December 21, 2010

If I were a bank CIO, I would take a sabbatical between Christmas and New Years, flush out all my old baggage, and create a brand new blueprint of what IT will do for my bank going forward. Here is one man's idea of the process:

Step 1 - Whether you've been on the job less than a year or more than thirty years, strip yourself of any ownership and think of yourself as the outsider. Then write down your division's best accomplishments and its worst failures. Stop and think about your list, but don't call your therapist or PR agent yet.

Step 2 - Create an IT Balance Sheet by application. Theoretically, there are 132 applications in any bank's IT system. Don't worry about that number, just ask me if you feel the need to be academically proficient and I'll provide the list. The important thing is to realize that commercial lending is #1 in importance and safe deposit box billing is #132. What's in your users' gripe bin? That's what really matters.

Step 3 - Identify all your users and prioritize them. I shouldn't tell you which criteria to use for the prioritization because that's an individual judgment. For example, way back when I worked for a bank, my #1 user was Bill Renfrew, Chief Bank Operations Officer. That man cared for the bank more than anything. And he knew how to care! Whatever he asked for we did. If in your case, you tell me some politically correct answer like one finds in the Declaration of Independence, then quit this exercise and go to work for a social services agency of a government. We're playing hard ball here. You should know who the power users are in your bank and you should dedicate your attention to the business of pleasing them.

Step 4 - Measure the influence that vendors have on your performance. Here's an example. A bank that has chosen a primary vendor for core applications, along with a high number of their ancillary applications, and uses the outsource mode of processing, is hugely dependent on that vendor. If you chose correctly, that means God, Country, Family and your favorite sport drop down to second, third, fourth and fifth in your life's priorities. Cherish the relationship with your vendor.

Step 5 - Identify who your primary staff members are. Then develop a what-if situation for each of them. Some you'll lose; others you'll retain. Create a contingency plan for each one, but most importantly, know what they're thinking today. If your organization is a healthy one, your staff will be driven by individual influences. There are no templates to guide correctness. You had better be the Dr. Phil for each of them.

Step 6 - Define the extent of integration as it applies to the 132 applications. And remember the true meaning of integration. It does not mean glued on. It means the same thing as invisible weave after you burned a hole in your $200 cashmere sweater and an artisan re-weaved it producing a seamless result. For every degree of integration you achieve, the bank can rightfully release dozens of employees from manual grunt work. And please don't ever use the term, "fully (or deeply) integrated bank system" because there is no such animal.

Step 7 - Who is paying your bank's IT Division to provide services? To understand this better, adopt a method that moves 180 degrees away from the federal appropriations committee methods of doling out funds. The motivation of Congress is to get reelected. Yours is to allocate resources in concert with legitimate needs and then payment. List your top six customers, top 20 if you promise no dilution of focus. Rank them according to the amount they pay. The CIO of the largest U.S. bank spent $14.4 billion in 2009. It'll be more than that in 2010, but not because IT will be any better. It'll be higher because the bank got bigger, but that's another story. The point is, IT in a bank is like an outsource company. Every offering has a price. Every customer gets an invoice. Outsource companies are designed to make a profit. Bank IT Divisions are designed to break even. If you don't know who is paying how much, and for what, then the rest of this exercise becomes academic.

Step 8 - Assuming you're still here and you've earned the right to be called a business executive, the next task is to mend what dropped out of the first seven steps. There's no rule book for the mend; that's on your back, or better yet, on your mind.

Step 9 - Finalize next year's plan. Make it real; make it relevant to your bank; make it relevant to the state of the economy; make it affordable; make all your users sign off on it; make your CFO hug it; make it available to your bank examiners even if they don't read it. Forget 5-year plans. The banking industry is now, and for several years to come, a one-year-at-a-time industry.

Step 10 - Two important tasks should be in every bank's IT plan. 1) optimization of existing systems, and 2) implementation of "new" applications released in the past ten years. The word "new" doesn't mean it hit the market this year, but bankers are slow to do new things, so the following ten-year-new-apps are still universally undone:

• commercial and retail online banking

• bill pay as a specific online banking app

• credit risk solutions

• any compliance solution

• any imaging solution

• any solution that protects the IT environment

• merchant/branch capture

• mobile banking

• increased capacity to provide a broad range of answers based on problems du jour

The business case for each of the above implementations should consist of only one sentence. "We are a modern, competitive, sound financial institution, and therefore we must provide services that many of our customers and stakeholders want."

Step 11 - Take a nice rest because 2011 will be a busy year, with no special recognition for superior performance for the IT Division. You and your staff will just be doing what was expected of you.

Did you see the word "innovation" anywhere in this blog? Innovation in banking is something that is in the minds and egos of PR agents and pundits who like to write about it.