Financial services CEOs might think they know how best to use their IT resources, but according to a recent study by Gartner and Forbes.com, this is not always the case. Bank Systems & Technology was provided exclusive first access to this telling report by the Stamford, Conn.-based research firm. Full results of the study will be made public in a presentation by Gartner managing vice president David Furlonger at the upcoming Gartner Financial Services Technology Summit (Aug. 29-31 in New York).
This marks the report's fourth year in which CEOs from 14 industries are polled about their attitudes toward IT. Out of a pool of 1,035 respondents, 167 were from financial services firms (banks, insurers, investors). In most cases (52 percent across the three sectors, 48 percent at banks), the primary responsibility for funding new IT projects and investments rests with the CEO. However, the overall findings demonstrate there is a chasm between CEOs' goals and their use of IT to attain them.
"There is a disconnect between what is required in the boardroom and what it will take to achieve that," Furlonger says. Financial CEOs appear to have a love/hate relationship with technology. When asked if they view IT as an enabler or inhibitor of organizational change, 65 percent of bankers said it was both (compared with 39 percent and 40 percent from insurers and brokers, respectively, who mostly see technology as an enabler).
Perhaps an offshoot of this attitude is that 40 percent of financial services providers do not measure ROI on any of their IT investments, while 43 percent said IT is considered after business objectives have been set. Banks are slightly ahead of the curve compared to their insurance and brokerage counterparts, with 35 percent stating they measure ROI on all IT investments (compared with 9 percent of insurers and 19 percent of brokers) and 52 percent saying they find IT critical when planning business strategy (contrasted with a similar 52 percent from insurers and 45 percent from brokers).
According to Furlonger, these numbers are too low and lead to failed projects, project cost overruns and lack of competitiveness. "This is not the fault of IT -- it's the fault of business for not introducing IT into the equation," he maintains.
Furlonger says this is really a cultural problem at financial services firms that needs to be overcome if they wish to remain viable in the future. One significant area of change must be in firms' attitudes toward their IT departments and CIOs.
"Some organizations have progressive CIOs. Some sit on the management committee and have a voice in business technology decisions," he explains. "But these are few and far between in general. There is a massive gap between the IT department and business."
At the majority of financial institutions, claims Furlonger, IT is considered an enabler of business processes but not a contributor. "Until IT is considered a vital contributor to the bottom line, you will continue to see competitive differentiation emerge [along these lines]. There is a huge cultural issue associated with this. What you're asking is to think of IT as a business generator and not a cost to your bottom line ... from cost center to profit center."