In the financial services industry, the business agenda has firmly moved from survival and cost containment to growth, as firms look to rebuild their earnings models.
As well as supporting this new agenda, CIOs from these industries also must adapt their IT systems rapidly to respond to the changing habits of consumers and the increasing and urgent regulatory changes that were implemented to stabilize the financial system and protect consumers.
This three-pronged threat – supporting a multichannel growth agenda while simultaneously managing costs and responding to regulatory change – is enough to test even the savviest CIO. Can financial services companies step up to the challenge? Results from Accenture’s third global IT performance research study indicate that some IT organizations across industries have managed to raise their games in the face of similarly daunting obstacles. These high performing IT organizations have overcome cost cutting mandates and demonstrated excellence in three key areas – execution, agility and innovation – which enable them not only to manage IT like a business, but to run IT for the business and with the business. CIOs at these organizations are engaged in their company’s business strategies and are able to truly map out how IT supports those strategies.
How do financial services firms match up against these high performing IT organizations? Making up over a quarter of the participants in our 2010 research, they generally outperformed their peers from other sectors but lagged behind high performers in several key areas. For example:
• They are behind high performers in web-enabling their interactions with customers and suppliers (two times more high performers’ suppliers interactions are web-enabled), and they are slightly behind other industries in mobile-enabling customer, partner and employee transactions;
• They spend 57% annually on developing and implementing applications, in other words 18% more than cross industry organizations, but less than high performers who spend 62% of their budget;
• They are ahead of other organizations in the realization of benefits from integrating their business processes, information and IT systems, but behind high performers as it relates to providing executives with real-time dashboards and visibility into key processes.
These financial services companies are focused on a few key business objectives, in particular the need to increase customer satisfaction. Channel is an important focus in the financial services technology agenda at present, being key to both better customer management and to the next wave of cost reduction, but many organizations are starting from a long way back: recent Accenture research found that only 37 percent of insurers believe their current distribution model allows them to perform at a higher level than their competitors, and in a 2008 Accenture global survey, 42% of consumers said they had switched banks because of poor service.
Accenture’s High Performance IT research shows that in order to deliver on these customer-centric objectives, financial services institutions are shifting significantly from being followers of innovation to driving innovation throughout the business. More than half (53%) of respondents from financial services
firms said they expect to be an early adopter of innovative technologies – compared with 38% of the
financial services executives who had similar goals in our 2008 survey. The CIOs we worked with on the study expect to play a key role in driving ideas into the business, leveraging core IT capabilities across the three areas of execution, agility and innovation.
While the economic downturn forced many IT organizations to cut spending in proportion to the reduced revenues of the business, high performers have shown resiliency in securing new investments. Their success can be attributed in large part to their excellence in IT governance and their ability to re-invest cost savings and efficiency improvements in IT in order to add value.
These patterns are apparent among financial services respondents, which have been able to maintain a focus on investing while managing costs more efficiently. IT staff at these companies are spending more than two-thirds (69%) of their time enhancing, building, integrating, testing and deploying new IT infrastructure – comparable to the cross-industry high performers. This is a noted step away from the “keep the lights on” mentality of many organizations that focus more on running and fixing existing systems.
Another key focus for these firms is information management, where investments are paying off for the slight majority of financial services organizations. They outperform their cross-industry peers when it comes to realizing value from investments in business analytics (56% vs. 40%), business intelligence (55% vs. 40%), portals (53% vs. 38%), data management (46% vs. 40%), and content management (42% vs. 29%).
High performers in our research are relentlessly focused on improving their application architectures. Financial services companies strive to do so but are weighed down more heavily by legacy systems. Nearly one-quarter of financial services companies (22%) admitted that they still struggle with modernizing their legacy applications, and 47% said that while they have clear legacy infrastructure retirement plans, they have not been able to fully execute those plans.
Many CIOs at financial services companies are looking to the cloud for help. Almost half (49%) of their CIOs said they are still leveraging mostly internal computing resources but are testing external dynamically provisioned computing services (compared with 38% of cross-industry respondents). And while only 2% of financial services respondents said they are fully committed to leveraging external cloud services today, 29% said they expect to do so in the future based on business needs (vs. 25% of all respondents).
These financial services CIOs see the cloud as a way to improve infrastructure cost and agility in the short term, while realizing other potential benefits over the next few years.
CIOs at financial services firms believe IT should have a critical role in the innovation process; 23% of these respondents said IT is driving the innovation process for their business, compared with 9% of all respondents. More than half of financial services respondents (54%) said their goal is for IT to play a critical role in innovation. Controlling the costs of innovation can be difficult, however. Forty-one percent of financial services CIOs said they have a hard time managing the trade-off between innovation with emerging architecture concepts and the resulting short-term operational cost increases. Fewer than half (48%) said they adequately control the costs of innovation today – compared with 69% of high performers.
Don’t wait to be asked
Our research shows that the gap between high performers and other IT organizations is widening. CIOs in the financial services industry have a choice to make: They can accept IT’s longstanding role as a caretaker for the business, or they can begin taking steps to improve the agility, innovation and execution of their IT organizations in order to establish a stronger partnership with the business. Financial services CIOs are stepping up to drive the innovation agenda with the business: the high performers will be those who succeed and who then execute flawlessly.
The views expressed in this column are the author's own and do not necessarily reflect this publication's view, and this article is not edited by Asian Banking & Finance. The author was not remunerated for this article.
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Pascal Gautheron is the Managing Director for Accenture’s Banking Practice in Asia Pacific.