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A New Kind of Executive Needed for Future Bank CIOs

From globalization to regulation, today's bank CIO needs to be both business manager and tech guru.

As banking continues to transform into more of a global, 24-hour financial services environment, the role of the bank CIO also will continue to evolve to meet new demands. According to experts, one thing is for sure: Now that bank CIOs have earned a place at the executive table, they need to prove that they belong.

"We've seen a good crop of CIOs in the industry," says Carl Carande, partner and manager of KPMG's Southeast asset advisory practice (Charlotte, N.C.). "But the business needs are changing, so the CIO needs to change, too. This is not a training issue but a matter of finding a different kind of person."

"Today, the job of a CIO is the job of a top-level general manager, as opposed to in the past when the CIO was a top-level technology manager," adds Accenture (Chicago) managing director Gary Curtis. "IT is a large business in a financial institution that touches everything, so you need someone who understands technology and can be a peer with the other C-suite executives."

As such, these days picking the right CIO must be a top priority for banks, according to Scott Hansen, EVP with Harland's (Orlando) integrated solutions group. "Twenty years ago, hiring a CIO used to be almost like an afterthought -- you needed someone to run the bank's systems," he says. "Now this is on boards' top-five lists."

This change, says Hansen, is due to the fact that banks recognize the importance of technology to the survival of the business. "The premise of the CIO being involved in business alignment goes without saying," he relates. "But beyond that, the role of technology has become central to the competitive future of financial institutions today. ... If you're operating with the premise that IT is the bedrock of the bank's future, then the CIO shouldn't be passive."

Rather, given the pace of change in banking and technology, the CIO must be a leader, stresses Jeanne Capachin, research VP, global banking, Financial Insights (Framingham, Mass.). "It's a tough role," she comments. "You're going to need a strong CIO to lead staff through all these changes, and someone who can lead the business partners and help them realize the need to invest for the long haul. The CIO must be a strong voice in the company."

The Sum Is Greater Than the Parts

In fact, the job is so challenging that banks might want to consider dividing up the CIO role so that there is someone to oversee the actual technology infrastructure, such as a chief technology officer, and someone to oversee the development arm of the IT department -- the CIO, suggests Andrew Dresner, director of Oliver Wyman's (New York) strategic IT practice. "These are two jobs, where the CIO would work with the lines of business and be expected to understand the business more, and the CTO would be there to make sure the infrastructure works right," he says. "The job is so huge that it's hard to find one person who understands the infrastructure as well as all the areas in which the bank competes."

According to June Felix, general manager, global banking solutions, with Armonk, N.Y.-based IBM, there are three key areas today's CIOs must be able to handle: the globalization of the financial services industry; the massive economic and demographic changes both domestically and abroad; and the unpredictable changes in banking, such as risk, regulations and security. This is all wrapped around the continued pressure on banks to retain clients' trust, she says.

"These three trends speak to what the new CIO needs to be able to do," Felix explains. "He needs to manage across many cultures, whether within the company or abroad. You also will need the ability to create effective partnerships, especially around innovation. ... A CIO needs to have the ability to create business models that are innovative, rather than [only] creating new products or services."

Financial Insights' Capachin adds to this list the ability to manage outsourcing arrangements. "Being able to outsource and manage outsourcing partners effectively is a new skill set that hasn't yet been mastered by many CIOs today," she contends. "If you don't have the right people in place to keep track of these relationships, outsourcing won't work."

In Search of the Next IT Leader

So where exactly will banks find this new breed of "super executive?" One option, according to Tim Ramsey, a director in KPMG's financial services advisory practice in Atlanta, is to look outside the financial services industry.

"Banks [can] look outside the industry to expand the talent pool," Ramsey comments. "It's important to understand the financial services industry, but it's not necessary to have grown up in a bank. It's about finding the right person."

Oliver Wyman's Dresner says this route perhaps could work on the development side, since infrastructure issues are fairly similar across industries. However, "It's tough for an outsider to get a handle on banking product development because it's so unique to this industry," he points out.

Financial Insights' Capachin is even less keen on the idea, believing an outsider just wouldn't have the credibility needed to lead within a bank. "You need to be part of a financial institution," she maintains.

"In my experience, hiring a CIO at a global financial institution with little financial services background involves a steep learning curve," explains Accenture's Curtis. "And the business won't slow down while that person learns. Plus, a bank CIO needs a network of other technology and business folks in the industry to be successful. ... Without this, it's a steep hill to climb."

It's more likely that banks will pluck CIOs from the business side of the industry or from non-U.S.-based financial institutions to find new blood, opines IBM's Felix. "Someone from abroad could have some very good skills," she says. "The big challenge of the CIO is to be able to work across the business and with many different businesses. You need to orchestrate huge projects across multiple countries and do so while adhering to the institution's goals."

As more banks increase their global footprint and as foreign ownership of U.S. banks increases, adds Financial Insights' Capachin, hiring CIOs from abroad will become a growing trend in financial services.

Even more compelling, however, is what will happen once the present crop of bank tech leaders -- largely from the baby boom generation -- begins to retire. Will there be enough talent to fill the gaps left by this demographic?

Harland's Hansen agrees that the aging population is a problem many industries will face. But, he believes, the up-and-coming generation will not disappoint. "The percentage of people in the next generation who are technologically savvy is much higher than in the boomer generation," he notes. "The average person now is closer to the ideal definition of a CIO than in the past."

And the boomers aren't likely to fade away quietly either. IBM's Felix suggests that many will likely stay on at their banks in advisory roles. After all, "Experience counts when it comes to solving certain problems," she says.

Oliver Wyman's Dresner isn't panicking either. Not only does he think the talent being "grown" today at financial institutions is up to snuff, he also notes that with the increase in bank consolidation, there will always be a supply of experienced executives looking for work.

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