Just enjoyed another great conference where one manager presented their IT strategy and operations.
Amazingly the old nugget of the language of IT and business came up again, where she opined that IT doesn’t speak the language of business.
She illustrated this issue with this amusing video from the BBC’s comedy series Big Train:
IT is broken, according to this manager, and needs to be fixed.
So how their company fixed IT was based upon research from 2007 published by McKinsey: “Better IT Management for Banks”.
McKinsey “studied the financial performance and underlying IT practices of 105 of (banks) in Europe, Asia, and Latin America. Our research examined many facets of the banks’ IT performance, including governance and organization, outsourcing and offshoring practices, the complexity of the application architecture, and the utilization rate of hardware. We then looked at the key financial metrics of the banks, cross-referencing their operational effectiveness. These metrics helped us identify a set of leading banks that spend carefully on IT and successfully apply those investments to the business. Examining the IT practices of banks in the top quartile highlights the link between certain IT practices and financial results, strongly confirming our experience that operational and other practices can substantially affect the performance of financial institutions.”
Some of their findings are obvious:
“Top-performing banks tend to form their IT strategies in close cooperation with the business by using formal governance processes and engaging the business to focus on value creation levers that are influenced by IT. What’s more, high-performing banks see IT as more strategic, and they drive more of their IT agenda directly; that is, they outsource less.”
Some maybe surprising:
“Top performers spend 45 percent of their IT budgets on innovation (new services or capabilities); lower-ranked banks only 29 percent. Best-practice banks also introduce new products in only three to six months, compared with six to nine for less well-run banks.”
And some just operational:
“Leading performers standardize their IT operations on a limited set of platforms and use infrastructure such as machines more effectively than others do. In Asia, for example, leading banks achieve utilization rates of 30 to 40 percent on their Unix servers, compared with less than 30 percent for lower achievers.”
It’s an interesting piece of research – along with many others that McKinsey produce - and is worth a read, but I have a more basic view of business and technology.
Technologists are a blockage for most businesses because any change to the technology can create huge amounts of change to their organisation, resources, budgets and capabilities.
As a result, most technologists resist change, adaptations and implementations of new infrastructure.
This is why the discussion of IT being unaligned with business is about as old as Men being from Mars and Women from Venus.
Meanwhile, there are some fundamentals at play that most firms, in the words of George W, misunderestimate.
A key one is the role of technology in banking.
Banking is a technology business, as underscored by bankers over and over again.
Banks must therefore clearly align technology with their business goals, and work as a cohesive council of governance between the business heads and the technologists to ensure achievement of delivery to buisness needs, on time and to budget.
This is why governance is such a critical factor.
And how do you achieve good governance?
You put a business person in charge of technology.
Not a CFO or CIO, but a CBO – a Chief Business Officer.
A CIO will be too blinkered because, coming from a technology background means that they will be too encumbered by the technology limitations to see the potential for innovation; a CFO comes from a numbers background, and is too handcuffed by the numbers to see the potential; a CBO comes from the business view and will see the potential.
Whoever a bank puts in charge of technology must see the potential.
Unfortunately many financial firms put someone in charge of technology who does not see the potential for technology to differentiate the organisation. As a result, the technology becomes subservient to the business needs rather than strategically innovating for the business.