The Need For Transformation

Western Union was the first true blood communications empire in the world, having started in the year 1851 as “New York and Mississippi Valley Printing Telegraph Company”. In the years to follow it was to dominate the “communications” business with its stranglehold on the telegraph business which grew to it being the first American communications company having its own fleet of geosynchronous communication satellites. Despite its early success and continual evolution including the launch of the first disposable prepaid phone card Western Union is no longer in the communications business and has transformed itself today as a financial services company, one of the biggest in the world today.

In the words of the Oxford dictionary, transformation is “a marked change in form, nature, or appearance”.

In a continually changing world where “Change is the only Constant”, the transformation of organizations from where they were; to where they need to be is a reality being faced daily. Transformation is a requirement for growth, a requirement for sustenance, or even a requirement for survival. Transformation is about having a fresh perspective to changing business circumstances. These changed circumstances are brought about by:

·         Technological changes
·         Change of dated working practices and processes
·         The need to bring about cost efficiency
·         Challenges brought about by mergers and acquisitions
·         Economic environment
·         Government legislation/initiatives

Transformation of companies is happening all around us. A good case of an organization undergoing transformation is that of CMS. For many CMS has been known as the IT services company present in the hardware area, providing services such as hardware maintenance support etc. How many know that this organization has been slowly transforming itself into a Cash Management services company? After its acquisition of Securitrans, CMS now accounts for 60% of the cash management business for ATM’s in India. Dig deeper and you would see that at the heart of this transformation lie two of the reasons listed above for transformation:   

1.       Economic Environment. India has about 100,000 ATM’s as per a report of London Based RBR Consulting, (a firm specializing in Banking Retail, and ATM Research). This figure is expected to grow to 400,000 by 2017.

2.       Government Initiatives. The RBI has decided to allow non-banks to service and setup ATM’s paving the way for White Label ATM’s or WLATM’s. In the words of Rajiv Kaul, CEO CMS, “Over the next 3 years state run banks would add 65000 ATM’s, Private bank’s 20000 and WLATM’s would be another 50000”.

Most ATM’s require about Rs. 10 lakh cash replenishment every alternate day, or about 15 Crore a year ($ 3 million a year). With about 400,000 ATM’s by 2017, the cash replenishment required could be as high as $1,200,000 million a year, or $ 1200 Billion a year. Just imagine the Cash Management fees, which at even 1% could be as high $ 12 billion. Is that not enough reason for transformation?