transformation means all the low skilled workers do not have a bright future! They will have to re-skill or perish!

Impact on Real Estate Costs

After labor costs, rentals on bank branches form the next highest costs for Indian banks. With Automation, the need for a large number of branches will reduce substantially. Some banks do not need as many branches as they have today.

Global banks like Citi, HSBC, etc have already consolidated the number of branches. Looking at the trend in US & Europe, where number of bank branches have shrunk by 20% in last 5 years, I expect a similar trend in India - but with a difference. The reduction of bank branches will be limited to urban areas only, while Indian banks will still add new branches in non-urban areas and the size of branches will reduce rapidly. Overall, I expect the total square footage of branch space will reduce 20-25% in next 5 years, while the total number of bank branches will increase.

Even in rural areas, Branches will need smaller footprints - and the focus in these branches will be to train customers to use digital online platforms. The branch staff will help customers learn and use digital systems - i.e., marry digital technology with human touch.

Changing face of Indian Banks

New banks like small finance banks like Au Financiers, Equitas or Ujjivan will use an army of  people to expand in rural areas, but this army of people will not sit & operate in a typical branch. Instead, they will be like foot soldiers, traveling to customer locations and providing banking services via mobile platforms.

Just like micro-finance companies & cell-phone companies that changed how people borrow, these newer small finance banks will change how people will use banking services. These banks can leverage a large army of small business owners in rural areas to offer human touch to rural customers - with digital platforms.  Customers can walk to any member of this rural service army and get their banking services.

Customers will now recognize the bank by the mobile apps, rather than the physical branches or the employees.

Closing Thoughts 

Banking sector in India will thrive in next 10-20 years and will employ millions. But it will not be the same way as today. Banks will expand branches and increase the reach of its distribution network, but it will be aided in a big way by IT.

New, exciting, & high paying jobs in Banks will be in IT as Banks transform to be a IT driven, software based banking services company.

The new face of the bank will be the mobile app - from which the entire banking transactions can be completed.

Also see: 

Disruptive influence of FinTech on Indian Banks

Wednesday, April 26, 2017

Blockchain for Real Estate Transactions


Indian real estate transactions are fraught with risks. At every stage, there are risks of fraud or risks of legal entanglements over the ownership title. As a result, the common man often does not have a choice of risk free properties to buy.

As a result, bulk of real estate transactions are handled in cash[1] - thus bypassing the organized banking sector. According to RBI report [2], housing sector accounts for only 16.6% of all the credit portfolios of the banks in India.

This contrasts sharply with the real estate loans represent a vast majority of outstanding credit portfolio in the USA [3], where 45.2% of the outstanding credit portfolio is in real estate sector.

This implies that there is a lot of opportunities in Indian real estate sector for banks to lend - provided banks can find ways to bring in transparency and developers can gain trust of borrowers. In this context, blockchain technolgies will be of big help.

Hernando de Soto, a renowned economist wrote that: No nation can have a strong market economy without adequate participation in an information framework that records ownership of property and other economic information.[4]

Property rights can be in form of any high value items such as:


  • Real Estate: Apartment, agricultural land, house
  • Art & Collectable Items of Value: Paintings, Antiques, cars, watches etc.
  • Proof of investments: Stocks, bonds, certificates of deposit etc.
  • Intellectual Properties: Copyrights, Patents, Algorithms, APIs etc


These records represents the owner's rights and majority wealth of an individual. It is therefore crucial to maintain completeness & correctness of these records to prevent unauthorized or fraudulent changes to these properties.

Historically, people had to trust the government agencies to provide a standard centralized ledger that represents the ownership. However in developing countries, and in times of uncertainties, we have seen that government routinely tramples upon individual property rights and in many occasions even usurp private property.

Even in developed countries or developing economies where there is stable government and a strong rule of law, trading in property is a hassle. Documents can be forged or fudged to create fraudulent transactions - which results in lost value and long time spent in court disputes.

Blockchain technology presents an alternative way to protect and secure the rights to these properties. Blockchain is a consensus based peer-to-peer network with a proof-of-work algorithms which makes changing these historic records probhitively expensive and correctness of the documents is guaranteed by block chain technology protocol rules.

Block chain technology ensures that the rightful owner can always be identified using public key cryptography. Blockchain technology allows creation of "colored coins" - i.e,. Non-fungiable bitcoin (see https://en.bitcoin.it/wiki/Smart_Property)

Smart property technology as described by Mike Hearn:

Smart property is property whose ownership is controlled via the Bitcoin block chain, using
contracts. Examples could include physical property such as cars, phones or houses. Smart
property also includes non­physical property like shares in a company or access rights to a
remote computer. Making property smart allows it to be traded with radically less trust. This
reduces fraud, mediation fees and allows trades to take place that otherwise would never
have happened. For example, it allows strangers to loan you money over the Internet taking
your smart property as collateral, which should make lending more competitive and thus credit
cheaper.

The main benefit of blockchain technology is a distributed database, which cannot be hacked or misused by administrators. Even in case of natural or man-made disasters land records data cannot be destroyed. Blockchain will also serve as a virtual notary service - which authenticates all transactions. This authentication service can be used by banks & insurance companies to provide loans and insurance services.

Therefore block chain is very useful for keeping property ownership records. There are multiple benefits of block chain based property rights management system, that goes beyond the proof-of-ownership and fraud prevention.

1. Provide Transparency
2. Eliminate fraud.
3. Smart Contracts
4. Increase the speed of Transactions
5. Leverage & unlock Value of Assets

1. Provide Transparency  

If I were to buy a property today in Bangalore. I need to get a copy of all the property documents from the rightful owner. Often, the owner of the property would have documents in a safe locker. The owner has to retrieve the original documents, make a photo copy and hand over the photo copy to the buyer. Then as a potential buyer, I need to verify the authenticity of the document with several government agencies, identify legal risks against the property by getting a legal opinion from lawyers, and then negotiate the final price and then pay via a bank, and then register the sale agreement/deed with government agency. All this will take several weeks for the transaction to complete and the buyer has to spend quite an amount of money.

In India, a significant amount of money - almost 1-2% is spent to verify and validate the ownership titles of the property before the transaction can occur.

With Blockchain based system, all this hassles are eliminated. All property related documents are hosted on block chain. Even the entire history of all transactions on that property can be hosted on the block chain. All relevant tax paid information, relevant clearances etc. are all on block chain. The owner of the property can provide read access to this data to potential buyers. The buyer in turn can trust this data, which results in total transparency of ownership rights.

2. Eliminate fraud

In India, real estate & property disputes form a majority of civil court cases. The prevalence of fraud and complexity of property rights has been a major obstacle for a vast majority of Indian citizens to buy/invest in real estate. No wonder less than 10% of the population owns property in India.

In India, a significant amount of money - almost 1-2% is spent to verify and validate the ownership titles of the property before the transaction can occur.

Since the original property records are on block chain, and these historical records cannot be edited/modified, it eliminates fraud and reduces the cost of transaction.

In case of real estate properties, there will be a common trusted registry service to authenticate the owners and record all transactions. With blockchain, the use of coloured coins to repersent the property. The ownership title of the property can be modified only with a combination of private keys of the owner and registration authority. This ensures that neither the property owner nor the registry - can modify the records individually, without the consent of the other party. This scheme provide safe & secure way to record all transactions. And ensures all transfers are properly recorded.

3. Increase the Speed of transactions

Block chain technology ensures total transparency in property ownership titles and it also eliminates fraud. This will encourage buyers to trust the seller, and close the transaction faster. A faster sale results in better economic gains to both buyer and seller. The seller gets a faster access to capital, and the buyer gets an assured property which he can use.

Furthermore, payments for real estate property transactions could be handled on a Blockchain using digital currencies. Thus eliminating the expensive bank transaction fees, and the seller gets faster access to cash.

4. Smart Contracts

A property can generate income and will have certain expenses. In case of real estate property, there are certain annual expenses such as property taxes, property insurance and there may be other maintenance charges.

With block chain technology, the owner of this property can build in rules into the block chain system which triggers payment of taxes or other maintenance charges based on predefined rules. In case of taxes, the rules will be defined by government agency and one can write in the automation tools to calculate and pay the required taxes - via the technology of "Smart Contracts".

Insurance companies can also evaluate the value of the property and provide better pricing and  owners can pay insurance companies via smart contracts.

A property can also generate income. In case of real estate, this could be often seen as rents. Smart contracts can be developed to collect rents from tenants. Smart contracts allows for automatic collection of rents as per predefined rules.

Take an example of retail shops in a mall. The mall owner/mangers can use smart contracts to collect rents for all tenants -based on smart rules such as rent as % of sales revenue or rent as % of electricity/utility consumed etc.

Today, these rule based rent calculations are tedious and cumbersome. This implies the landlord has to spend money to have accountants go over all the calculations, generate an invoice and then go behind tenants to collect. Tenants can at-times dispute this calculations (human error) and delay payments.

With smart contracts, all the rule based rent collection can be automate.

Smart contracts will also allow the rents to be paid out to multiple owners - if the property is jointly owned by many investors. Smart Contracts will encourage investments in commercial real estate ventures.

5. Leverage & unlock Value of Assets

Block Chain technology provides total transparency and when merged with smart contracts, the entire transaction history on that property can be made available to banks or other financial agencies over the block chain. This will allow banks/lenders to evaluate the quality of the assets and quickly determine the quantum of loan that can be provided to the owner.

Property owners can quickly leverage their real estate assets quickly and use that freed up capital in other ventures.

Banks/lenders in-turn can bundle up the assets and create Mortgagee Backed Securities (MBS) and trade MBS to investment banks in the secondary markets. Credit rating agencies can quickly valuate the quality of the underlying assets that makes up the MBS, the risk rating of the MBS can be dynamically calculated on demand.

Unlocking the value of real estate assets can really accelerate a countries economy!

Closing Thoughts

Blockchain technology is ideal for real estate property transactions. However this will not happen overnight. The Blockchain technology offers great prospects for the future. Streamlining a slow cumbersome process in real estate transactions will unlock value for everyone.

However such an innovative technology will not get a wide spread acceptance quickly. It will take time and few innovative & forward thinking real estate firms will lead the way and create enormous wealth for themselves.

Retail Banks, Investment Banks, & Hedge funds will benefit greatly by having real estate on Blockchain. These bankers have the clout and money to clear off the hurdles and create adequate regulation or rules needed for real estate.

Blockchain technology is still in its infancy, but the potential benefits of this technology is too great to ignore.

References

1. www.iimb.ernet.in/sites/default/files/u201/Housing%20Market%20in%20India.pdf
2. Https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/T_11118A5AFCC55634D2F8AA62E5CB885E233.PDF
3.    Http://www.forbes.com/sites/greatspeculations/2015/06/17/q1-2015-u-s-banking-review-outstanding-commercial-loan-portfolio/#61b531074e61
4. "The Destruction of Economic Facts", by Hernando de Soto. April 28, 2010. Bloomberg BusinessWeek. Accessed online May 2, 2011

Disruptive influence of FinTech on Indian Banks


Indian banking & financial services industry has endured a tumultuous months following November 8th 2016 announcement of demonetization.

Banning of high value currency notes and the subsequent cash shortage and financial crisis is still taking their toll on banks. Indian banks were already under tremendous pressure due to bad loans and are now facing increased demands from retail customers. Many banks are still struck with slow & archaic online payments, with users needing to type in user names, passwords, 16 digits from the credit card and more. It is no wonder that the public trust and confidence in Indian banks is arguably at an all time low.

It is no surprise that consumers and businesses alike have moved enmasse to newer financial services which are enabled by FinTech!

FinTech is a catch-all term for the nascent revolution in the financial services space. Mobile payment systems that use technology and Internet platforms to offer a wide range of financial services. FinTech now offers a genuine alternative to traditional banking and payment systems offered by financial services firms such as Visa & Master card!

Indian customers & businesses are tired of the oligopoly of the state owned banks and duopoly of Visa/Mastercard in payments services sector.

Mobile payment systems offer an exciting, democratizing development which offers tools and services needed to meet the demands of vast majority of Indian small businesses and consumers. This denotes a major paradigm shift in banking and it will disrupt existing financial systems.

Disruption

Last few months post the demonetization, Fintech based payment systems in India - PayTM, MobiKwik, Freecharge, mPesa etc., have moved aggressively to get new customers and businesses, thus loosening the vice-like grip of banks & card payments. PayTM has made a huge splash in the 2016 and has changed the way consumers view payments.

Small Merchants in India have openly embraced FinTech payment services - mainly because of ubiquity of smart phones. More and more Indians are using smart phones, which enables banking and payment transactions to be completed electronically.

This transition to mobile payments also coincided with rapid adaptation of 4G data services.  In last 4 months alone, more than 125 Million users have taken 4G data services. This enabled rapid movement to digital payments. Rural businesses & merchants are accepting mobile payment through services like PayTM, MobiKwik,  UPI, etc.

Given the increasing usage of smart devices and mobile payment methods, there will be rapid growth of FinTech industry. I think in the near future we will see everything being paid for with our mobiles– for example paying Rs 10 for cup of coffee!

The movement towards mobile payment systems with newer payment companies using FinTech is just the beginning. Eventually customers will stop using credit/debit cards or cash, opting for mobile payments instead. This denotes the first move away from traditional banking transaction.
Given the increasing usage of smart devices and other contactless payment methods to complete transactions, business to consumer growth seems a natural direction for the FinTech industry.
In the next phase, people will start investing from their mobile platforms. Mobile payments systems will evolve to offer interest bearing investment opportunities - in form of fixed term deposits, Recurring Deposits or Mutual Funds etc., which can be accessed directly from user mobile devices.

As technology and consumer tastes continue to evolve, the market for financial services must keep pace, and learn to evolve. Newer FinTech companies will lead this new revolution.

Traditional banks, insurance & financial companies will struggle to change and adapt to this new paradigm. Banks in India will particularly find it hard to change because their customer experience management, based on legacy systems and legacy thinking, is lagging behind.

FinTech companies on the other hand have no technical debt, and they design the solution based on end user experience, therefore FinTech companies will have the upper hand when it comes to building better services.
  
Closing Thoughts

In the short term, FinTech in India will evolve & grow around the consumer banking space - with focus on consumer banking, making it easier for consumers to pay, and making it easier for small businesses to transfer money to other business entities. FinTech companies will unbundle banking & financial services and pick the 'cherries out of the cake', focusing on high-margin, highly scalable product and service areas, while leaving the commoditized or low margin services to banks.

Banks have the choice of either becoming 'platform utilities' or turning themselves into FinTech companies and building up their own FinTech ecosystems via various FinTech partnership and innovation models, and corporate venturing strategies.

The paradigm has shifted. The influence of FinTech is sure to be felt for years to come. Thanks to a perfect storm of changing banking rules, market forces and business cultures, FinTech has proved to be a disruptive force in Indian banking circles, a trend which looks set to continue well into 2020.

Wednesday, April 19, 2017

Fintech Disrupts Wealth management

Today a typical mutual fund or a ULIP fund in India charges 2.75% for managing your money.

Plenty of investors would be surprised at what a large proportion of their returns go to expenses. 2.75% sounds like a modest figure. However, that's 2.75% of the total amount, which includes the principal which is yours to begin with. The service you get, which you are paying for, is getting returns on your money. When seen with this perspective, the expenses charged can be very high.

With Robo advisors on the horizon, how long can fund managers charge such high fees?

The concept of "robo-advice" The use of automation and digital techniques to build and manage portfolios of exchange-traded funds (ETFs) and other instruments for investors has gained significant attention within the wealth management industry.

Current robo-advice capabilities remain fairly basic. In general, they use simple surveys to profile clients and to assess their needs. An asset allocation is proposed, adjusted and implemented.
Portfolios are monitored, re-balanced and reported on. Robo-advice streamlines the account opening process, and its ability to transfer assets is increasing. All in all, it represents a useful basket of services at an attractive price

Robo advisor can reduce the fees charged for managing your money to less than 0.5%, and it presents investors with an interesting value proposition.

Although robo-advice to date has gained only a minuscule share of assets under management, I expect Robo-advice to grow rapidly in next few years. I anticipate that competition, innovation and new technology will dramatically increase robo-advice capabilities in the near future. Future
versions will consider the client's complexities by adapting questions based on earlier responses to fully understand investor needs.

In developing a financial plan, they can assimilate multiple goals, including college savings, planned home purchases, retirement, protection needs, estate planning and the need for health care and/or long term care coverage. In proposing investment solutions, they will be able to
incorporate outside assets, handle individual securities, ladder bond portfolios, consider low tax basis holdings, and allocate around illiquid positions. They will help clients understand their portfolios by providing information and learning in the context of the financial results and market information being presented.

There are also elements of the roboadvice experience that clients prefer over traditional models. Investors like the privacy offered by a digital solution and the ability to learn, and to chart their own path. These benefits will be expanded on in future releases.

Over the next decade and beyond, emerging technologies, such as cognitive computing, will power major advances in robo-advice capabilities. We anticipate a rapid evolution towards an automated advisor assistant that can even provide complex advice, and that will also allow clients to interact with the digital assistant in a multi-step process rather than a one-time effort. This will help to serve clients even more effectively.

Over time, investors who have low-cost and reasonably effective alternatives to traditional wealth management programs will not be willing to pay premium prices unless they see real differentiation and value.

Financial advisors will remain central to wealth management, but robo-advice will add new capabilities that wealth management firms will need to adopt and integrate.

Fintech Disrupts Wealth management 

Although a high level of disruption triggered by FinTech is already beginning to reshape the nature of lending and payment practices, a second wave of disruption is making inroads in the
asset & wealth management sectors.

A survey done by Price Waterhouse Cooper's found that this financial houses are already feeling the heat. Nearly 50% of insurers and asset and wealth managers consider their respective industries will be the most disrupted.

The investment industry is also being pulled into the vortex of vast technological developments. The emergence of data analytics in the investment space has enabled firms to hone in on investors and deliver tailored products and automated investing. Additionally, innovations in lending and equity crowd funding are providing access to asset classes formerly unavailable to individual investors such as commercial real estate.

When asked which part of the Financial Services sector is the most likely to be disrupted by FinTech over the next 5 years, 74% of insurance companies identified their own industry, 51% of asset managers said their industry will be disrupted.

Venture capitalists are looking very closely at start-ups dedicated to reinventing the way we invest money and buy insurance. Annual investments in InsurTech start-ups has increased fivefold over the past three years, with cumulative funding of InsurTechs reaching $3.4bn since 2010.

The pace of change in the global insurance industry is accelerating more quickly than what is being imagined. The industry is at a pivotal juncture as it grapples with changing customer behavior, new technologies and new distribution and business models.