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Running a bank as an IT shop … is the pain worth it?

I was sitting through a vendor presentation …

Presentatino

… when a slide
popped up titled: industry pain points.

It was an interesting slide about the banking industry’s challenges
with technology.

The slide was divided into four sections, the first of which
talked about the challenges of managing technology effectively.

The issues here relate to:

  • increasing total cost of ownership
  • an uncontrollable number of new applications
  • applications become inefficient and obsolete more rapidly
    over time
  • returns on investment are not delivered as promised
  • too many companies providing too many solutions at
    different price points, making it difficult to compare apples with apples.

The technologies are a challenge:

  • too many platforms, applications and technologies that are
    legacy
  • too many systems that are not integrated or web-capable
  • too many applications that are too tightly integrated to
    be able to unravel them
  • new technologies disrupting the existing infrastructures
  • existing applications that have become unstable,
    unsupported or unusable

The technology processes are a problem:

  • challenges to comply with new regulations
  • processes that are unique and cannot be standardised
  • processes that should be complied with but suffer from low
    adherence to the flow or rules
  • lengthy time-to-market
  • process performance failure and inefficiencies

Finally, the human talent pool is a barrier:

  • a reducing pool of expertise in specific areas
  • lack of in-depth knowledge of product, process, domain or
    system
  • issues with utilisation and productivity of staff
  • attrition rates increasing
  • difficulty in getting best practices shared
  • increasing costs of gaining and retaining good people
  • too much dependency on core staff

The list here is not exhaustive, but represents the key
things highlighted during the presentation.

At this point, I did ask myself: why do we bother?

Why would a bank bother with all this pain?

Isn’t it all too difficult?

Are banks banks, or are they technology firms?

And yes, I know some banks technology departments are bigger
than Microsoft
, but should they be? (the answer to
this one is yes by the way)

I then realised the answer to the question: outsource!

Of course, it is.

And guess what? 

The vendor doing the pitch is an outsourcing company.

Oh, good move …

Goodpresentation

Images sourced from Impact Communications and Stockex

About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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  • The principle I rely on is “never outsource your core business.”

  • Sarah

    I agree with jang which is why I think it is probably a good idea that banks outsource IT… I hear time and time again how poor (if any) the ROI is on internally led IT projects.

  • IanJSutherland

    Unfortunately outsourcing creates its own challenges! And will require different skills from the “bank”. The outsourcing company did its job well to leave you with the answer to outsource and is probably part of the answer in relation to established, standard technology and services, but where agility and pace is part of the bank’s key proposition it may struggle.
    Shaking the status quo up is often good to deliver at least short term improvement, as is considering all the options, but I fear that the answer is nowhere as simple ad “either/or”.

  • hakan karamanli

    Banking products are %99 percent IT outputs. If you outsource IT, ıt is very difficult to differentiate your products.