"Wait and See" No More

At the beginning of 2003, we noted with irony how those executives who, by more or less ignoring the flurry of strategic IT initiatives pursued by many institutions in 1999 and doing very little or nothing themselves, may have saved their jobs through inaction for the time being.

This seemed an unlikely prospect just a few years ago when such managers were considered obsolete. For these managers, time is of the essence.

Financial Insights classifies strategic IT initiatives into three categories: "hitting full stride," "reaching a tipping point" and "talking before walking." Each category designates the maturity and business impact of an initiative over the next 12 to 18 months.

Drum Roll, Please

Hitting full stride are enterprise-performance management, risk management, channel renewal and fraud management.

These strategic initiatives have become well accepted, and management's focus is now on execution, meaning that banks have set the course for their strategy, made some selections of appropriate technology solutions and have to fulfill management's expectations.

Reaching a tipping point are enterprise payments, rightsourcing, integrated-delivery systems and compliance reporting.

These initiatives are near the fringes of mainstream adoption. Getting from where we are today into tomorrow requires a strategic focus by management on developing the rest of the puzzle pieces.

Talking before walking are intelligent-interaction management and exception-based banking.

These are interesting ideas that require further strategic analysis by banks. While some of these concepts are not yet ready for prime time, they could turn out to be the "next big thing."

Spending Outlook

The outlook in 2004 for IT budgets at banks is for a modest increase of about 5.1 percent over 2003 spending levels. Our surveys of banks in the fourth quarter of 2003 suggest that their key business drivers center around three key themes:

- infrastructure, back office and reporting for cost-related reasons,

- compliance and risk management for regulatory reasons, and

- customer management and front- office initiatives for market-related reasons.

Overall, bank management frequently cited regulatory compliance, operational risk, front office and infrastructure as the most important initiatives.

Yet caution about IT spending remains a common theme.

Everyone now realizes that the Internet exceeded the expected spending levels, but it has become an established channel that cannot be unplugged.

Solution providers-whether hardware or software vendors or consultants/systems integrators-who are most effective at delivering the goods will continue to succeed. For these providers, it is not about closing deals or hitting quotas, although they certainly keep track of results. Rather, they are aiming to achieve the status of trusted supplier.

As vendor revenues expand at a modest rate, we expect to see more consolidation among all types of solution providers. Of course, nothing beats having more satisfied customers than everyone else.

However, the challenge for all solution providers is to succeed at helping middle-of-the-pack and laggard banks improve.