Terry Dann says it is vital that
finance houses protect IT investment during difficult
times.
Go deeper with GlobalData
When the going gets tough, the IT budget
gets going – or so it seems in most companies. The IT budget is a
massive number in most financial services companies; a very
substantial percentage of total spend and not always well
understood or well-valued by senior executives. It’s the easy
(lazy) target for serious cost reduction.
Take care
Before wielding the hatchet, though,
perhaps we should remind ourselves of the fundamental role that IT
plays in the financial services arena? For us, IT is much more than
just an adjunct to the business – it is the business. IT is our
factory, our sales team and our customer service. By all means,
target IT efficiencies, but don’t destroy or endanger business
value or future capability.
Where can I expect to reduce my IT
costs?
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By GlobalDataClearly, in the current economic climate,
something has to give. So, what opportunities are really available
to reduce IT expenditure without risk? My own experience, managing
cost cutting strategies within the industry, has highlighted a
number of target areas:
– Start with an IT workload
review. Look at in-progress and planned projects/change requests
and prioritise them by business value. Accelerate those that reduce
cost and purge those that are no longer relevant to today’s
environment. This is probably not the time for those grand
infrastructure renewals!
– Go for process efficiency, both
business and IT, and use tools such as Six Sigma to reduce waste
and make multiple small improvements.
– Let go of IT agency staff and
protect the skills investment in your permanent staff. They have
your business knowledge and the right IT skills. They are your
future. ‘Agency’ should equate to variable and dispensable
resources – prove it!
– Review all hardware and software
licences and contracts. Are you paying for things you no longer
need or for a volume which no longer applies? When did you last
renegotiate your IT contracts? Now could be the right time to do
so.
– Reduce your IT energy consumption
– investigate hardware consolidation, virtualisation,
decommissioning old technologies.
– Consider outsourcing your data
processing/infrastructure operation and maintenance. There are a
lot of hungry people prepared to offer excellent service in this
area. Now is the time to get a good outsourcing deal.
Where should I maintain/increase
my IT spend?
– That was the good news; IT
expenditure can be reduced in many areas. It is just as important,
though, that the senior management team understands the
significance of IT to the business, protecting and developing the
budget in business critical areas. Again, based on real-life
projects, I believe the following should be high on the agenda:
– Ramp up mandatory application
software projects. Accelerate those on which the business depends,
such as faster/more efficient processes; development of competitive
and innovative products; internet sales channel; differentiating
customer services. You will probably need these just to stand still
in an ever-more competitive marketplace.
– Invest in essential technologies
to maintain competitiveness (such as SMS alerts), while replacing
ailing hardware to improve reliability and reduce energy.
– Maintain your IT skills. Don’t
stop recruiting the best graduates; they are your future senior
management. Take advantage of slack times to up-skill. After all,
this is when a pool of real talent – people with valuable financial
services expertise – is being laid off. Grab them while you
can.
What should I expect from my CIO
during this period?
– CIOs are always pressing for
bigger budgets. I should know; I did it for ten years. Well, now is
the time for the CIO to earn his/her stripes. Here’s what I think a
senior management team should expect from a CIO:
– Partnership. The
CIO should always act as a fully integrated member of the senior
executive team, ensuring the IT portfolio and priorities fully
align with those of the enterprise. The CIO and CFO should work in
harmony, with a clear understanding of each other’s considerations
and an eye to the longer-term strategy.
– IT prioritisation and
governance process improvement. The CIO should be
encouraging initiatives to drive out waste and risk from the IT
internal processes and project management methods.
– Leadership. Above
all else, the CIO should lead by example, maintaining IT morale
while proactively driving cost reductions that do not endanger IT
and business capability, today or in the future.
What’s the bottom
line?
– Simply rearranging IT expenditure
– reducing in some areas while increasing in others – is hardly
effective. A close eye has to be kept on total IT costs. The good
news is that, in my experience, even the most efficient IT activity
can probably reduce expenditure by around 10 per cent without
cutting into the muscle. For some companies, where this may not
have been a way of life in the past (probably several of our
financial services companies fall into this category) it is very
likely that reductions of more then 25 per cent are possible. The
caveat is a need for sensible management and due consideration of
the factors set out above.
The author is a director of Woburn
Consulting Group, and was the CIO of Ford Financial Europe for 10
years
