How Does A Detailed Discovery Phase Before Custom Software Development Benefits You?

The heart of every successful product in the world today is the result of research done for months and years. The relentless hard work and efforts behind developing it prove to be fruitful in the long run. It is the backbone without which no product can survive in this ever-evolving market. The same philosophy is also applicable even in the world of Information Technology. Research done by McKinsey found out that 45% of Information Technology projects consistently exceed the estimated amount.

The more one digs deeper, the better the result. In layman’s terms, what we call research is the discovery phase for software development. Over the years, it has proved to be an effective method. The preliminary stage is where the custom software development team does an in-depth analysis before the work starts.

The ever-increasing market of customer-based industries in the New York area has given birth to the demand for custom software development. Software is the core engine that keeps a company running. Without it, a company is just like a ship without radar. For someone, who has hired a software development company or is about to hire one, the discovery phase is the primary stage as it will lay the framework for the future of his software. A discovery phase focuses on four primary areas- the problem, the need of the users, the solution that custom software can deliver, and the estimated budget required to complete the project.

This article will discuss the benefits of going through a detailed discovery phase and why it plays a crucial role in agile app development.

Risk Mitigation

As per research, one out of three software projects fails due to missed deadlines, underestimated budgets, unrealistic expectations, and poor planning. A discovery phase entails a careful evaluation of all these factors. It offers a blueprint of the estimated project completion date, budgets, and team size required. Hence, the probability of risk reduces significantly.

Sorted Finances

The primary stage of assessment in the discovery phase is crucial. One must give special attention to the financials. The final cost of development will help to finalize the budget for the project. A discovery phase tells you the exact price so that no unanticipated costs pop up during the developmental stages. In some cases, the estimated cost of the project also goes down after a detailed discovery stage.

Test a Prototype

Before the development stage begins, you have the opportunity to create a beta version of the software. You can test the software with end-users to find out if there are any bugs or glitches. Once you receive the feedback, you can quickly make the changes. It will save time, cost, and money. Moreover, during the development stage, you can also focus on more important things in your project as the discovery phase allows you more time.

Leverage Technical Expertise

The Discovery phase is just the perfect time to utilize the skills of your developers. For instance: effective data collection helps to take pragmatic technical and architectural decisions. Companies that do not have their in-house software development team mainly find it beneficial. They also hire top custom software development companies in New York that embrace clients as long-term partners, resulting in a fruitful association.

Find your Competitors

The Discovery stage gives you more time to do comprehensive research on the market. It opens new doors for you to find out about your competitors. You can do a SWOT (Strength, Weakness, Opportunity, and Threat) analysis of your own company; identify specific user needs and find solutions to solve them. This evaluation will enable you to strengthen your weak areas. A value proposition can also be derived, and you can start working on those principles.

In addition to the points mentioned above, I have compiled three brief stages in the Discovery phase – Business Understanding, Core Process Evaluation, Product Deliverables. Now let us discuss them.

Business Understanding

It is the first stage in the discovery phase. It will primarily focus on understanding the problem we are trying to solve after analyzing the end-users and the primary stakeholders associated with the project.

How will it benefit you?

• You can map out a plan for the next course of action
• Identify the resource requirements in terms of staffing and technical expertise

Core Process Evaluation

It is the second stage in the discovery phase. You can identify any complicated domains of your project here. All the developers, project stakeholders gather together and give an amicable solution to deal with it.

How will it benefit you?
• A better understanding of any inconsistency in the software development process
• Develop a model that deploys easily

Product Deliverables

It is the third stage in the discovery phase. It visually offers a software timeline that includes the software development strategy model of the development stage. The focus here is on the scope of the project, its timeline, and the estimated costs.

How will it benefit you?

• You will know about the features of your software from a user perspective
• You will get an idea about the estimated time of the project delivery

Before committing to a project, a systematic approach aligns with the work strategy. Software development methodologies like the Discovery stage help an organization streamline the processes, identify critical steps beforehand, and get an idea about the estimated outcome of a project.

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Universal Banking – Answer For The Best Banking Design?

1.1 INTRODUCTION

In recent years, universal banking has been growing its popularity in Indonesia. Mandiri Bank, for example, has taken strategy to become Indonesia’s universal bank; this bank has also initiated to develop an integrated financial risk system in terms of sounding financial performance and increasing shareholder value. In Germany, and most developed countries in Europe, universal banks have initiated its operations since nineteen century. There is mounting evidence that in those countries, universal banks have taken an important part in the development of real sectors and the financial system. In those countries, the growing numbers of universal banking practices are really supported by the regulation of central of bank.

Despite, in The United States, they are strict to regulate universal banks by blocking commercial banks from engaging in securities and stock markets practices. They argued that the practice of universal banking might be harmful for the financial system. ((Boyd et.al, 1998) cited in Cheang, 2004) The “risk” might be the key reason why the central bank of The U.S is worried about the universal banking system. Since, if the central of bank allowed banks to adjust their operation to be universal banks, the relationship among, banks, financial and stock markets would be closer. Consequently, this would give an uncertainty to the banks condition and performance. For example, if there were a disaster in stock market, banks would get problems in their financial positions. Thus, they would tend to be insolvent.

In addition universal banks would also threaten the market share of other specialized institutions, because more customers would choose universal banks that offer more option to their investment. Hence, more specialized institutions are likely to be ruined in the U.S financial industry.

One majoring factor, which is triggering a bank to be universal bank, is to increase the profit by enlarging their market share. According to João A. C. Santos (1998) universal bank itself can be defined as the financial institution, which enlarges its service range in terms of offering a variety of financial products and services in one site. Thus, by operating universal banking, banks could get a greater opportunity to expand to another financial area, such as : financial securities, insurance, hedge funds and etc.

Although the trend of banks has recently tended to universal banks, it is undoubtedly true that universal banks would also face further risks because a wide range of financial services is strongly associated with increasing risks and escalating monitoring costs. These are the major concerns why banks have to implement more advance technology in terms of financial risk management. Moreover, the practices of universal banks would cause significant risks to economy’s payment system. Since, the operation of universal banks connects closely to the financial and stock markets that are very fluctuate in a short term.

To win in the tight competition among financial institutions, banks have to alter their maneuver to lead in the market. Universal bank could be the wise choice for the bank manager, because they can attract more customers with a wide range of services. Furthermore, by altering their operation to the universal banking system, banks would get benefits from the efficiency and economies of scale.

In order to understand about the universal banking practices, this paper would examine the exclusive matters, which related to the risks and benefits in a universal bank. Moreover, this paper would also focus the whole impact of this institution to the financial system and the economy as a whole.

1.2 PROFITS AND COSTS IN UNIVERSAL BANKING: IMPLICATIONS FOR INDIVIDUAL BANKS

General problem related to financial intermediation, include universal banks and another type of banks, is about asymmetric information . It is the main problem that causes costs to increase and influence the performance of financial institutions. In Universal banks, the problems that would increase are slightly different with specialized banks; they are similar in that they should cope the risks problem associated with their financial position. Although, in universal banks, the risks are more bigger due to the wide range of financial instruments that they organized. Therefore, banks have to increase their spending on monitoring costs that are more complicated than specialized institutions or conventional banks.

Possible answer why more banks sacrifice to the escalating risks and transform it operation into the universal banking is that they want to compete and expand their market share, in order to seek a greater opportunity profits by serving more choices to their customers. Many banks has experienced a great performance after they alter their operation, the main concerns are that they could reach better economies of scale which can reduce the amount of spending in operational costs and also a greater opportunity to get more profits. The research finding which was conducted by Vender, R. (2002, cited in Cheang, 2004) about the efficiency of revenue in financial conglomerates and the level of both profit and cost in universal banking, has proved that both financial conglomerates and universal banking contain good performance in several indicators of bank profitability. His finding also suggests that the sustained expansion of financial conglomerates and universal banking practices may increase efficiency in the financial system.

This opinion is strengthen by another experts, like : George Rich and Christian Walter (1993). They state that universal banks which posse benefits over specialized institutions, are able to take advantage of reduction in the average cost of production and scope in banking. It is essential for banks that operate on a international level and in order to fulfill customer needs with a variety of financial services. They also mention a classic example how universal banks in some countries, such as : Switzerland, Germany and more European countries has experienced benefits by operating universal banking. In addition, they also state that the fear if universal bank would threaten specialized institutions has not proven. In Switzerland and Germany, for example, specialized institutions could achieve a better improvement in terms of cooperating with big banks. Universal banks are one of potential market channel which can sell their products directly to the customers, so specialized institutions also get additional return due to the increases in the number of universal banks. Therefore, this proves that universal banks do not threat other institutions; in fact, they support specialized institutions to market their products.

According to Fohlin, universal banking would lead to a bank’s concentration due to the increases the number of branch. Based on Germany’s experience, such branching-based expansion has led to the efficiency in banking because it could increase economies of scale in advertising and marketing, and open an enormous opportunity to enhance diversification and steadiness for banks.

A universal bank has unique position to tackle asymmetric information. As stated by Joao A. C. Santos (1998), that a universal bank has potential benefits on the reduction of agency cost and acquires profits due to information advantages. Although in other sides, universal banking also face problems related to the cost, conflict of interest and safety and soundness. But the default risk, which is generally happened in financial intermediation, would decrease substantially because universal banks are easier to control over their customers. Most of lenders in universal banks are their customers, so they can understand about the capacity of the customers from the information that they gather.

Nicholas Cheang (2004) also points out how universal banks could reduce a crucial problem in financial institution, asymmetric information. He argued that they could preserve a close relationship with their borrowers, by gathering more relevant information to make an important decision for investment. Their advantageous positions also vital to optimize the distribution of fund allocation, because banks have already known which investment that would give more margins to them. So, they don’t need to worry too much about the risk.

1.3 UNIVERSAL BANKS AND THE STABILITY IN THE FINANCIAL SYSTEM

Financial institution plays a vital role in terms of mobilizing funds in the economy. Consequently, stability in financial system is really important to manage by government in order to prevent wider implications to the real sectors. Financial disasters which happened in most countries in Asia in 1997 are the classic examples how importance to save banks to recover the economy.

As the financial supermarkets, which are handling a variety of financial instruments, they must face a greater risk than specialized institutions. As a consequence, this institution needs to be monitored closely in order to prevent more implications to the economy. According to Benston (1994), the escalating risks in universal banking would lead to a great problem because it can cause generous distress in the financial system. Hence, it will greatly increase the risk to the economy’s payment system. In another term, Rime and Strioh (2001) who examine the financial system in Switzerland in which universal banking are becoming more important in this country, state that difficulty in monitoring large universal banks is a major concern. This is the reason why universal bank has to spend more money in monitoring cost and develop an advanced system in information technology. In other words, it could say that the consequence of inefficient monitoring could lead to financial instability. (Cheang, 2004)

A wider range of universal banks in financial system makes the fund channels of banks to the customer are larger than specialized institutions. So, the economy will improve because universal banks will support more funding. This can be seen by the fact that a universal bank practice in Germany has triggered the progress of some enterprises performance in this country. (Stiglitz, 1985). It is understandable that when the allocation of fund can distribute widely and effectively to the potential enterprises, the economy will improve. In this context, universal banks have played as the key institution which mobilize fund to the potential lender.

Edwards (1996), has also proved that a universal bank is not just significantly contributed to economy from the external funds that they provide, but also from the improvement of the information flows. (cited in Cheang, 2004) Therefore, this proves that universal banks have played a significant role in terms of reducing the default risk by providing important information about the lender or customers. Furthermore, the safety of the financial system would be improved by the existence of universal banks.

1.4 CONCLUSION

The development of universal banks has to in line with the policy direction of central bank, because it is important to keep the stability of financial system and the economy as whole. There are three important areas that must be concerned related to universal bank operations, such as : the strengthened of capital and advanced risk management system. Consequently, in order to manage universal bank, people need to be aware about the unique of the risk type in universal banking. Furthermore, policy maker must also consider about the implication of universal banks in financial system.

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