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Banks should address IT complexity with more, not less, technology - Cornerstone Advisors

19 August 2015  |  3213 views  |  0 Source: Cornerstone Advisors

A new research report from management consulting firm Cornerstone Advisors finds that as banks and credit unions struggle with an overload of technology projects, the remedy is having more technology—not less technology.

Technology Management Complexity: Drowning in a Sea of Technology Projects found that half of 252 surveyed senior executives at U.S.-based financial institutions cite "too many projects" as a top technology concern for 2015.

"These executives are battling less with the complexity of their technology architectures than they are with the complexity of managing all that technology," said Brad Smith, managing director of Technology Services at Cornerstone Advisors. "It's all the enhancements, additions, replacements and vendor contract negotiations that are making it harder each day for FI executives to deliver measureable business results from their technology investments."

According to report findings, FIs with high or moderate "technology management complexity"—defined as the degree to which management is challenged to make coordinated, interdependent technology decisions—plan to improve the utilization of 21 applications in 2015, in contrast to the eight to nine apps for FIs with low technology management complexity. In addition, FIs with high technology management complexity expect to add or replace more than eight apps and renegotiate five to six contracts in 2015.

"As the number of technology projects an FI is managing increases, the likelihood that these projects will fall short of achieving their intended business benefits also rises," said Ron Shevlin, research director at Cornerstone Advisors. "The best way for banks and credit unions to manage this ever-growing complexity is to improve their existing technology capabilities."

Roughly eight of 10 FIs in the high complexity category will spend more on technology in 2015, the report states, with approximately one in four investing much more. This compares to 65% of moderate complexity FIs and barely half of FIs with low technology management complexity.

Among other key findings of the report:

On average, FIs will improve the utilization of 17 apps, add or replace nearly five apps, and renegotiate two to three contracts in 2015.
FIs' plans to improve, add/replace or renegotiate lending apps are not on par with their plans for other technologies. Among five lending-related apps, none are in the top five for utilization improvement, addition/replacement, or contract negotiation.
From 2014 to 2015, there was a double-digit percentage point increase in planned utilization improvements for 21 technologies.

The report includes recommendations aimed at helping financial institutions better manage technology complexity, projects and contract negotiations as well as a scorecard FIs can use to assess their levels of technology management complexity.

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