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IT Management Issue
Size
matters. To be in the hunt, financial services firms need to function
in a single global capital market tied into many local markets. Financial
services continue to build momentum towards global growth, continuing
the migration from what had been a predominantly local/national business
focus. This growth is being fueled by:
- Loosening regulations
- Increased savings and investments in the developed world
- A continuing pattern of investment banking/commercial
banking convergence and consolidation (sometimes burdening companies
with duplicate capabilities which slows momentum)
- The impact of the Internet and technology on both the financial
markets and business operations in global financial services
Financial
service firms are also feeling pressure to deliver sustained and predictable
profitability over an extended horizon in an increasingly volatile business
environment. This volatility can be linked to many factors, including
the increased commoditization of products (current pressure from e-commerce),
the rapid pace at which products and services can be copied by competitors,
and the soaring costs and risks associated with information technology
decisions.
There
is also a trend towards "all in one" service offerings, where customers,
with access to vast amounts of information, are now more knowledgeable
and mobile and have access to the full range of investment banking products
and services. Financial service firms must compete in all of these areas
if they plan to maintain long-term client relationships.
Business
Implications
To
help illustrate the issue, consider Zurich Financial Services, a global
leader in the financial services industry specializing in financial protection
and asset accumulation. Zurich Financial is moving fast on many fronts;
concentrating on reorganizing its many subsidiaries (e.g., reorganization
of Property groups), combining operations, selling non-strategic businesses,
and making acquisitions. Perhaps the most significant business implication
is their move from bricks to clicks. Zurich Financial is partnering with
technology companies to fill holes on the e-commerce front and launching
projects from within. Several recent initiatives include:
- A major addition of fund and asset management business and the
launch of a virtual bank in Switzerland (Zurich Invest).
- Zurich Commercial is designing financial packages to meet individual
needs by using Cognos web solutions to access and analyze customer
profile data; rendering older static, costly, and time consuming monthly
reports obsolete.
- Creation of an e-commence hub (portal through which brokers have
access to all Zurich Financial products and possible third party products).
What is in store for companies like Zurich Financial?
Information
Technology Management Implications
Statistics
show that close to 80% of the IT projects initiated by financial services
companies without a business case and clear business objectives are considered
failures by executive management.
The
customers of financial institutions expect integrated services. They do
not want to have to identify themselves repeatedly and carry multiple
pin numbers to gain access to multiple accounts.
The
changes that the online revolution is bringing to financial services are
daunting. Below we document a series of IT and operational issues that
companies face:
E-commerce
- Maintaining a global view and providing one face to the customer.
- Keeping back-end systems such as financial accounting up with the
pace of the front-end systems such as web banking and investing.
- Impact of the web on agents and brokers; including how to handle
channel conflicts.
- The user interface for direct to consumer transactions must be responsive,
intuitive, and integrated. For example, is it obvious how a consumer
would sign on once and change his/her address for all accounts with
your institutions? and its affiliates?
Data
Warehousing (data integration, data sharing, data provisioning)
- Do multiple systems appear as one to the customer? to the company?
- Is data extraction synchronized across systems?
- Do data provisioning systems respond to requests for new data items
fast enough?
Messaging
- Is the company's electronic messaging system an enabler for effectiveness,
efficiency, and agility?
- As the company continues to acquire, are the e-mail systems tied
together seamlessly (i.e., not only communicate with each other but
facilitate calendaring, information sharing, centralized directories,
etc.)?
Security
- Is the company and customer data private, trustworthy and legally
compliant?
- Does the company have a firewall(s) protecting its confidential
and high-risk data & assets from external attack? - From internal
attacks?
- Does the company have an Intrusion Detection System deployed on
its network?
Business
& IT Management Response
As
the hectic pace and nature of change in the Financial Services industry
continues to magnify complexity, cost, and risk issues, IT and business
leaders must work together sooner and be bi-lingual; speaking in the language
of IT and business. To do that business and IT leaders must reassess critical
leadership competencies. According to Results-Based Leadership, a TEC
partner and recognized expert in leadership alignment systems, the move
from bricks to clicks will require a new emphasis on competencies such
as:
- Taking a strategic perspective - the ability to take
a broad, long-term view of the business and its future and developing
a distinctive focus and direction for the organization so that
it will be able to outperform the competition and attract and excite
employees and investors.
- Turning vision into action - communicating a consistent
and compelling understanding of the organization's vision and translating
it into defined plans tactics so that employees throughout
the organization understand what they need to do to make it a reality
and are committed to being part of it.
- Aligning the organization - acting to ensure that
the organization's internal enabling systems (e.g., structure, systems,
and processes) are aligned so that it can more effectively
execute its strategy (e.g., how to handle channel conflict).
- Speed and agility - supporting and enhancing the
ability of the organization to act quickly and decisively so that
it can adapt sooner and more effectively than the competition to changes
in the unpredictable, uncontrollable business environment.
- Building customer commitment and intimacy - keeping
in close touch with the needs of targeted customers and building their
commitment and loyalty to the organization so that firm equity
is created and sustained (e.g., tailoring a company's approach and
products to the subtleties of local overseas markets).
- Supporting collaboration - fostering a spirit of
trust, cooperation, and collaboration in working relationships throughout
the organization so that the boundaries that often detract
from organizational effectiveness are broken down and expertise flows
to where it is needed in a timely manner (e.g., broker automation
that allows real time access to company data and new roles for brokers).
The
combination of clearly articulated organizational capabilities and the
clear definition of the leadership attributes required to build them will
help to:
- Accelerate the speed with which financial services firms deploy
high quality globally integrated services
- Reduce the risks caused by 'internet speed"
- Deliver distinctive products to global customers
- Design for, and build to, efficient global service delivery