Industry chief Dominick Cavuoto tells Parveen Bansal why banks must seize control of their IT strategy.As president of Unisys’ Global Financial Services division, Dominick Cavuoto leads a practice that provides strategic technology business transformation solutions to financial institutions around the world. With years of management and consulting experience, Mr Cavuoto has strong views on the current state of the financial services industry and its technical perspective.

Trying to heal wounds

“There are a number of pressures on the banking business right now,” says Mr Cavuoto. “Speaking with senior executives around the world, it is clear that this level of pressure is unprecedented, and most agree there is a general down-trend.”

The financial services industry is suffering the aftermath of the economic boom-and-bust of the 1990s, the impact of global terrorism and SARS (severe acute respiratory syndrome) as well as other local and international events. On top of this consumer and regulatory compliance demands are higher than ever before.

“‘It was the best of times, it was the worst of times’ is a phrase that describes well the current state of the financial services industry today,” Mr Cavuoto says. Financial services institutions have two options in light of the current environment, he says. Organisations can keep their heads in the sand in the hope of bearing it out, or they can take charge and proactively navigate their way through the storm.

“Many organisations still bear the wounds suffered from headless investment in the internet in the late 1990s,” Mr Cavuoto says. Deemed to be the next generation’s key channel of communication, the internet was also found to be a low-cost channel. Although today it is an important medium, it is not the universal channel it once was heralded to be, and operating costs are soaring with organisations sustaining several channels both old and new.

“When the bubble burst, everyone thought that all they had invested in was useless, and many began questioning the internet,” says Mr Cavuoto. “However, the internet plays a critical part in the tactical, day-to-day operation of banks, as do the legacy systems at the core of the organisational IT infrastructure. None can be disposed of, yet change in investment is necessary in order to survive. No one is talking about organisational adventure of the kind that existed during the dotcom boom and internet’s heyday. Today the talk is that of survival. Change is imperative.”

Look at long-term objectives

While organisations in the 1980s established themselves with the limited support of technology, the following decade saw a wave of technological investment with the aim of automating several processes, chiefly technology du jour. Today, says, Mr Cavuoto, the technical infrastructures of these organisations are a mess, and their chief challenge is to reduce operating costs.

For some this may mean investment in new technology to replace the outdated systems developed more than 20 years ago; for others it may be rationalising the current infrastructure to eliminate costs. The best solutions are determined by taking into account the long-term objectives of the business.

Another driver of the transformation wave rippling through the financial services industry is the changing meaning of globalisation. “In the 1970s and 1980s, becoming a global organisation meant that the company had bought other companies abroad,” Mr Cavuoto explains. “Today globalisation is about acquiring or setting up a new office in a foreign country and then integrating the company in both the technological and business sense.”

The aim, and the challenge, is to integrate the organisation across the world to have a common set of goals, governance and values achieving consistency across the different regions and cultures.

The imperative to change is great, the money insufficient, the systems inflexible and the risk high. Which is the best approach? “Organisations are caught in a quandary,” says Mr Cavuoto. “All the heritage systems must continue to operate supporting the business, and new development is essential to enable them to lower operating costs. But with maintenance dominating a major chunk of the IT budget, there is little left to spend on new technology development.”

While there are many proponents to change by replacing old systems with new, in practice this is no simple matter. “Organisations that do not maximise the value of what they already have in terms of technical assets and infrastructure are foolish,” Mr Cavuoto warns.

Recent technological developments such as J2EE, Microsoft .Net and the concept of web services mean organisations can now keep their heritage and invest in tomorrow with a degree of certainty that investments are focused and getting value from their legacy systems. “But in order to better utilise the IT assets, businesses need to understand where they stand today and where want to be in the future.”

Decision making

The challenge of change and integration is not to be underestimated. Mr Cavuoto quotes a Costa Rican banker who summed it up aptly: “It is like charting a path through the Amazon without destroying the plants and weeds and still developing the infrastructure.”

Banks now have had to change their decision-making criteria for any investment. “Gone are the days of thoughtless spending,” Mr Cavuoto says, suggesting that organisations have to be more careful.

“Over the past few years, many banks and insurance companies have attempted to align their architectural technology frameworks with their corporate strategies, but they lacked the internal governance to link business and technology goals in real time to capture a greater market share,” he explains.

To help organisations overcome this challenge, Mr Cavuoto is leading the development of Unisys Business Blueprints, a method combining intellectual capital with a suite of tools, methods and business technology assets to deliver solutions and transformation initiatives faster. He says the blue-printing solutions provide a new, prudent means of understanding the organisational capability today and its potential for tomorrow in order to align the IT strategy with the overall business strategy.

“The blueprinting solutions are for organisations willing to take charge of their future,” he says. “Blueprinting is a concept that allows an organisation to chart its business and technology needs and keep its employees focused in the direction that is most efficient. The blueprinting solutions focus on both the top- and bottom-line impacts of any change initiatives.”

Visualisation exercise

The idea is to enable the management to visualise and gauge the impact of any strategic changes on the IT infrastructure and the business itself. “The blueprinting methodology provides senior management with a road map to manage change, to get them to their future destination,” says Mr Cavuoto. Early client experience indicates business blueprinting can deliver cost savings of 25%-60% from improved business processes, reduced cycle times and elimination of redundant elements.

“The blueprints enable organisations to assemble new business structures in terms of people, processes and technology, to prepare for shifts in the market, organisation or technology,” he says. It has been said that tech-based business blueprinting allows companies with diverse operations and geographic presence to achieve greater operational efficiencies. Its basis is to leverage a common architectural platform to make maximum re-use of critical business processes and supporting software.

Despite the pressures of the current market and business environment, Mr Cavuoto is optimistic. He believes the present period is leaving a tide mark that will be remembered as an advancement in the financial services industry, when reason and technology met. “The best solutions are often developed when organisations are forced out of their comfort zones,” he says.

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