Dan Barnes canvasses the views of senior technologists within the banking industry on the innovation challenges they are preparing for during the remainder of this year.

 

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Lars Gustavsson, CIO, ABN AMRO

 

Effectively managing a multi-vendor outsourcing model

In the financial services industry, firms are increasingly outsourcing IT processes to multiple vendors, with ABN AMRO at the forefront of this trend. Ensuring the success of this multi-vendor model, our focus will be on maximising commercial leverage for global and regional projects, close tracking of service-level agreements and key performance indicators as well as ensuring the retention of staff with strong multi-vendor management skill sets.

Move from technology-centric to service-centric

The days of IT operating in its own silo are long gone. Today, to truly succeed in adding value to the business, IT is moving towards a more commercially minded, services-oriented mindset. IT organisations are professionalising service management capabilities, emphasising the development of things such as service catalogues, activity-based costing and formalised user feedback.

Participate in battles in the marketplace

A challenge for IT is to shift the mindset of its business partners from being perceived as merely a cost centre. IT is becoming the critical enabler that links the back and front office of financial institutions. To assist the business in driving competitive advantage, it must participate more actively in revenue enhancement opportunities and exploit the advantages of this interconnectivity.

Managing risk

The complexity of today’s regulatory environment means that assessing and managing IT risk remains a priority for many organisations and is a key consideration for any new business proposal. For example, new sales, communication and execution channels within the private banking area are reliant on proper risk control for compliance with global and regional regulations for high net-worth individuals residing in different countries.

Driving innovation

Establishing formal innovation processes and exploring new innovations is at the top of the agenda for many CIOs. Disruptive technology can facilitate the identification of new business opportunities, support current projects, and assist the organisation in gaining a competitive edge in the marketplace.

As new technologies begin to emerge, successful CIOs will find ways to identify their potential to provide business solutions. For example, the usage of RFIDs [radio frequency identifications] could move beyond IT security into broader areas such as supporting customer profiling and payments innovations.

Agility of IT management

An agile IT organisation is invaluable to supporting the business that seeks to be responsive to changes in the competitive landscape. Agility enables scale at diminishing cost, as well as being able to go highly specialised on a small scale, while maintaining and not being restricted by legacy environments.

Use it or lose it

In a commoditised marketplace, technology has a greater role to play in driving competitive advantage. Firms that recognise this are likely to be more successful than those that view technology as a necessary evil.

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Damian Atkinson, UK CIO, wholesale banking, ING

 

The balancing act between providing a cost-effective service with innovation is possibly explained as a four-way pull between:

Service delivery

Those services we provide daily that our customers expect as soon as they come into the building.

Controls

Being compliant with internal and external rules and regulations and being open to self-assessment of the services we provide.

Staff

Meeting the needs of our staff through a combination of financial rewards, stimulating work, training and education and a career plan. Get succession planning done.

Operational efficiency

Balancing the above to provide a cost-effective service with the room to innovate and to show the IT yield rather than the IT cost savings.

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Gerry Pennell, CIO, Co-operative Group

 

Meeting requirements

Implementation of Faster Payments and Basel II – that should be done by now from an IT point of view but no doubt there will be some settling in and amendment.

Core banking

The gathering pace/interest around re-platforming core banking.

Awareness of consumer technology

The impact, potential opportunities associated with the blurring of the boundaries between corporate and consumer IT.

Security, security, security

Particularly looking at approaches to online customer authentication and safety.

New payments methods

The technology and growing adoption of contactless payment.

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John Crane, CIO, National Australia Group UK

 

Right cost IT department

Agility and cost effectiveness in delivering to the business – how do we get the right TCO [total cost of ownership] for the technology department without sacrificing speed or quality.

Capability and agility

Enhancing delivery capability through co-sourcing.

Investing for the future

Making the right investments for the organisation long term as opposed to short term. Bank-wide thinking over project silo thinking.

Security

Ensuring the organisation stays secure in a connected business environment – getting the right balancing between open access through web technologies and securing the organisation against ever more innovative security attacks.

Reusable business services

Making the promise of reusable business services a reality. The continuing challenge to develop applications rapidly and flexibly makes service-oriented architecture’s [SOA] promise of reusable large-grained components that can be rapidly reconfigured and deployed a critical approach for the future.

Virtualisation and lean approaches to data centre operations

Most organisations have taken the benefit of consolidating data centres and the servers within them. Virtualisation, both vertical and horizontal, is the next step along this evolution. The technology is now maturing and will be rolled out to improve both cost-efficient usage of infrastructure and to increase the robustness and performance of shared systems.

José ValinoCIOCaixa Galicia

Execution

There is a strong feeling that I share with colleagues that the main CIO role is now about execution, execution, execution. Every banking employee in Spain sold three times the amount of financial products in 2006 than they did two years ago. The competition is very strong and we are obliged to put more products on the market and at the same time cope with regulations such as the MiFID [Markets in Financial Instruments Directive] and increasing levels of quality of service.

Core banking system transformation

We can see a shift from banking packages (where suppliers lost the quest for SOA) toward incremental change in core systems based on new architecture and principles (even open systems and heterogeneous architectures). We will still see ‘pieces’ of those solutions on the market, but there will be a new and important role for the architecture function.

Consolidation of the digitalisation process

Taking advantage of those in place in the convergent worldwide IP [internet protocol] network.

Deployment in Spain of the new DNI

This is the national identity card, with chip and security, that has the potential to transform the banking process in Spain (risks process, know-your-customer regulation).

Mobility

This will be a key technology in which to develop and invest. For example, using the mobile as a second security factor for online banking instead of the more expensive tokens.

Security

Security is a key concern particularly with ATMs and the internet.

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Mark Cates, Senior vice-president managing director, Corporate & Investing Banking Technology, Wachovia

 

The major technology to follow in 2007 is virtualisation. The virtualisation trend should evolve from a pure provisioning type of model made popular by VMWare to more of a utilisation model that is made possible by newer, more sophisticated middleware control software.

The major benefit resulting from virtualisation will be marketed as cost savings but the early implementation of serious virtualisation technologies will most likely result in a cost increase until the technology is fully embraced as a replacement for existing implementations as opposed to an addition to existing implementations.

Longer term, the efficiencies from higher server utilisation, lower power and cooling consumption, and reduced floor space allocation should result in significant cost efficiencies.

The new control and monitoring applications being developed for the virtualisation space will allow the creation of true services utility based on an SOA framework. This services utility will be the major benefit of virtualisation in the near and longer term and will provide businesses the type of flexibility required to expedite time to market for any products with a large IT component. The application of virtualisation to disaster recovery will also present businesses with a myriad of new options that should increase redundancy for more reasonable costs. The other trends that will be very important to watch are the complementary trends to the virtualisation model in the areas of data storage and data caching, which will increase the performance and efficiency of the virtualised environment.

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Tobias Straessle, CIO, Saxobank

 

The war for talent

Finding the right people, finding enough of them, and at the right price, and being able to retain them.

Delivering business value

This is as much a challenge for the business as it is for IT, requiring strong business ownership and engagement to make it work.

Keeping up with growth

With ever-increasing volumes, better/ faster performance requirements, and increasing demand for added business functionality – this requires striking the right balance between infrastructure investments and application development.

Delivering high-availability

Technology is so integrated into everyone’s lives, and dependency on it is so high that system failures or non-availability are becoming increasingly intolerable – this requires IT to think high-availability all the time in everything they build, demanding time/money as well as the right skills/experience and courage to make a fundamental decision to drop legacy systems rather than keep patching up the old stuff.

‘Letting go’ of ownership of non-competitive business capabilities and processes

Many companies (and especially IT engineers) are still reluctant to leverage the third-party market to deliver in these areas. But I think the third-party market is much more mature now and many business processes are standardised, thanks to increased automation and on-demand offerings, which allow for quick and cost-effective implementation.

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