Banks have one of the largest IT budgets of any industry, but what exactly are organizations getting for the money? Powering innovation starts with transforming technology and its use.
Almost every enterprise has a story about attempting to transform its operations, but ultimately coming up short because it lacked the IT bandwidth to finish the venture.
Many banks are built on legacy, and that includes legacy IT. Unless you’re leading a brand-new company, your organization has history which may often times mean expensive, valueless IT investments that bog down competitive advantages. And when it comes to who has the most to gain, not every industry is the same.
The banking and financial services industry nearly tops the list of largest IT budgets, spending an average 6.3 percent of revenue on technology, according to the 2014 Gartner IT Key Metrics Data. It’s only a few points behind the top spender – software publishing and internet services industry – which spends 6.7 percent of revenue on IT.
The enemy, however, isn’t cost. It’s the value IT delivers. That’s the difference between “old IT” and “new IT.” Companies of any size can exploit short-lived competitive advantages using technology’s speed, ubiquity and cost models—as long as they’re unencumbered by valueless IT assets.
Activities that “keep the lights on” consume precious resources. Eliminating valueless assets gives IT new-found time and capital to keep pace or even lead business innovation.
Think like a stockbroker. Data-driven buy-hold-sell management helps companies weed out unnecessary assets and focus on what furthers the business.
Thinking like an Investment Banker
Digital technologies offer nearly limitless promise, but funds and talent to deliver them do have limits. Some IT organizations allocate more than 80 percent of their budgets and talent to maintain the status quo.
But significant change can be made. For example, one financial services firm with a $4 billion IT budget unified its business and IT strategies with a focus on optimizing its application portfolio. The move not only reduced technological complexity, but also freed 15 percent of its IT budget.
The firm used a systematic, fact-based approach that can be replicated by other banking and financial services organizations. By using business and IT metrics, leaders are encouraged to think like a stockbroker and categorize existing IT assets into a buy-hold-sell portfolio.
“Buy” refers to applications needed to grow the business. “Hold” reflects necessary applications that don’t require investment beyond their value. Lastly, “sell” points to apps that are no longer useful, depleting resources and budgets without contributing to the organization.
Agility of the Lean
As companies identify and eliminate valueless IT assets through buy-hold-sell management, the IT operating model becomes focused, lean and more efficient. Business leaders will feel the operational agility of business and IT unified around things that matter most. New business capabilities will be delivered with the speed, accuracy and cost structure of a unified enterprise.
The IT investment yield curve quickly springs from a flat formation to a steeper, yield—more representative of a digital company.
Organizations that can deliver five-or 10-times the business capabilities per cost unit are operating with the desired steep operating model yield of a digital company. These are companies, regardless of size, are capable of delivering a digital knock-out blow to incumbent businesses operating with flat, old IT operating models.
As IBM’s Chief of Innovation Bernie Meyerson has said, “Those who stop innovating disappear.”
Banks Move from ‘Old IT’ to ‘New IT’
Some companies have seen as much as $200 million in savings over the course of 12 months, just by categorizing and rationalizing their applications. Like an investor looking to buy, hold or sell, the right decisions can make your application portfolio the catalyst for a new IT operating model.
Shedding the weight and complexity of unnecessary applications leaves a company with more money and greater bandwidth to focus on priorities beyond just maintaining operations, fostering innovation.
The impact is clear. Embrace the power of the new IT operating model and drive digital innovation so your company not only survives, but thrives.
Bob is Founder and President of KillerIT. He is responsible for KillerIT’s strategic direction and execution. During Bob’s 25 years at Forsythe Technology, he has held a number of national management positions and earned numerous distinctions. Most recently, he was senior vice president, general manager, responsible for serving clients in the company’s Central Area. His industry experience includes both software and hardware solutions at Unisys Corporation (F/K/A Burroughs Corp.), Dun & Bradstreet Software (F/K/A MSA Software), and Computer Associates, Inc. (F/K/A Cullinet Software).