SWIFT Bank Network Taps Crowdsourcing

Staid bankers are embracing the latest collaborative tools to drive innovation. The Society for Worldwide Interbank Financial Telecommunications (SWIFT), a global organization that handles an average of 15 million standardized financial transactions such as wire transfers every day for more than 8,000 banks, is spearheading a drive to “inject an innovation culture not only at SWIFT but the financial community as a whole,” by collaborating on new e-banking solutions and working more closely with start-ups, says Kosta Peric, head of innovation at SWIFT.

Since 1973, Brussels-based SWIFT has provided a shared worldwide data processing and communication link for the world’s banks, using a common language for international financial transactions. Its main function is to be a carrier of messages. It does not hold funds, manage accounts on behalf of customers, or store financial information on an ongoing basis. That said, SWIFT is increasingly taking on the role of a catalyst to bring the financial community together to work collaboratively on market practice, standards, and issues of mutual interest.

With that goal in mind, Peric is behind an online marketplace called Innotribe that went live on Feb. 11 and aims to leverage the collective creativity of the finance sector. The idea is not only to deliver on the traditional mission of lowering costs, reducing operational risk, and eliminating inefficiencies, but also to get creative about taking the sector into entirely new directions.

Innotribe is clearly not your father’s banking communications platform. Bankers who wish to submit their ideas for new products, services, or business processes (or enhancements to existing ones) can do so by signing in with a Facebook, Google, or Twitter account. They are greeted with the message “Remember, everyone is an innovator; and a crazy idea that works is not so crazy at all. Share with us your ideas, be they matter of fact or wildly aspirational.”

The site uses a cloud-based software application from Brightidea.com to collect, track, and manage ideas. It also allows those participating in the project to volunteer to work on particular projects and vote on which ideas should be considered for investment and developed to the proof-of-concept phase.

"What we are doing is enabling collaborative innovation," says Peric. That includes embracing crowdsourcing and mash-ups—technology approaches more often associated with start-ups targeting the under-30 crowd than staid bankers.

Peric and his five-person innovation team started out two-and-a-half years ago as a research and development unit. After little more than a year they began encouraging others inside SWIFT to collaborate on new projects. Teams of SWIFT employees were asked to solve particular problems. They were given one month to work on their ideas during their free time, such as lunch or coffee breaks. When the deadline arrived, the proposed solutions were passed to Peric's team. A jury of executives voted on which ideas they liked best. The winning ideas were then implemented on the company's time.

Based on the success of the in-house collaboration, SWIFT decided to involve the wider banking community. During its annual Sibos conference in Hong Kong last September some 6,000 delegates were asked to generate ideas in three different areas—crowdsourcing, mash-ups, and cloud computing, which allows the shifting of computing tasks and storage from local desktop PCs and company servers to remote systems across the Internet. About 500 people showed up to learn more. A core team of 40 delegates met for two hours a day during four days to flesh out concepts and develop pitches that were then delivered publicly to a jury.

One of the winning ideas is called "eMe," a cloud-based project that would allow banking customers to establish a digital lockbox with sensitive personal or business information, such as credit card numbers. Instead of having to type in the information each time a consumer or business makes a purchase, a code could be given to the digital lockbox. Click here to watch a video of the original eMe pitch. Another winning idea, with the working title "eBiz," involves creating a central electronic point where information could be retrieved by businesses about the status of shipped goods.

SWIFT is exploring the idea of co-investing in the development of the "eMe" and "eBiz" projects alongside some of the banks that are its clients. Working with startups is the next step. "We are not yet working with startups but we want to engage with them," says Peric. "It is very much in line with our open collaboration concept—there are lots of ideas out there that are relevant to the financial community so we want to make our SWIFT brand known in this context."

To help spread the word SWIFT has become a sponsor of a global competition called Innovate! 2010 launched by the Guidewire Group, a market intelligence and advisory firm, to identify and accelerate the world's 100 top technology, media, and telecommunications startups. (Click here to learn more about Innovate! 2010). Peric says he hopes to give at least one of the winning startups from the Innovate!2010 contest some exposure at SWIFT's next Sibos event, which will take place this October in Amsterdam.

Start-ups with technologies relevant to the financial industry should pitch directly to SWIFT or through the Innotribe Web site. "We guarantee the request will be acted upon," Peric says.

Guest blog post from Jennifer L. Schenker.

This blog post was adapted from www.informilo.com. Click here to read the original posting, provided courtesy of Informilo.

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Nokia and Ericsson: A Tale of Two Telcos

Like a one-two punch, the two Nordic giants of telecom equipment reported results on Apr. 22 and 23 that fell short of analyst estimates. Nokia’s first quarter revenues announced on Apr. 22 grew 3% from the same period a year earlier, to €9.5 billion ($12.7 billion), and net income nearly tripled from 2009’s tough first quarter, to €349 million ($466 million). But the earnings were about €61 million shy of analyst estimates, and Nokia’s shares plunged 13.3% on Apr. 22 and another 2% on Apr. 23. It wasn’t so much the profit miss that spooked investors but falling average selling prices for phones, flat market share, and a slightly lowered forecast for operating margins this year.

Ericsson’s results announced Apr. 23 were in many ways worse. Revenue dropped 9% from the same quarter in 2009, to 45.1 billion Swedish kroner ($6.28 billion), about 3 billion kroner ($418 million) short of analyst predictions. Net income fell 27%, to 1.26 billion kroner ($174 million), nearly 38% ($103 million) below analyst estimates. The company blamed tepid operator investment in network equipment and continued sharp price competition from rivals. Yet Ericsson shares soared 10.3% on Apr. 23, largely because its results included a near-doubling in North American sales.

Is there an illness at the heart of Nordic telecom? No question, the first quarter was a comedown from the results posted by both Nokia and Ericsson in the final quarter of 2009. But aside from that, the companies are facing quite different situations. While the reaction from investors in both cases may have been overdone, the basic direction of movement reflects diverging realities.

Nokia, whose shares have fallen 1.4% this year against a backdrop of generally rising telecom stocks, can’t seem to catch a break these days. Long the leader in mobile handsets, and still hanging on to one-third of the overall market, Nokia has been sent reeling by the success of the Apple iPhone. Sure, Nokia sold 21.5 million “converged mobile devices,” or smartphones and mobile computers, in the first quarter, up 57% from a year earlier. Apple, by comparison, sold just 8.75 million iPhones. But Apple snagged an average of $622 in product and service revenue for each iPhone, whereas Nokia’s devices sold for an average price of $207 (€155). Translation: Apple made 22% more revenue on 60% fewer units—and its profit margins were even more dominant.

It's not as if the Finnish giant hasn't been developing smartphones for years, or hadn't spotted the trend towards mobile services. Indeed, it was ahead of the rest of the industry for many years in both areas. Recall that the original palm-top Communicator with a QWERTY keyboard came out in 1996(!), and Nokia made waves—and annoyed jealous mobile operators—a decade ago with its Club Nokia download center for ringtones, screen savers, and other phone enhancements. But Apple, with its snazzy design, great timing, and unparalleled ability to rally software developers, has walked away with the market buzz in state-of-the-art smartphones and downloadable (and revenue-producing) apps.

It's this perceptual gap that inclines investors to sell Nokia on any signs of weakness in its results. Overall, the company's performance remains enviable. It sold a solid 107.8 phones in the first quarter, up 16% from a year earlier (against a market that Nokia predicts grew 11%) and it still enjoys 12.1% operating margins in its handsets and services business. Its operating cash flow in the quarter was a cool €1 billion, and its somewhat troubled Nokia Siemens Networks joint venture gratified analysts with a small pro-forma profit for the quarter. Even the forecast decline in 2010 operating margins—from an earlier estimate of 12% to 14%, to a revised range of 11% to 13%—doesn't amount to much.

A bigger worry is that Nokia still hasn't come up with a blockbuster answer to the iPhone, and the time horizon is slipping. CEO Olli-Pekka Kallasvuo told analysts Apr. 22 that Nokia's first device using a new open-source version of the Symbian smartphone operating system, known as Symbian^3, won't ship until the third quarter of this year. It had earlier been expected in the second quarter. A follow-on Symbian refresh is now expected in 2011.

What about Ericsson? Far and away the dominant seller of mobile network equipment and services, the Swedish company has been on a roll since it bounced back from the horrorshow of the dot-com and telecom crash in the early part of this decade. But stiff competition in its business, especially from rising Chinese rival Huawei, is keeping prices down at the same time that recession-strapped mobile operators are holding back on spending.

Ericsson has bulked up by buying other companies, including some of the assets of failed Canadian telco gear-maker Nortel. It was the addition of those assets, plus a well-timed deal with AT&T, that helped Ericsson lift its North American sales 99% in the first quarter, to $1.3 billion, making the region now its largest in the world.

The proximate reason investors bid up the shares of Ericsson even as they hammered Nokia is, ironically, the same: the iPhone. In his conference call with analysts after the earnings announcement, Ericsson CEO Hans Vestberg pointed to the rapid growth in mobile data services in the U.S.—a phenomenon largely driven by Apple's popular device and the voracious wireless bandwidth consumption of its users. Investors see huge opportunity for Ericsson to sell equipment that serves that growing demand, which in some cities has already lead to network saturation. Credit Suisse figures Ericsson could be 20% undervalued at its current price.

As for Nokia, its shares are likely to remain under pressure until it shows a clear turnaround. With further delays on tap in next-generation software, says analyst Mark McKechenie of Broadpoint AmTech, 2010 is likely to be a "more of the same" year. The truth is, being the volume leader with dominant market share outside the U.S. just isn't enough when you're facing a phenomenon like Apple.

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Irish Startups Shine in Venture Tech Tour

Venture capitalists are descending on the U.K. and Ireland this week to meet the cream of technology upstarts. They’ll be introduced to companies such as Belfast’s Lagan Technologies, a supplier of software for improving delivery of public services that has become a world leader in its market niche, beating rivals like Oracle for contracts with American cities from San Francisco to Boston.

Lagan is one of 30 companies pitching themselves to a group of more than 60 venture capitalists during the U.K. & Ireland Tech Tour on April 27-28. Many of the presenters are, like Lagan, later-stage companies that have already carved out successful global businesses. A surprising one-third of them are located on the Emerald Isle.

This week’s tour of the U.K. and Ireland is the 42nd such outing put on by the Geneva-based European Tech Tour Association, an independent non-profit organization that has been discovering and promoting early- and later-stage tech startups for more than a decade. It last held tours of England in 2004 and 2007, Scotland in 2001 and 2006, and the Republic of Ireland in 1999 and 2004.

What sets this tour apart from earlier trips is how many of the companies have already established themselves as world leaders in their fields, says Victor Basta, a veteran investment banker and president of the European Tech Tour Association. Basta is a former partner with London-based boutique investment firm Arma Partners, and now serves as an advisor to Magister Artis Capital, a London-based firm that provides merchant banking services for later stage companies and investors in growth industries.

The other major difference this time around is the number of Irish companies. Lagan is based in Northern Ireland, and another 10 of the startups that made the tour selection committee’s final cut are from the Republic of Ireland. That’s a disproportionately large number, considering that Ireland has a population of just 4.5 million, compared with 62 million in the U.K, says Basta. “What this shows is that multiple years of government focus on technology in Ireland, tie-ins with universities, an entrepreneurial spirit, and a local ecosystem of advisers and investors has created an ecosystem to rival [that of] Cambridge,” says Basta.

While many areas in Europe have tried and failed to recreate the success of California's Silicon Valley, Cambridge—sometimes dubbed "Silicon Fen"—is often cited as the place that has come closest. The English city is home to a large cluster of high tech businesses, many of which are connected to the University of Cambridge. Ireland's focus, says Basta, "seems more on building companies than technological innovation, and that cultural difference seems to be paying off." The Irish government also has done proportionally more to support entrepreneurs than Britain has, he says. "It's clear from the quantity and quality of the Irish candidates on this tech tour that their efforts are paying off handsomely."

Des Doyle, manager of growth capital for the government-run agency Enterprise Ireland, is proud of the high number of Irish companies on the tech tour. Enterprise Ireland notified local companies about the competition and urged them to apply, Doyle says. The Irish government has made a "huge commitment to supporting the entrepreneur," he says.

Among other programs, Ireland offers richer tax incentives than do many of its European neighbors for entrepreneurs who start their own companies and for investors who bet on ventures aiming at global markets. Through Enterprise Ireland, the government also directly finances start-ups—some 70 to 75 companies per year, at an average investment of €300,000 ($400,000) each—and makes indirect investments by putting money into seed and venture capital funds and defraying the operational costs of regionally-based angel networks.

For example, the eighth new fund supported through Enterprise Ireland's Seed and Venture Capital Program is comprised of a €17 million investment from the Bank of Ireland, €8 million from Enterprise Ireland, and €1 million from the University of Limerick Foundation. Managed on behalf of the Bank of Ireland and venture capital firm Kernel Capital, the €26 million fund launched last November invests in startup and early stage companies in the technology, food, and financial services sectors.

When you add up all of the efforts "you don't find that kind of government sponsorship in Cambridge or elsewhere in Europe," says tech tour president Basta. "It's worth looking at this in more detail because Ireland is producing a disproportionate amount of world-class start-ups."

Guest blog post from Jennifer L. Schenker.

This blog post was adapted from www.informilo.com. Click here to read the original posting, provided courtesy of Informilo.

View the original article here