Why connectivity is king

“All teams will henceforth expose their data and functionality through service interfaces [APIs].
Teams must communicate with each other through these interfaces.
….

“All service interfaces [APIs], without exception, must be designed from the ground up to be externalizable.
That is to say, the team must plan and design to be able to expose the interface [API] to developers in the outside world. No exceptions.”

He closed his email with this:

“Anyone who doesn’t do this will be fired.
Thank you; have a nice day!”

The point he was making is simple. Make all your applications (and functionality) capable of being connected to other applications. It does not matter whether these connections are made to internal or external parties. This statement is as true now as it was in 2002.

Applying connectivity to your IT strategy

What does this mean for your IT strategy? Connectivity is about using systems that can easily ‘talk’ to other systems. This ‘talking’ is done through an Application Programming Interface (API).

It is this core principle that is driving the Open Banking or the Making Tax Digital initiatives as both initiatives rely on the connectivity of different applications. The idea is that if you connect software together, people will spend less time re-keying information and more time on value-added activities.

We are often faced with a procurement question from our asset finance clients: “Should we use specialist software that is tailored to carry out a specific task or buy one application that can seemingly do everything?”

Software that claims to do everything is becoming difficult to evaluate.

Take e-signature as an example. It is far easier to connect your platform to a cloud e-signature provider such as Adobe Sign or DocuSign than to expect your loan or leasing platform provider to develop the best e-signature solution.

Why API-driven technology is key

The most pragmatic procurement approach is to purchase technology that it is capable of connectivity to other technologies, that is to say, it is API-driven.

This allows you to switch segments of your customer journey to use other software.

For example, if your platform manages the whole deal lifecycle but, over time, you discover that there are more advanced and specialist origination or quotations solutions, you can replace that part of your customer journey with an alternative solution.

Managed carefully, this type of switching can be a smart move. This strategy only truly works if the process is automated and you are not manually re-keying data.

So what are the benefits of switching? First, let’s look at the definition in microeconomics.

Switching costs can be defined as the costs (tangible and intangible) that a client will incur by changing a supplier or moving to another product.

Switching loan and leasing platform providers in this sector has always been a high stakes game. However, switching is no longer about swapping everything.

Instead of making wholesale changes, it is possible to remove the non-performing segment of your technology suite and connect to specialist software to carry out that task.

While this needs to be managed carefully, the flexibility of this approach can reduce the anxiety of software lock-in felt by many asset finance C-suite executives. The cost of switching is becoming lower.

Below is a sample of the types of automated external application connections you may wish to make:

● Credit reference agencies – credit, risk, KYC, AML data
● Accounting and ERP platforms – eg Sage, Xero, Microsoft Dynamics, SAP
● Asset ownership and registration
● Connect to Business Information/Data Science tools
● Customer relationship management (CRM)
● Supplier/manufacturer data
● E-signature for automated contracts
● Open Banking
● Asset pricing and resale value services
● Asset performance data
● Government data sources

The good news is that many asset finance software providers have increasingly understood the benefits of connectivity by providing API interfaces with their applications.

My advice to anyone looking for the right asset finance software is this: instead of worrying about whether it can do everything, find out about its ability to connect via APIs and its ability to integrate with other applications.

Connectivity is just as important as the application’s stated features because this will extend the life of your purchase and avoid costly IT overhauls.

* Downswood was founded by Carl Davis, a former chief technology officer, who has led many award-winning projects in the financial services sector. Projects include the digitisation of asset finance and invoice discounting and delivering data-driven automation. Davis holds an MBA degree from the University of Cambridge. Downswood helps clients realise their digital potential through strategic technology consultancy, technology procurement, systems integration and software development.