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Kathy Burger
Kathy Burger
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Bank CIOs Prepare To Tighten IT Belts in Expectation of Recession

CIOs and other bank IT executives report they'll shift spending toward maintenance and infrastructure, versus new technology initiatives, as the outlook for the economy worsens.

Doing more with less is nothing new for bank technology executives -- especially those who have been overseeing IT at their organizations during the past five or six years. The deflation of the dot-com bubble in 2001 and 2002 contributed to a dramatic shift in the responsibilities and priorities of CIOs and other bank IT executives -- from developer to broker, from builder to sourcer. While that shift really had begun earlier, during the "good times," the post-9/11 recession made it clear once and for all that "technology for its own sake" was a dead concept and that CIOs need to be as proficient in managing budgets, delivering ROI and driving revenue generation as they are in building applications.

Fortunately, once business conditions began to improve -- and banks' profits grew -- IT management, for the most part, maintained the disciplines that were required during the lean years. IT budgets grew, but generally only by single digits. And spending has tended to be very focused -- either compliance-related (e.g., Patriot Act, Basel II, etc.), efficiency-focused (e.g., bringing STP to loan processing, moving customers to e-payments, etc.), or tied to revenue and growth goals (e.g., customer analytics, multichannel integration). The kinds of massive "projects from hell" that were the norms in the 1980s and and '90s generally have been avoided -- probably one reason why large-scale core systems replacement has remained pretty much a non-starter.

It's only been in the past year or so that we've seen notable activity in areas that might be considered bleeding-edge or untested, mainly things such as mobile banking and Web 2.0 applications. So it will be interesting to see how these kinds of new initiatives fare in the coming year, as it appears we have returned to the belt-tightening times of 2001-02. An exclusive research report from TowerGroup and BS&T that begins on page 33 forecasts a retrenchment in bank IT spending, along with a shift in spending toward maintenance of existing applications and infrastructure as opposed to new technology.

I'm guessing that whereas only a few years ago these kinds of budget decisions were made in the boardroom and imposed on IT, today's bank CIOs are much more proactive and business-oriented and are making the tough calls themselves. It's the new "business as usual" for banking IT.

Katherine Burger is Editorial Director of Bank Systems & Technology and Insurance & Technology, members of UBM TechWeb's InformationWeek Financial Services. She assumed leadership of Bank Systems & Technology in 2003 and of Insurance & Technology in 1991. In addition to ... View Full Bio

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