Investment Banks are at an interesting cross-road when it comes to their technology investments. Over the last few years, the investment banks cut down their IT spends while the demands from the IT organization continued to increase. Over the last few years, the IT organization was in a ‘React’ mode; responding to the budget cuts by slowing down new programs and by diverting IT spend to ‘mandatory programs’ like Dodd Frank, EMIR, FATCA etc.
“This, however, is not enough to bring a change in how ‘technology gets consumed’ by the banks and bring in efficiency. There is a need to ‘Reorder’ or ‘Refresh’ technology investments and the IT departments in these banks are now starting to think differently.” says Vinay Jhari, Vice President at Sapient Global Markets, a division of Sapient and a leading provider of services to today’s evolving financial and commodity markets.
Initiatives that Investment banks are undertaking to reorder technology investments:
– Rationalization of their IT Application footprint
Most banks, in the good old days, built far more applications than they needed leading to redundancy in their application stack. With budget cuts, there is an opportunity to review and rationalize the application footprint. While it is significant spend in the short term, it will lead to long term savings.
– Focus on Wealth Management
Most Investment Banks are increasing their focus on wealth management. In their search for ‘fees based income’ that is more regular and predictable, it will create the need to build ‘best in class customer experience/interaction tools’ in addition to improved tools for their ‘advisors’ and ‘agents’. The race to ‘retain customers and Assets’ will be won by those who get this right.
– Investing in ‘off the shelf’ products as opposed to customized applications
As old applications become obsolete (either due to business change or tech obsolescence), most banks, especially mid-tier banks, will look at standardized products.
– Rationalize ‘technology investments’ in the compliance and regulatory space
Banks have built redundant applications in this area given ‘time to market’ constraints and will look at fixing this over the next couple of years.
– All investment banks are reducing their FTE headcount in their desire to cut costs
Banks are looking forward to their ‘In-House captives’ to step up to the plate outsourcing more ‘change the bank’ work to lower cost locations.
– More ‘outcome based programs’ rather than ‘lowest cost outsourcing’ bids
Banks are looking for partners that can deliver outcome based services as they look to reduce the ‘Total Cost of Ownership’ as opposed to focusing on just dollar/ hour rate.
