Are we creating or engineering the digital economy?

Systems of Engagement (SoE) and Systems of Record (SoR) are mostly about interaction styles rather than a formal description of IT systems. The modern digital consumer – customer, developer, ecosystem partner, employee – is now expecting to interact with ‘apps’ according to SOE characteristics.

There are broadly two types on companies on the web. The traditional enterprises that have enabled themselves to do business on the web and are now beginning to exploit the digital explosion. Then there are there digital enterprises – those born on the web creating business models around innovative use of latest technologies. Both need to develop SoEs and SoRs to to provide a digital capability  to their consumers and operate as a business. Traditional enteprises have started with SoR and are now building SoE atop of them. They have made themselves multi-channel and are now exploring building interaction models for the digital age. Digital enterprises have started with SoE and have had to build out SoR in order to legitimately operate.

Traditional financial services organisations such as Barclays, Allied Irish Bank and Westpac have immersed themselves fully in delivering suites of apps for customers and employees; Mastercard has a money transfer API; and American Express launched a payment services toolkit and so on. Conversely digital enterprises, such as Twitter have SoE that are designed and built around their API platform; Facebook take payments for in-platform credits; both still need order to cash, payroll, sales management systems etc. using SoR such as Oracle e-business suite to operate their business.

The digital economy analysts talk about “properties”. These are the real estate pieces of a digital business. Traditional enterprises would refer to these as capabilities such as mobile banking app, foreign exchange, online retail Store, gas stations etc. These are business functions often realised through technology – sometimes getting referred to as business platforms. Consumer web examples of properties might Amazon Marketplace, Google Mail, Pinterest Photos, Facebook Newsfeed.

Where things start to get cloudy is the expectation of service, transactional integrity and regulatory compliance for a particular property.

A common trait of digital enterprise platforms today and the services they offer – either through human interaction or API – is that they are covered by a terms of service that often devolves the platform owner of meaningful responsibility in the context of that property. Many sites are silent or explicit on guaranteeing safe storage of your stuff e.g. photos. If you delete data (or deactivate an account) it might be left in a ‘recycle bin’ and survive on backup up to 90 days, or as long as is “commercially viable”. Many say they will look after your privacy but do not guarantee it. Their Systems of Engagement are wonderful to use and offer great features and flexibility, but none of the integrity we’ve come to expect in traditional enterprises and their Systems of Record. Of course these digital enterprises are building SoR – they have to financially report, secure and confirm payments – part of their legal requirement to operate as a company.

These digital enterprises and their wonderful Systems of Engagement all sounds a bit loose. What now if we are dealing with a traditional enterprise expanding into the world of digital? They are naturally going to be building out their SoE. If that enterprise is a bank and it starts offering a platform akin to Twitter or Facebook, do you automatically assume a much higher level of data responsibility?

All companies operate pretty much equally in terms of financial reporting (varying by country). But as the digital world begins to blur and interaction services and platforms become more prevalent we need to assess where the boundary of any additional industry regulation e.g. banking, oil and gas etc applies. Digital enterprises and their stock price (or IPO valuation) are currently living and dying by consumer and media analyst ‘regulation’. If a site started losing photos in a big way we would hear about it in a loud way, or if it suffered continual security password breaches we might move quickly to a different service (probably newer, probably less mature!)

Traditional enterprises therefore have a more difficult road in transforming to digital enterprises. They often have much older and complex IT systems that need simplification before exposure through SoE. Their new terms of service they attach to their SoE will often move data back and forth with their SoR. These enterprises will often be regulated in some way by their industry. But most of all their customer service expectation must survive and be maintained in their new digital world. Becoming a fully operating and responsible business operating in the digital economy is no doubt easier for the digital enterprises transforming outside-in contrasted with the traditional enterprises transforming inside-out.

As consumers we want the creativity in the services provided through Systems of Engagement, yet also expect the engineering of services provided through Systems of Record.

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About Jeremy Caine

IBM Executive Architect and Client Technical Advisor to UK and Ireland Retail Banking Sector clients. Providing technology strategy leadership and architectural direction. Advocate of business model innovation, ecosystems, platform architecture, disruptive technologies and the digital economy. Experienced in sales and delivery of business transformation and complex system integration IT programmes. Client technical advisor for strategic enterprise growth. Industry experience in Financial Services (banking, insurance, investments), Public Sector, and Distribution. UK Chartered Engineer and Member of the Institute of Engineering and Technology. The Open Group Distinguished Certified IT Architect. Industry Expert to Advisory Board of the New Economic Models of the Digital Economy.

2 comments

  1. Pingback: Are we creating or engineering the digital economy? | Jeremy Caine | The Research Platform

  2. Pingback: Are we creating or engineering the digital economy? | Jeremy Caine | fred zimny's serve4impact

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