3. The Cost of Cost Cutting
Steven Lewis, a London-based lead analyst with Ernst & Young's global banking and capital markets center, contends that banks' IT organizations may be victims of their own success at cost reduction. Lewis explains that banks were so focused on staff downsizing and offshore outsourcing to lower costs that they may no longer have the right people with the right skills and the institutional memory left in their IT departments.
"We're seeing a real issue with the cost of cutting costs," says Lewis. "Technology will continue to evolve as a differentiator. Banks will need their IT staff to adapt to become more of a strategic partner rather than a low-cost technology provider."
In fact, banks have been so focused on downsizing or hiring technology specialists for labor arbitrage, says McKinsey's Weinberg, that they've lost the IT generalists who can solve problems across business units and will be increasingly needed in the bank of the future.
4. Changing Service Models Change the Required Skill Set
Many banks are shifting to an IT environment in which they outsource applications or run them as software as a service rather than develop and run systems in-house. In this scenario, coding and programming skills take a backseat to the ability to direct and manage third-party providers and partners.
"IT staff must be more savvy with procurement, risk management, regulatory understanding and insight into service providers that are available in the marketplace," says Accenture's Sullivan. "The IT workforce of the future will need to manage a growing ecosystem of service providers to ensure that they bring value to the bank. The IT role is more business-oriented than it used to be."
Adds PricewaterhouseCooper's Courbe, "More than technology skills, banks need sourcing managers, vendor managers and risk managers. It's less about operations and more about governance and managing risk."
5. More Demanding Customer Expectations
Banks no longer have the luxury of defining what constitutes an exceptional customer experience, explains Accenture's Sullivan, and that has implications for IT skills. Instead, customers judge their banking experience based on their experiences in other realms, such as comparing what it feels like to walk into a branch versus an Apple store. To keep up with more demanding customer expectations, banks need IT staff well-versed in using technology to create a good customer experience.
In fact, the lines between financial services and retail are blurring, says Deloitte's Hughes, and banks increasingly need IT staff that understand how customers think and what they want. "Banks can teach banking to their staff," she says, but responsiveness and sensitivity to customers is a skill IT workers need to bring to the bank.
6. Finding the Right Leaders at the Top
The role of the CIO is shifting as well, says Accenture's Sullivan. A new CIO, one who melds technology with business background, is replacing the technology-focused CIO of the past. "Many banks are changing CIOs and trying to inject better business acumen into that leadership position," notes Sullivan. "Banks want the CIO to be able to have a strategic business conversation with the CEO and COO."
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E&Y's Lewis argues that those holding the title of CIO in a bank, even if they came up through the technology ranks, most often have spent part of their careers in different functional areas and already possess a keen business understanding. He believes the biggest challenge for banks is to appropriately staff the level directly under the CIO. "Rather than be a technology expert in a system or a function, IT management will need a broader understanding of what the bank is trying to achieve, the impact of regulations and the ability to partner with other areas of the bank," he says.
The title of chief technology officer is still viable, but banks need to clearly define the role of the CTO, adds Deloitte's Hughes. It's not unusual for bank employees to be confused about who is responsible for the overall operating model or for making strategic IT decisions, she relates, adding that clarity of roles is especially important for banks that choose to designate a second in command to the CIO, whether a CTO or another executive.
"It's amazing how banks just assume staff understand, but banks need to reiterate responsibilities since they are on-boarding employees all the time and the business is constantly shifting," says Hughes. "Especially for banks with multiple technology implementations, I hope it's clear who is driving the ship."
Accenture's Sullivan sees a new executive role emerging in the bank of the future: the chief technology risk officer. This job title reflects the new risk paradigm inherent in operating an ever-growing set of channels and a more diverse portfolio of products and services, and in managing multiple vendors in a service-delivery model, he says.
The IT workforce of the future will be increasingly important to a bank's success, and there will be shifts in the required skills of the workforce that reflect the changing banking environment, McKinsey's Weinberg suggests. "Technology has never been more important in banking," he says. "In fact, technology is the bank from the customer's perspective. At the same time, banks are facing an incredibly challenging economic landscape, and technology can help them run more efficiently. Staffing will need to keep pace."