IT Simplification in Financial Services

IT Simplification in Financial Services

          
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IT Simplification in Financial Services

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  • In This Article
    • According to some estimates, IT complexity and inefficiency is costing firms worldwide $750 billion per year in lost productivity.
    • Such problems can be solved by radically simplifying the IT landscape—reducing overall IT costs by up to 30 percent.
    • Financial institutions that act decisively to reduce IT complexity will gain considerable competitive advantage.
     

    Over many years, the IT function in financial institutions has evolved from a mere transactional tool into a pervasive, integral element of virtually every aspect of doing business. This transformation has constituted a fundamental, structural change in the financial services arena and has put IT performance at the top of the CEO’s agenda at most banks and insurance companies.

    Yet most institutions are facing a major IT problem: how to cope with growing complexity. This complexity can stem from numerous sources, such as funding models that make it difficult to pursue long-term, low- ROI projects like IT application consolidation; shortterm business decisions whose cumulative IT ramifications become problematic over time; old and inefficient legacy systems that are never retired; numerous new applications that are incrementally patched in without sufficient regard to their effect on the longterm IT environment; and poor integration of IT systems following mergers and acquisitions.

    As it evolves, IT complexity causes severe problems for financial institutions and their customers alike. For example, employees often see only a portion of any given process and are unable to get an integrated picture of a customer’s current holdings or position on one screen. Staff must deal with multiple applications that show inconsistent or incorrect data and must log on to numerous systems every day. Customers, for their part, must cope with the staff inefficiency that results from a disjointed IT landscape and frequently must turn to multiple channels to resolve issues—often with different points of access providing conflicting information.

    Moreover, from a cost standpoint, IT costs are growing faster than any other category for most financial institutions. And between 60 and 80 percent of IT budgets usually go toward maintenance, with about half of what remains being committed to wiring in new applications. Precious little is left over for investment and renewal. Indeed, in a value-creation sense, the cost of IT’s effect on staff productivity and morale is greater than the cost of capital for most banks.

    The problems stemming from IT complexity can often be solved by radically simplifying the IT landscape. Such an initiative can also reduce overall IT costs by up to 30 percent and provide significant benefits in terms of increased flexibility in implementing future changes to the IT environment. But how can banks go about a comprehensive IT streamlining?

    To Contact the Authors
    AMERICAS
    • Alumnus
    • Boston
    ASIA-PACIFIC
    • Senior Partner & Managing Director
    • Sydney
    EUROPE & MIDDLE EAST
    • Partner & Managing Director
    • Cologne
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