February 10, 2004

There's a pretty reasonable chance, both for us and the industry as a whole, that we're going to wind up spending more money in 2004 than we spent in 2003," says Bob Rickert, CIO, KeyCorp (Cleveland; $85 billion in assets). "The signs are probably more positive than they've been in quite a while."

That bodes well for technology workers. "I wouldn't be surprised to see more turnover of employees," says Rickert. "We're going to focus on trying to retain our top guys...and stealing other companies' top guys!"

Increased tech spending would also help line-of-business executives who have had to cope with a backlog of unfulfilled projects. But the enthusiasm is still restrained, as KeyCorp intends to play it safe by waiting until the second half of the year to take on anything new.

Furthermore, Rickert has made one thing clear to his team: "I don't want to have any more science-fair projects," he says. For instance, Linux might be a fun thing that everyone likes working on, but that's no excuse to divert resources without a clear return and a proven business case. "There's all kinds of interesting stuff out there that potentially could do good things," he says. "On the other hand, we do have an installed base and a bunch of assets that have been paid off. You don't want to just go swap that stuff out recklessly. You've got to have a good reason."

Great Reasons

Indeed, KeyCorp's top projects for 2004 simply build upon the top initiatives for 2003:

Check imaging. Last year, Key implemented an enterprise-wide check-image-archiving system. Now, with Carreker Corp. (Dallas) as a technology partner, it has been preparing to exchange those images with other banks. "In 2003 we were pretty successful in getting a lot of check-image-capture technology rolled out, and this year we really want to build on that," says Rickert.

Analytics. KeyCorp is in the midst of deploying software from Siebel Systems (San Mateo, Calif.) to all of its branches and sales associates. "Like most banks, we've got mountains of customer data piled up, and we're really looking to get better analytics off of that," says Rickert. "We're going to take our data, get better analytics, and then farm out the leads."

Information security. "I think that this is going to be another bone-crushing year as far as security patches, vulnerabilities, and all that kind of stuff," says Rickert. "That's going to consume probably more resources than ever."

The front-and-center focus on imaging highlights the strategy for KeyCorp, which has taken a leadership role in the transition to the emerging world of electronic-check processing. Indeed, every bank has a choice to make in 2004 as to how it approaches the business of clearing checks. "You can always try to chase after that ever-shrinking pie and keep your centers going, or you can embrace the change and live with the consequences," Rickert observes.

However, the promise of greater efficiency in the check- clearing system comes at a price: revenues. "Today, we're paid a fair amount to handle all those items," says Rickert. "We're going to have to take costs out to match the loss of the revenue."As one of the eight "vanguard banks" working with SVPCo on electronic-check presentment and image exchange, KeyCorp hopes to achieve first-mover advantages. "We'll be one of the early learners, so we'll know what's going to work and what to avoid," says Rickert.

A former IBMer, Rickert brings a varied perspective to the business dynamics involved with the introduction of disruptive technologies such as image-exchange networks. In situations such as this, "the first entrant generally reaps the most of the economic return," he says. "Once the costs start to come out and prices start to fall, then the people who show up later are going to be playing catch-up."

Not that it's safe to stay on the sidelines, either. "There's a lot of risk from an industry point-of-view," says Rickert. "There's a lot of capacity in the industry to handle all this stuff."

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