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How to Save Money on IT

The last time I addressed the subject of IT cost cutting for a mass audience was April 1978, at a BAI conference in Indianapolis. Bankers filled the room, but what surprised me was the absence of napping. Most of them were taking notes because my list was long and each bullet was self explanatory. To provide you with a sense of how much we have progressed in 33 years, I'll give you an example of what was on the list - "Recycle your microfiche processing materials to extract the precious metals."

The last time I addressed the subject of IT cost cutting for a mass audience was April 1978, at a BAI conference in Indianapolis. Bankers filled the room, but what surprised me was the absence of napping. Most of them were taking notes because my list was long and each bullet was self explanatory. To provide you with a sense of how much we have progressed in 33 years, I'll give you an example of what was on the list - "Recycle your microfiche processing materials to extract the precious metals."Saving money isn't just about spending less or not spending at all. Avoiding embarrassment is also a real cost savings item. Another tip was - "Don't throw your unwanted green bar reports into the building's dumpster." As I recall, that one came from a D.C. bank on K Street that discarded customer account activity printouts, which the shoe store on the first floor found useful as stuffing material in shipping shoes to its customers, many of whom were members of Congress. The Congressmen didn't appreciate that as the story hit the Washington Post.

Today's job of saving money on IT is a bit more complicated. For example, you may have to spend some money one time to get it back many times over during the life of your system.

In my opinion, there is one highly effective way to arrive at IT cost savings, aka productivity improvements. Hire your primary vendor to examine your operations in order to produce a list of corrections, refinements, enhancements and concessions. This may take some selling on a banker's part based on a finding that popped out at me in last year's Automation in Banking report. Of the ten popular core vendors, only three reported that they provide consulting services for their customers. Even though the report provides a clear structure for reporting the offerings of vendors, some vendors probably overlooked consulting because it is not a product like a piece of software or a service such as transaction processing. What's interesting is that I know these companies like the back of my hand and they all offer consulting services, sometimes referred to as professional services.

And if you're thinking this invitation to your primary IT vendor is like handing the fox a key to the hen house, you are either using the wrong vendor or you are a highly suspicious banker who never made a bad loan in his life.

To give you a head start as to what you should expect from this exercise, here is a list of deliverables.

1. A list of applications that the bank doesn't have, but should have to improve productivity. 2. Viewing the system in the broadest sense of the word, which pieces are broken or not pulling their own weight? 3. Which ancillary apps, even those with primary vendor labels, are weak? 4. Which offerings of the primary vendor has the bank opted not to implement? 5. What if anything has the bank done in its architecture that violates the vendor's native architecture? 6. Point to areas where the bank's system users do not measure up to the full scope of the system's capabilities. In other words, what aren't we using that we paid for? 7. Point out areas where greater integration is required. 8. Identify the weakest link in our ability to excel in customer service. 9. Are we using IT stuff that has outlived its usefulness? 10. Based on your experience with thousands of other banks, what have we missed that a bank using a competitor's system would throw in our face? 11. How much training (or retraining) is necessary? 12. How much of our deficiencies is the fault of: Bank management Bank employees Our vendor 13. To what extent is our bank a victim of what the pundits, bloggers and Boston Brain Banks claim is the legacy system syndrome? Or are we ready for a core system conversion? 14. Give the bank an overall score (0 to 100) if the criterion were "achieving usefulness and performance of the system."

If I were a bank CEO, I'd love to receive a report that delivered the above. But I wouldn't commission the study based on price tag. I would decide based on ROI.

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