1. New Technologies in Banking: hype or reality?
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New Technologies in Banking: hype or reality?
Oldřich Příklenk
Country Director
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2. Hype Cycle for Banking and Investment Services Front-Office Technologies, 2007
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3. Technologies moved off-hype cycle
Linux in Banking Delivery Channels (not taken off as a technology trend with specific applicability to banking beyond the trend for enterprises replacing or upgrading desktop computers and servers)
Deposit ATMs (was incorporated in the Advanced ATMs and Kiosks element)
Bank Document Imaging/Archive/Retrieval at Front Office (no specific applicability to banking and is tracked in other Gartner Hype Cycles)
Customer Natural Language Speech Recognition in Bank Telephone and Call Centers (and replaced by Speech Recognition in Contact Centers)
Real-Time Analytics, Profiles and Detection (broken into two technologies: real time analytics and centralized customer profiles)
Alert Technologies (it has reached the Plateau of Productivity) 3

4. Priority Matrix
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5. Implications The Hype Cycle Explained Visibility
Peak of
Inflated
Expectations
The Hype Cycle Explained
Gartner’s Hype Cycle helps enterprises decide when to implement emerging technologies. As with all technology investments, there is no simple answer. Business needs and philosophies should determine when it makes sense to invest in a particular new technology.
Visibility
Technology
Trigger
Plateau of
Productivity
Slope of
Enlightenment
Trough of
Disillusionment
“Type A” Adoption
“Type B” Adoption
“Type C” Adoption
Maturity
Type A, Type B and Type C Enterprises
Enterprises are identified as Type A, Type B and Type C, based on the aggressiveness with which they adopt and use technology, which typically varies based on industry:
Type A enterprises are technology-driven, often using immature, cutting-edge technologies to gain an edge.
Type B enterprises are moderate technology adopters, implementing new technologies that have entered the mainstream.
Type C enterprises are technologically risk-averse and are usually among the last to adopt new technologies.

6. Hype Cycle for Banking and Investment Services Front-Office Technologies, 2007
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7. Recommendations
You own your technology-related strategy, not your vendors
Innovators: Compete at the cutting edge of innovation and use IT as a weapon only if you have people/culture/strategy for that
Mainstream: Use IT to improve productivity, product quality and customer service, wait for technology to be tested
Laggards: Wait for a technology to become absolutely stable before deployment 7

8. Taming IT Costs in Banking
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Taming IT Costs in Banking
Felix Enescu
EXP Executive Partner
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9. Key Findings
IT spending has to continue for run-the-bank operations and "must have" projects.
Must also continue for those discretionary projects that can differentiate a bank in an increasingly commoditized industry with fickle customers.
Avoid "me too" spending that copies peers — but note that targeted IT investments have a direct impact on profitability at banks.
Whatever routes CIOs take to reduce costs aspects such as governance and cultural fit will be more important in the long term than short-term savings on price.
Banks and investment services firms must assess the medium-term cost of cutting IT
spending, as well as the short-term savings. They must preserve IT investments that can
drive the greatest business value, and those that help maintain competitiveness or
leverage economic upturns.
Key Findings
• CIOs will be under pressure to give greater support to business units that struggle to
survive difficult conditions.
• IT spending has to continue for run-the-bank operations and "must have" projects. But it
must also continue for those discretionary projects that can differentiate a bank in an
increasingly commoditized industry with fickle customers.
• Avoid "me too" spending that copies peers — but note that targeted IT investments have
a direct impact on profitability at banks.
• Whatever routes CIOs take to reduce costs — outsourcing being perhaps the most
obvious tactic — aspects such as governance and cultural fit will be more important in
the long term than short-term savings on price.

10. Spend Less, Get More: 25 IT Cost Containment Techniques
Use cost containment techniques that not only save money but also provide business benefits
Some techniques just save money or delay expenditures
Others also provide business benefits because they reduce complexity and/or provide flexibility
Improve service levels
Increase agility
Reduce risk
SERVICE
AGILITY
Some cost containment techniques actually increase service levels. For example, automated software distribution and a standard operating environment reduce service calls and permit remote fixes, reducing downtime from days to minutes. The case-study enterprises report they have reduced the time to apply critical patches from four days down to 30 minutes, the time to provision and configure a server from three to five weeks down to four days, and so on. Their customers report increased satisfaction on surveys.
Other cost containment techniques reduce complexity, which Gartner research shows is a major cost driver. Reducing complexity also increases agility. Consolidation and standardization are common themes in most of the report cases. The result: a less complex operating environment that is easier and faster to change.
Shifting from fixed to variable costs lets IS organizations vary costs in response to business changes. With capacity-on-demand, they can also scale processing capacity up or down quickly and economically, another form of agility.
Some techniques even help reduce risks. Virtualization of servers and storage makes mirroring of critical transactions, failover and business continuity easier, faster and more affordable. Data center consolidation moves dispersed servers—previously in broom closets and under people’s desks—into a secure facility, with proper cooling, 24x7 monitoring, uninterruptible power and fire protection. Disciplined processes in IT operations provide a controlled environment for changes, thereby reducing the number of errors, ensuring backup and recovery, and so on.
RISK
REDUCTION
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11. Understand your costs at the macro and micro levels
Spend Less, Get More: 25 IT Cost Containment Techniques
Understand your costs at the macro and micro levels
Use activity-based costing (ABC) to understand major cost drivers
Use total cost of ownership (TCO) to understand life cycle costs of major assets
ABC traces the cost of each activity to the reason why organizational resources were consumed in support of the necessary activities.
TCO for Desktop User
Knowing what drives your costs helps you determine how to contain them. Without this insight, you can only cut costs "with an axe"—by cutting jobs or shaving costs across all functions. Activity-based costing (ABC) and total cost of ownership (TCO) are two techniques that can help.
ABC helps organizations identify their cost drivers and allocate indirect costs to the appropriate processes and activities. This gives visibility to the entire end-to-end cost of IT processes in a way no traditional budget can.
Fortis, a Belgian financial services company, is using ABC to increase the transparency of its IT costs. It is showing the cost of IT activities involved in providing services. When these services are meaningful to business managers, they can assume greater control over their use and better manage demand.
Most enterprises focus too much on the cost to acquire an asset and not enough on the cost to keep it operational. IT assets can have a long useful life. In five years, annual maintenance costs can equal the original software license cost. Sometimes it’s less expensive to replace equipment at the end of its warranty period rather than start paying maintenance. So developing the TCO for major asset classes can provide valuable insights into how best to manage them during their life cycle. The desktop computing TCO illustrates all the ownership costs, which far exceed the acquisition cost.
But to maximize savings and other benefits, CIOs need all the facts: historical cost trends, industry cost curves, enterprise growth plans and demand forecasts. That can take more digging.
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12. Compare your costs to peers carefully
Spend Less, Get More: 25 IT Cost Containment Techniques
Compare your costs to peers carefully
Use common ratios and indexes carefully to identify areas for analysis
Use benchmarking for more accurate comparisons and insights and compare your costs to peers carefully
Benchmarks can also show where further cuts are unwarranted or increased investment is required
IT Cost Metrics
Pros
Cons
IT spend as percent of gross revenues
Widely used, easy to calculate
Can be very misleading: heavily influenced by revenue size, does not consider effectiveness
IT operating budget per employee/user
Outsourcing can distort ratio
IT professionals to total employees
One measure of efficiency
Industry standard metrics, e.g., cost per mortgage, ton
Puts IT in a business context
Does not consider effectiveness
Unit cost, e.g., cost per MIPS, cost per gigabyte
Many IS organizations do not have the necessary data available
Knowing how your costs stack up to your peers’ costs is another way to understand your cost position and identify areas with high potential for cost reduction.
When assessing your cost position, use high-level ratios carefully
Start with common high-level ratios to compare yourself with industry averages. The beauty of high-level ratios is their simplicity—but that’s also their danger. It’s too easy for executives to latch onto a single number without understanding its underlying complexity and then jump to the wrong conclusion. Each of the common ratios has pros and cons (see figure opposite). A ratio that differs significantly from industry averages are a red flag to cue you to dig deeper to understand why. There may be good reason, or it may indicate an area that needs cost reduction.
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13. Spend Less, Get More: 25 IT Cost Containment Techniques
Use the 25 common IT cost containment techniques framework to identify opportunities
Manage Demand
1. Chargeback
2. IT PMO
3. IT Governance
Link costs to demand
Shift to Variable Cost
4. Contingent Workers
5. Software as a Service
6. Capacity-on- Demand
Reduce Labor Cost
7. Staff Reconfiguration
8. Selective Outsourcing
9. Offshore Outsourcing
10. Automated Software Distribution
Reduce Resource Costs
IT cost containment
Reduce Technology Cost
11. Server/Storage Virtualization
12. Voice/Data Network Reengineering
13. Voice over Internet Protocol
14. Open-Source Software
Change IS Operating Model
15. Data Center Consolidation/ Automation
16. Standard Operating Environment
17. Teleworking
18. Refresh/ Upgrade Delay
The IT cost containment framework lists 25 techniques reported by the case-study interviewees as contributing significantly to meeting their cost containment goals.
The techniques are numbered sequentially. The report has a page about each technique that provides some background, a short definition of the technique, its benefits, the issues, typical range of savings and case studies.
Change Operating Practices
19. Asset/License Management
20. Print Fleet Rationalization
21. Telephone Expense Management
22. Telephone Bill Audit
Improve IS Business Practices
23. Contract Renegotiation
24. IT Operations Process Improvement
25. Apps Dev Process Improvement
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14. Recommendations
Resist calls to slash the IT budget, but do examine how IT can be run more efficiently.
Benchmark operations to assess how technology investments can support the business strategy.
Fight to preserve the IT budget for new projects that will make the bank unique and able to stand out from the herd.
Make provisions for IT spending on customer onboarding systems.
Bargain aggressively with IT providers and seek out emerging vendors
Recommendations
• Resist calls to slash the IT budget, but do examine how IT can be run more efficiently.
Benchmark operations to assess how technology investments can support the business
strategy. CIOs at banks and ISFs should focus on reducing the cost of running the
overall business or increasing profits and revenue.
• Fight to preserve the IT budget for new projects that will make the bank unique and able
to stand out from the herd. A good example is investing in the IT necessary to achieve
the appropriate degree of time or range agility for optimal profitability.
• Make provisions for IT spending on customer onboarding systems. This can save
money (through increased automation) and improve customer satisfaction. Moreover,
such spending is necessary if the bank or ISF acquires another firm.
• Bargain aggressively with IT providers and seek out emerging vendors — but beware of
damaging any transformational capability.

15. Contacts Oldrich Priklenk Country Director M: +420 603461866
KPC-Group, s.r.o.
Independent Gartner Representative in Romania
10 Montreal Square
Bucharest , Romania M: E:
T: , F:
gartner.com

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