By Art Gillis

Even though I got a degree in Accounting, I am not a CPA and Boston University didn’t offer courses in Fastow 101. I just know how to put numbers together accurately to come up with true costs. So here are some discoveries that might help bankers get a better handle on their true IT costs.

1. First, accept the fact that you don’t really know what your IT costs are. The more than 300 banks I worked for didn’t know. Some of them thought it was the bottom line of the invoice from their vendor. Others overlooked the bootlegged systems that department heads bought and coded them as “support resources.” Others didn’t know amortization from globalization. Whoever coded the expense ticket decided if it was an IT expense.
2. Annual reports of even the most sophisticated banks show a figure for technology expense. But they don’t include the IT staff because that expense is included in the total HR expense. That’s like drinking a diet Coke for lunch to cut back on your calories, and drinking three beers at dinner. It all goes in one stomach and pumps up your weight. Without people, IT halts.
3. Don’t rely on so-called industry surveys. Most of them just make you feel good, knowing you don’t stand out in a crowd. Surveys show that banks spend 10% of total operating expense on IT. It’s often double that. The highest I’ve seen is Citibank’s at 25.8%. For some community banks, it’s 6%.
4. Since there are no industry standards defining true IT costs (other than my brutally exhaustive spread sheets), force yourself to go on a witch hunt from bowels to board room in search of anything tech-looking.

Finally, don’t feel bad if you have a higher IT cost than your peers. I wasn’t a math major but the math shows that a 13% IT cost, for example, can be better than a 10% IT cost if it eliminated a host of manual functions in bank operations. The whole idea is to get to the truth so you can fix what’s broken. The General Ledger won’t do that for you. It must be a “General” problem. Even Generals at Walter Reed didn’t tell the truth.