It's Not the Economy That Will Hurt Bank Technology; It's Fear, Uncertainty and Doubt

There's a lot of bad news in the financial services sector these days, and I'm sure it's real - problems with subprime mortgages, problems with the investment banking units of large banks, poor quarterly earnings by some of the giant banks, downturn in the national economy, slump in the housing market, deterioration in credit quality, and not-so-encouraging comments by the Ben & Alan Duo saying things could get worse.So what does this gloom and doom have to do with the business of bank technology, and why am I writing about it? Well, 20 percent of my client work is for investment companies, and having completed the 107th project this week for that group, I can report that their main concern right now is how the big bank tech companies will be affected by this negative set of circumstances.

Here are my answers:

• First take a deep breath and focus on the real villain. Technology didn't cause the current problems. If you were taking a cross country road trip in an RV and got lost in Iowa, you wouldn't blame the tires or the engine or the price of gas. It was you and the road map that got you in trouble.

• Technology is not a good scapegoat. The word, tweak, was popularized by technocrats, for the purpose of fine tuning the system on a daily basis. That's a good thing. But tweaking of IT budgets is not something bank managements should do in searching for relief when costs need to be cut. That's a bad thing.

• Technology investments are very long term and cannot be tampered with from quarter to quarter. Whether a bank outsources or uses an in-house system, IT costs are sunk costs. There's no turning back.

• What this means is that whatever is in the tech pipeline will stay in the pipeline and vendors will get their due.

• Of course, there are two conditions that will give bank tech vendors reasons for concern - 1) new projects could be delayed because of the FUD factor, and 2) some mortgage companies could be filing for Chapter 11. At that point, I would admit that this economy will hurt bank tech companies.

Two years ago, I was looking for reasons that would give bank tech companies a boost in revenue and couldn't find any. This recent downturn certainly hasn't added any optimism to my gloomy outlook.

Art Gillis www.artgillis.com

Two years ago, I was looking for reasons that would give bank tech companies a boost in revenue and couldn't find any. This recent downturn certainly hasn't added any optimism to my gloomy outlook.