Talent Development Centre

Category Archives: Trends

All Talent Development Centre posts for Canadian technology contractors relating to trends.

Job Market Update Across Canada for October 2019

Kevin Dee By Kevin Dee, Co-Founder at Eagle

Here at Eagle we provide job market information on a regular basis, sometimes at a high level across the country and other times looking in more depth at specific markets. This update is a high-level look at the Canadian job market, and the factors influencing it. In previous months we have provided market updates, specific to different markets, which you can find through the links here:

There are a number of indicators that I have used over the years to give an idea of how things are going, one such indicator is the markets. For this purpose, I have focused on the TSX. When I wrote this update in March of this year the TSX was at its low of 16,000 points, and it has been as high as almost 16,900, but as I write this sits at 16,400. This is probably a decent indicator of Canada’s economy… meh! Not booming, not in the doldrums but not setting the world on fire either.

The unemployment rate is an obvious indicator for the job market and the September numbers were quite positive, adding 54,000 jobs with 41,000 of them in Ontario. This saw the unemployment rate drop to 5.5%, which is pretty close to the year’s best rate which was 5.4%.

In the new world of work, one of the factors that will favor the job seeker is a willingness to go where the jobs are. In Canada, the four largest provinces represent close to 90% of the jobs, with Ontario the largest (close to 40%); Quebec (approx. 23%); BC (13.5%) and Alberta (12.5%). BC and Quebec have the lowest unemployment rate in Canada (4.8%), with Newfoundland & Labrador the highest (11.5%); Manitoba (5%); Ontario and Saskatchewan (5.3%). So, when considering where to look for jobs, a province that employs a lot of people and has a relatively low unemployment rate is a good place to look. BC, Quebec and Ontario all fit that bill. Alberta is still struggling because of the hit on the oil and gas sector so their unemployment rate is 6.6%.

One of the big factors affecting the Alberta market is the price of oil. The price of a barrel in Canada is more than $10 a barrel less than on the WTI price (and more than $15 less than Brent). This is due to a number of factors, including that fact that Canada’s only client is the United States. Until there is a clear change that will likely remain a factor in Alberta’s economy. Having said that, there are still opportunities in Alberta, just not the booming demand we saw in the past.

The hot US market has created significant skills shortages and cost increases for companies with large workforces. This has created an opportunity in Canada, where large US companies like Amazon, Facebook, Google etc. are adding to their Canadian presence to tap into the talent up here. We have seen big announcements in Vancouver, Calgary, Montreal and Toronto in recent months and I expect this trend to continue. There has been particular interest in the skilled technology talent here in Canada. Canada is also able to attract skilled immigrant talent easier than the US, whose immigration laws are more prohibitive.

Tech job activity is relatively strong in most markets across Canada, even Calgary, which has not returned to pre-oil crisis levels of activity but is still seeing some demand. This makes sense if you recognize that even at a 6.6% unemployment rate, that probably represents an unemployment rate among professionals and in-demand skills of more like 3.5%.

For a more detailed look at the specific markets across Canada, I suggest you read the linked writeups from Eagle’s Executive team across the country, referenced earlier.

Eagle’s focus is technology professionals and the most in demand areas/skills recently have included: Cloud, Healthcare, Government, Telecom, Banking, CRM, BI and AI; Project Managers, Business Analysts, Change Management, Quality Assurance, Architects, Sys Admins, Full Stack developers, Database Admins and Dev Ops engineers.

In summary, people with tech skills and experience should have little difficulty in finding employment, either contract or perm, for the foreseeable future. A willingness to relocate to the bigger centers will only increase their marketability.

The big unknown in the world today is whether there will be a recession, and if so, how deep will it hit. The trading tensions and regional politics around the world are not helping, but generally I am seeing many indicators that 2020 will be a slower year than 2019. A recession is not in the forecast but forecasters have been wrong before! I don’t believe the election will have a negative impact on jobs, whichever party gets in.

For employers, our advice has not changed, it is a “job seekers market” so it is important to hire quickly! Establish clean hiring practices that move candidates quickly through the hiring process. We are seeing more and more multiple job offers and clients losing talent because they are too slow to make a decision.

Contractor Quick Poll: Will You Subscribe to Disney+?

For a couple years now, Disney has been teasing a streaming service that would rival all other services and give the leading Netflix a serious run for its money. Now, Disney+ is less than a month away and the hype around it is real. Disney is going all in, where for a lower monthly subscription than Netflix, viewers can get access to everything that is Star Wars franchise, the Marvel franchise, Disney classics and everything in between.

As we prepare for colder Winter months that typically include binge watching, we’re asking IT contractors what you think of Disney+ and, more specifically, if you’ll be subscribing. If you are, will you give up any of your current streaming or television services?

IT Industry News for September 2019

Kevin Dee By Kevin Dee, Chairman of the Board at Eagle

This post first appeared on the Eagle Blog on October 10th, 2019

This is my 30,000-foot look at events in the ICT industry for September 2019. What you see here is a précis of the monthly report I produce, which will be available in more detail at the News section of the Eagle website, where you will also find back issues.

A Little History of September in previous years …

Five years ago, September 2014 saw some big deals announced, including Microsoft’s Microsoft logo$2.5 billion purchase of gaming company Minecraft, Lenovo’s $2.1 billion purchase of IBM’s x86 server business and Cognizant’s $2.7 billion purchase of healthcare company, Trizetto Corp.  Hootsuite had an injection of cash and bought two companies, social telephony company Zeetl and social media marketing platform Brightkit.  Google also made two acquisitions: biotech company Lift Labs and desktop polling company Polar. There were plenty more deals announced, including Yahoo’s $8 million purchase of cloud-based document hosting company Bookpad; Cisco’s purchase of private cloud company Metacloud; SAP’s purchase of expense software company Concur; Blackberry’s purchase of virtual identity software startup Movirtu and Red Hat’s purchase of mobile app company FeedHenry.

In September 2015, there was a fair bit of M&A activity but no blockbuster deals.  Microsoft was very active, closing three deals, Adxstudio which provides web-based solutions for ACCENTURE LOGODynamics CRM; app developer Double Labs; and cloud security firm Adallom.  Accenture picked up the cloud services company Cloud Sherpas; IBM added cloud software startup StrongLoop; Netsuite paid $200 million for cloud-based marketing company Bronto Software; and Blackberry paid $425 million for competitor Good Technology.  Hardware company Konica Minolta bought IT Weapons; Qualcomm bought medical device and data management company Capsule Technologies; Networking and storage company Barracuda Networks bought online backup and disaster recovery company Intronis; and Compugen bought some of the assets of another Canadian company Metafore.

September 2016 saw Tech Data pay $2.6 billion for the technology solutions group of HP logoAvnet, and HP made the biggest printer acquisition to date, paying $1.05 Billion for Samsung’s printer business.  Other deals saw Google pay $625 million for Apogee, and restaurant company Subway bought online order taking software company Avanti Commerce.  One investment that caught my eye, in the staffing world saw Accenture invest in crowdtesting company Applause.

Two years ago September 2017 saw Google splash out $1.1 Billion to acquire HTC’s pixel team, strengthening its own smartphone capabilities.  In an interesting move IKEA bought gig economy company TaskRabbit. HPE bought Cloud Technology Partners, presumably to strengthen its capabilities in that area and possibly access new clients.  Finally Edmonton company F12.net bought Vancouver’s ONDeck Systems as it pursues its goal to be a National IT Service Provider.

Last year, there were some big deals in September 2018.  Adobe’s $4.5 million purchase of Marketo was the big deal of the month.  Not a true tech play but Sirius XM paid $3.6 billion for Pandora, and with digital/media/tech convergence it seemed like a fit.  Digital Realty is expanding its data centre footprint with the $1.8 billion purchase of Brazil’s Ascenty.  SS&C paid $1.5 billion for Intralinks.  Vonage paid $300 million for contact centre as a service company NewVoiceMedia; Microsoft added to its AI portfolio, buying Lobe; Intel bought a startup, NetSpeed to help with its IoT chips; Cognizant added to its Salesforce capabilities, buying Advanced Technology Group; Infosys also added Salesforce capability in Europe, buying Fluido; and Slack added an AI driven email client to its portfolio with the purchase of Astro.

Which brings us back to the present …

September 2019 was relatively busy in M&A with Qualcomm’s $3.1 billion acquisition of TDK’s share in a RF joint venture, the largest deal of the month.  There were some big Facebook logonames out shopping in September, with Microsoft buying cloud migration company Movere; Facebook bought Wearables company Ctrl-labs (reputedly for big dollars); HP bought endpoint security company Bromium; Western Digital bought Kazan Networks; and Github bought developer tool Semmie.  Commvault paid $225 million for cloud software company Hevig and there were a few more smaller deals.

Other companies in the news included YouTube who reached a $170 million settlement related to protection and privacy for children; Kik interactive shut down its messaging service; and DoorDash became the latest cyber breach casualty.

The jobs numbers were optimistic in Canada, and the US also had good jobs news although the ongoing trade war and potential impeachment have put a negative spin on some of the reports coming out.

That’s what caught my eye over the last month.  The full edition will be available soon on the Eagle website.  Hope this was useful and I’ll be back with the October 2019 industry news in just about a month’s time.

Walk Fast and Smile

What’s on the Minds of Canada’s CIOs?

Morley Surcon By Morley Surcon,
Vice-President Strategic Accounts & Client Solutions, Western Canada at Eagle

What's on the Minds of Canada's CIOs?

 

While many CIOs are great communicators and share clear and motivating visions for the future, some can be tougher to pin down and it is sometimes hard to see what makes them tick. Even if the CIO at the company where you work is one of the former, it is hard to tell if he or she is part of the majority. Well, all this is to say that ITWorld Canada released the 2019 Canadian CIO Census and I thought I’d share some of the findings as they apply to IT Labour with you. This is particularly good information as it is Canadian-only data, and most of what you find online is US-content-heavy. So, without further ado, here is what the IT leaders in Canada have on their minds!

Hiring Plans for the Coming Year

Almost half (48%) of those surveyed are expecting to keep IT headcount at current levels, either by choice or due to a hiring freeze; while over a third (37%) are looking to increase the size of their teams. This makes for robust demand for talent in Canada. Only 4% suggest that they will decrease the size of their departments.

Day-To-Day Concerns

While 16 different “concerns” were cited, the top 5 things that keep most CIOs up at night are: Data Security/Privacy Issues, Uptime/Reliabilty Concerns, Compliance Requirements, Business Innovation Demands, and tied for 5th place was Making Data Actionable and Staffing.

CIO’s concerns for finding the right resources for their teams and projects has grown by over 55% over the past 3 years. This is a result of unemployment rates of IT workers in Canada hovering around the 2% mark, on average. Most economists consider “full employment” to be around 4% unemployment… as a consequence, most regions in Canada are in a supply-constrained state. With things even tighter in the US, they are exporting their labour shortages to Canada, enticing Canadian workers to travel down to work on their projects or they are employing “remote work”. The results are the same, save a global downturn of some kind, IT labour supply is going to become tighter and tighter… and our CIOs know this.

ITCT, StatsCanada Chart - ICT Employment

In-Demand and Out-Of-Demand Areas in IT

CIOs report having the hardest time hiring for the following areas: AI, Data Analytics, IoT, Mobile Development, and Cloud Services. Specific roles that are of particular interest include Enterprise Application Developers, Big Data/Analytics Specialists, Business Analysts, and Project Managers. All this was consistent with the CIO Census finding from last year, with interest in Application Developers growing slightly.

Given the focus that much of Canada’s IT sector has been giving to Cloud and As-A-Service technologies, it isn’t too surprising that the IT roles where they report “negative demand” is a tie between Data Centre Management and Application Maintenance and Support.

Although there aren’t many IT roles that CIOs claim might be reduced, there are some roles that may see some “turbulence” with some CIOs claiming to need to hire, while others are looking to shed workers. These include Help Desk, IT Support, Network Security, and IT Generalists… some of the people working in these roles may experience opportunities ending at certain companies, but demand from other companies will more than offsets the reductions that are expected, with the number of CIOs “hiring” outstripping those “downsizing” 3:1.

If you are interested in reading the entire CIO Census report, you may do so here.

 

The Digital Workplace – How It’s Changing the IT Job Market

Guest Post by Gil Artmoore

The Digital Workplace - How It's Changing the IT Job Market

It’s no secret to anyone who has lived through the last several decades that technology has radically changed just about every aspect of our lives.   Try to imagine living without smartphones, Facebook, and Google in today’s world. It’s revolutionized our professional lives as well.

Digitization has also had a significant effect on the IT (Information Technology) job market. IT workers have had to continually adjust to an ever-shifting set of demands that also offer tremendous new opportunities to those who want them.  Far from the classic figure of the coal miner put on the street when the world evolved past a need for their services, IT is an industry that almost always replaces older functions with opportunities for growth.

Let’s look at some of the ways the digitization of the workplace has changed the way we work, how it has affected the job market for IT professionals, and what kinds of opportunities it will bring to IT professionals in the future.

How Automation Changed The IT Job Market

The early part of this century saw a dramatic shift from jobs that required no expertise with digital systems to ones where people couldn’t get by without those skills.  Everything moved toward jobs that require knowledge with digital systems, and as you might expect, this became a huge boon for IT professionals who manage the systems everyone needed to start using.

The next revolution came years later, when a drive for increased efficiency demanded systems that required less manual touchpoints.  This wasn’t always an easy transition for IT professionals, and while it did create a skills gap for some years, the workforce has largely adapted and is ready to move with the digital workplace into the 21st century.

The New Opportunities Automation Has Created

Automation and the digital workplace have had a substantial effect on the IT job market, and while that initially looked like a net negative that would eliminate jobs, it instead transformed and relocated them.  One of the most visible ways this manifested itself was in the rise of cloud computing.

Cloud computing is an arrangement where, instead of owning, operating, and maintaining servers and other infrastructure equipment internally, companies now have the ability to pay outside vendors like Amazon Web Services or Microsoft Azure to host those services on their servers.

This did initially lead to the elimination of many IT jobs for system administrators who were there to maintain and administer in-house servers and network equipment, but the flip side is that the cloud vendors needed to hire people to maintain those systems once they were in charge of them.   Literally their entire business revolved around running servers for their customers, and they needed someone to manage the physical hardware.  As a result, system administrators went from being support staff at law firms, financial services companies, or wherever they worked, to driving revenue at a company whose entire business was being one big IT department.

Another major net positive the change in the IT job market brought to IT professionals was that remote work became not only feasible, but commonplace.  Given that cloud computing commonly operates on distributed systems (meaning the same data and functions are duplicated across and run from systems often separated by hundreds or thousands of miles), there’s no single data center to manage like most companies had in years gone by.  Without needing to be physically present to manage the systems, many administrators have gotten a greater work/life balance in this new arrangement.

Finally, IT work has become more collaborative and made employees who may not be in close proximity to each other a lot more equal than they used to be.  Many companies have traditionally had IT employees at corporate HQ, and local IT teams at other offices who often felt like they were on the outside looking in when it came to having their voices heard or being considered for opportunities.  The nature of cloud computing mitigates that dynamic to a great degree, and provides a more level playing field for IT staff no matter where they’re located.

Conclusion

The advent of the digital workplace has not only not led to the prosperity of the IT labor force, but has even eliminated many of the difficulties and frustrations associated with IT work in years gone by.  Many companies have begun enjoying the benefits of using modern technology to build internal structure, and IT professionals will continue to enjoy the benefits of a more focused IT career for many years to come.

About the Author

Gil Artmoore has spent the past decade working in various roles in IT departments for many businesses both small and large. Recently, Gil started writing out the things he has learned, experienced, and witnessed in the small business and tech world during his career. He is eager to share his insights with the rest of the world.

Digging into the Trends and In-Demand Skills of the Canadian IT Job Market

Omar Khan By Omar Khan,
Account Executive at Eagle

Digging into the Trends and In-Demand Skills of the Canadian IT Job Market

 

Having worked in Western Canada’s IT staffing industry for several years, I’ve had the opportunity to see trends come and go, and I find it especially interesting to look deeper into what’s driving them. In our industry, perhaps the two most common trends we regularly monitor are overall hiring trends and demands for specific skills. Here are a few of my observations about what’s happening in the market today.

Overall Hiring Trends

Companies across Canada continue to talk about skills shortages and this will continue to be a topic of focus in the future. Managers in the IT sector are finding that additional duties are being put on their plates and thus the need for additional staff is growing. This lack of IT personnel not only affects the IT department but has an impact in other parts of the organization.

To address staffing issues, a trend that we have seen is that more and more organizations are hiring junior staff. They invest and hope to retain them by paying them well and/or train them on additional skills.

Another trend on the rise to address the shortages is allowing more remote work from different parts of the country, therefore gaining access to a larger talent pool.

Organizations are increasingly turning to staffing firms to help with their contingency workforce. Due to hiring freezes, contract work is on the rise and organizations are bringing in a contingent workforce, as contingent workers do not count towards organizational headcount.

Overall, we expect that organizations will continue to use staffing firms in large volumes, to access greater candidate pools to find top talent and to manage their contingent workforce.

More Specific In-Demand Skills

To understand where the location of job opportunities and what skills clients are hunting for most, it’s best to start at the top and understand what’s driving demand. Knowing what organizations are prioritizing and valuing gives insight into what kind of contractors they want to hire. Here are 8 specific trends I’ve noticed, and the in-demand skills as a result:

  1. Trends related to digital transformation continue and individuals with Transition and Change Management experience are growing in demand. In terms of accreditation for these types of roles, we are seeing requirements that include PROSCI for Change Managers and PMP for various other IT roles. The PMP certification is an indication there is more of an emphasis on soft skills for IT professionals to encourage productive collaboration.
  2. Hybrid-like roles are emerging as certain IT Professionals are wearing multiple hats i.e. Business Financial Analyst, Project Managers with Change Management backgrounds. On the notion of multiple hats, Managers are being asking for certification in AGILE, PMP and Scrum.
  3. The Cloud continues to be a popular subject and, with that, roles specializing in cloud migration, cloud system engineers, cloud architecture and cloud developers are also growing in popularity. Through these respective clouds, we are seeing more demand for experience in Virtual Machines.
  4. Healthcare continues to see transformation and in the needs of IT personnel. Cyber Security around healthcare is becoming more and more important. For example, many provinces are continuing to put strong emphasis on confidentiality of Electronic Medical Records and the patient privacy that surrounds them. This increases the need for security professionals across the country, especially in healthcare industry.
  5. Making sense of the overload of information and data in today’s business landscape is on the rise. Professionals with backgrounds in analyzing big data are in high demand. Roles such as BI Analysts and Data Scientist are roles our organization has filled and we continue to see demand.
  6. There is also consistent demand regarding network administrations, help desk and desktop support. Particularly around network administration, we are seeing requirements in certification such as CISSP (Certified Information Systems Security Professional) and other Cisco Certifications in security.
  7. Speaking of certifications, these can add up to 10 % in people’s salaries and add specialized knowledge. Certification in ITIL, MCSA (Microsoft certified solutions Associate), SAS and BI all are proving to be valuable.
  8. In many cases, tech is mixing with other areas of organizations. For example, we’re seeing more and more IT roles with more of marketing background in SEO, PPC, and Email Marketing .

Of course, that is just a few things we’re seeing right now. The future will see more opportunities in different areas. Although already popular, we’re bracing for an influx in demand for Blockchain, Machine Learning and AI.

Regional Job Market Update for Toronto, Ontario

Brendhan Malone By Brendhan Malone,
Vice-President, Central Canada at Eagle

 

Toronto, Ontario Canada

 

The cat is out of the bag — Toronto is now an established world leader in IT and an innovation hub that rivals any city in the world.

Now what does this mean to the real job market?

Firstly, it means that a vast majority of Canadian fortune 100 companies have their IT headquarters in the GTA, plus IT start ups are finding Toronto to be the place to get started in record numbers. This brings an incredible opportunity to IT professionals, but what skill sets and profiles are the majority of these organizations looking for?

The answer to that lies in the customer. Companies today are all clamoring to create the best Customer Experience and the GTA job market reflects that, which can be seen in their position requirements. In addition to technical skills, they want to know their contractors can enhance the customer experience by knowing as much as possible about customers and, in return, provide that experience.

Specifically, companies are searching for:

Integration:

Resources with major project experience are in hot demand. There are many projects right now that are attempting to consolidate internal systems to ensure that when customers are contacting companies — regardless of the issue — they won’t be passed around from touch-point to touch-point, having to re-issue their info and explain their concerns over and over.

A meaningful customer profile is imperative in providing a positive experience.

Agile:

As more firms transition to the Agile methodology, the need for IT resources who truly understand the impact of their work on the overall customer experience is growing exponentially. In years past we have seen a large number of tester/QA positions go overseas. With the increased adoption of Agile, many of those requirements now sit locally as QA is part of every Agile team.

These business skills and knowledge are of course only part of it and in-demand IT skills remain. The hottest skills we see right now are:

  • Integration Experience
  • Full Stack Development
  • Core Java Development
  • Agile
  • Data Science
  • Security

It is important to note also that with this increased level of customer information and profiles comes an increased need for uncompromising security of that information. With that, the need for security resources remains high and demand far outweighs supply.

You may have seen the report Randstad recently published of the top IT jobs in the Toronto Market

  1. Developer/Programmer
  2. System Administrator
  3. IT Project Manager
  4. Quality Assurance Analyst
  5. Data Analyst
  6. It Business Analyst
  7. Help Desk Analyst
  8. IT Manager

While these positions may not look considerably different than they have in years past (except Agile), the difference we are seeing is in the requirement for business understanding and understanding of customer impact as well as the in demand traditional IT skills.

Understanding the customer is the goal of the companies hiring and they are looking for people who understand this goal and its impact on the bottom line.

Quick Poll Results: Keeping Up with the Latest News and Trends

Knowing what’s happening in your city, country and around the world is the crucial for remaining competitive in today’s job market. You need to understand the trends coming down the pipe, make informed decisions based on external factors, and have the ability to have conversations about current events during networking events and interviews.

While the need to be informed is standard, how you get that information is definitely not. Canadians have a plethora of options when it comes to choosing how they’ll get their news and in last month’s contractor quick poll, we set out to find out how people are doing so. The results were mixed, with social media taking the lead. An interesting observation, but probably not surprising, is how traditional outlets like newspapers and radio are at the bottom of the pack.

Quick Poll Results: How do you keep up with the latest news and trends?

Contractor Quick Poll: Do You Have a Personal Website

Paper resumes are all but useless in today’s digital job search economy, with virtually all employers and recruitment agencies demanding an electronic copy of your resume. These files are the only way their Applicant Tracking Systems (ATSs) can quickly scan through resumes and shortlist the best IT professionals for the job.

But while computers are doing much of the upfront prescreening, recruiters still want to get to know the top applicants more personally to ensure they’re not hiring a psychopath, and you can be certain that they are researching you in every way possible. Building your online presence is the only way you can control what recruiters learn about you and one of the best ways to do so is to build a personal website that communicates your brand.

Personal websites that include a digital resume go a long way in differentiating you from other IT contractors, yet so few people decide to build one. In this month’s contractor quick poll, we’re curious to learn if you have a personal website and, if not, do you plan to?

Banking and Technology — Reaching an Inflection Point

Morley Surcon By Morley Surcon,
Vice-President Strategic Accounts & Client Solutions, Western Canada at Eagle

The banking industry today is one of the drivers of innovation in Information Technology in Canada and around the world. Yet, many of the established big banks have legacy systems that threaten to drag them down in the coming tsunami of change. In times of great change and confusion, there are opportunities for the wise consultant.

It wasn’t that long ago that banks were using green-screen technology and were still doing so long after rolling out the first ATMs. They weren’t often thought of as being leading-edge users of newer technology; after all, they needed certainty of operation, maximum uptime, few errors. Bleeding-edge technology was often a bit risky in these respects. Furthermore, the processing that they did need required very large and very expensive (and very consistent/predictable) mainframe computers. They were a large investment that was needed to scale with the banks’ growing businesses. Much of this changed with advent of internet banks who limited the physical requirements of typical brick-n-mortar facilities and offered ubiquitous convenience of anytime, anywhere banking (providing you had access to the internet). These new banks were nimble, technologically-advanced and great marketers. Seemingly all-of-a-sudden, new products, new ways to reach people, and new technology became key differentiators for market disrupting upstarts and innovation became a necessity to the slower-to-change institutional banks.

Number of ICT Workers in CanadaThe big banks’ world was changing and they were being ‘leap-frogged’ by these borderless entities. The change was on! Today, Toronto and Montreal have a large share of the IT talent supply in Canada (45%+ of all talent in Canada) and at least some of this is the result of the strength of demand/needs coming from the strong banking sector. New technology and new ideas are being envisioned, piloted and rolled-out by even the stodgiest of banks. Digital and business transformation, the new paradigm taken up by so many of today’s companies and organizations, is absolutely rampant in the banking industry.

Ok… You’re saying, ‘So tell me something I don’t know’.  Well… How about a short history lesson that might shed some light on what the banking industry may be facing?

For those of us with some grey hair, this situation is quite reminiscent of what happened around the turn of the century in the Telco space. What happened there was that large, ponderous, Regional Bell Operating Companies (to use the old vernacular) had been implementing massive telephone technology systems, incurring huge costs to do so and then amortizing the expense of it all over decades. They had near (or actual) monopolies, long distance calling rates were atrocious, and they had time on their side with little enticement to innovate. Canadian company, Northern Telecom (later Nortel), was a mainstay in the industry, selling their telephony solutions to the world. Then came Internet Protocol (IP)… and the game changed for them and for the RBOC’s, seemingly overnight.

In reality, it wasn’t really all that fast (not by today’s standards) but they were about to be one of the first large industries to learn the lessons that disruptive technology has taught to so many since then. Smaller, more nimble telephone companies began popping up everywhere (CLEC’s – Competitive Local Exchange Carriers) leveraging newer technology that took advantage of high-bandwidth data trunks and new switching technology. Although still expensive, they were able to piggy-back on the networks that the RBOC’s had built (Gov’t regulators demanded the RBOCs allow them to do so). The cost per call was dropping dramatically as a result and data was able to be transmitted in volumes that actually made sense for businesses. The internet had its highways. What came of this was that the well-financed old equipment companies and the quick-and-nimble upstarts were pitted against each other — companies like Nortel coming from the high-reliability world of telecommunications and those like Cisco coming from the world of data-networking. Initially Nortel joked that they’d learn to spell ‘IP’ before Cisco could learn to spell ‘reliability’ and, for the most part, they were able to hold their own. At one-point, Nortel employed over 60,000 people in their research-and-development facility (BNR – Bell Northern Labs) alone. Both sides created great new products. Nortel had age-old client relationships with the telco’s on their side along with excellent quality products, and the likes of Cisco produced innovative and cheaper alternatives. It was the ‘space race’ of the telecommunications industry. Fantastic new products were coming out quicker and quicker… which sounds great …until it wasn’t.

Their customers — the RBOCs and the CLECs — were in a feeding frenzy of buying. It seemed that every 6 months, a better, faster, more progressive solution was coming out. CLECs were leap-frogging the RBOCs to offer better and cheaper service to consumers. Then the RBOCs would leap-frog them back again. The problem for all the players in this industry was that they no longer had time on their side. They didn’t have time to amortize the very high costs of the new technology before the next iteration came out and they were forced to buy/implement/replace or be unable to compete. It was a global race to the bottom and RBOCs and CLECs alike were running out of money — especially the CLECs, many of whom were relatively new business start-ups, part of the dotcom craze. Nortel’s clients couldn’t afford the new gear anymore so Nortel began ‘selling’ their new products and taking equity in these companies as payment. The whole industry and their supply chains became dangerously over-leveraged, a veritable house-of-cards. Then the dotcom bubble burst and most of the CLECs went out of business, dragging the over-leveraged Nortel (and many of their suppliers) down with them.

So, back to the Banking/Finance Industry today. Some of the obvious parallels are the ‘old guard’ who were titans in the industry with wide moats to protect their market share and had relatively little technical innovation for many years. Then come the upstarts, leveraging new technology to change the game. And then the response from the established banks to modernize to be able to compete and, in fact, push on the boundaries of what was possible before. The big banks also have a similar challenge to the Regional Bell Operating Companies, and that is they are somewhat handcuffed by the older, legacy systems that they’d deployed. The new companies don’t have this to worry about. They can move 100% to new technology, whereas the big banks have huge investments tied up in their mainframe technology and, worse, no easy or quick or cheap ways to get off this technology.  As the legacy banks struggle with this piece, the staff that they have managing this infrastructure move dangerously close to retirement — and there are not a lot of Cobol programmers out there ready to step into the vacated roles!

Of course, there are a lot of differences between the Telco and Banking scenarios as well. It has been almost 20 years since the dotcom crash, and everyone has seen lesson after lesson on the disruptive impact technology can have on entire industries, and people are quicker to react to the challenge. And banks are definitely not cash strapped — they have the ability to invest in new technology, in transforming their business, in moving into or out of markets. And, most important to IT experts/contractors, they have the ability to hire many of the best IT people the market has to offer!

Banks, old and new, need to get their technology/business process mix just right. Their continued market success and very survival depends upon it. Innovation = Technology + People. With enough money, the Technology part of this equation is easy… the People part is what is strategically important! As I mentioned earlier, in times of great change and confusion, there are opportunities for the wise consultant.

Disclaimer:

I’m going to pre-acknowledge (before anyone chooses to call me out) that, for the purposes of this blog post, I’ve oversimplified the Telco/Nortel/Cisco/market crash scenario. There were many, many additional factors that played out. However, this is how I remembered it and the lessons that I took away. I worked during those years for Northern Telecom, and a failed CLEC (Norigen), and was part of companies (Anixter and ADNS – Ameritech Data Networking Solutions) building out the data-highways to which I refer in this blog post. I was part of the industry at that time and lived through the ups and downs of it. So, I ask that I be allowed to share my opinion based on what I witnessed directly.

That said, if you have other opinions or experiences of your own and would like to share with our readership… please do so by leaving a comment below!