Banks Aim To Increase Revenues Through Innovative Uses of IT

Each year, the InformationWeek 500 tracks the IT practices of the nation's largest and most innovative IT organizations. This year, those 500 organizations included 17 banks and 10 securities/investment firms, whose survey answers provide insight as to what happened in 2003 in financial technology, as well as what's in store for 2004. (InformationWeek is a sister publication of Bank Systems & Technology.)

Some notable findings from this year's InformationWeek 500 survey, conducted by InformationWeek Research, include:

Business-Technology Strategy

The banks were split almost evenly between those where the IT organization directly produces and sells services to other companies, and those that do not. Even so, 61 percent reported having dual strategic goals to both streamline operations and also to generate new revenue from the IT department. Only 17 percent reported having a primary focus on generating new revenue, while the remaining 22 percent were solely concerned with cost-cutting.

IT Spending

This year, the banks surveyed reported an average IT spend of $919 million, or 7.2 percent of revenues. The greatest chunk of banks' IT spending goes towards maintaining old applications (38 percent), followed by building new applications (33 percent) and integrating applications (29 percent).

About one-third of the budget goes to salaries and benefits; about 20 percent to new technology purchases; another 20 percent to applications, and about 15 percent to IT consulting/outsourcing. But only three percent of the remaining funds goes towards research and development.

The largest IT budget item-salaries and benefits-remains the one to watch in 2004.

There might even be good news for people in the beleaguered, post-bubble IT workforce. Fifty-six percent of the banks said that they intended to "increase somewhat" IT staffing levels, and, indeed, one bank even responded that it would "significantly increase" its IT headcount. By comparison, securities firms were split between those that planned to keep IT headcount the same, and those that planned to "decrease somewhat."

Another difference is that banks are less prone than securities firms to use offshore IT development and maintenance services. Only 42 percent of banks reported doing so this year, compared to 82 percent of securities firms. Yet 39 percent of banks said they increased their use of consulting and outsourced IT services over the past 12 months.

Across their entire workforces, banks appear quite willing to seek productivity gains through IT. The most common productivity boosts come through upgraded PCs, e-learning and wider network bandwidth. Other popular steps include applications training, Internet access, notebook PCs, upgraded desktop productivity software and operating systems.

But despite the expectation that these steps will increase productivity, in the banking industry, at least, putting a number on it has been difficult. Only 42 percent of banks review worker productivity to gauge technology performance.

KNOWLEDGE MGMT.

What once was a buzzword has become a reality in nearly 90 percent of financial institutions surveyed. But companies build their institutional memories in different ways. At the foundation of many efforts are data warehouses, relational databases and data mining tools. E-learning is used by 84 percent of banks; groupware by 68 percent; and AI-based expert databases by 58 percent. But only 38 percent of banks provide business intelligence tools, such as OLAP or data mining, to their knowledge workers.

To review the entire InformationWeek 500 report, visit www.informationweek. com/956/.