The Blended IT Team

To make the most of their technology resources, banks are searching for the ideal workforce balance between internal expertise and outsourced efficiencies.

All banks rely on technology to support their business operations — to bring products to market and service customers. Thus, it is not surprising that North American banks are increasing their technology spending. According to a recent study by Boston-based research firm Celent, U.S. banks will spend up to $38.5 billion on technology in 2005, representing a 4 percent increase over 2004. However, it is not the product offerings, or the supporting technology, that differentiate banks in the marketplace. Instead, the key differentiator often is the talent behind a bank's systems.

"Our banking customers ... only introduce a certain number of products a year — they know they cannot solely compete on products," relates Mark Lange, national vice president, human capital management, for SAP, a Newton Square, Pa.-based provider of enterprise application software. "Rather, human capital is their true competitive advantage. That is how banks can truly differentiate themselves."

Therefore, while a portion of banks' IT budgets will be allocated to outsourcing partners, savvy organizations are keeping their business knowledge and project delivery teams in-house. To strike a balance between competitive advantage fueled by internal expertise and efficiencies enabled by outsourcing, many banks are blending their internal and external IT resources to create a true global workforce.

Integrating local IT talent and offshore teams should seem old hat to the banking industry. Many banks have experienced similar adjustments while integrating systems during the recent wave of mergers and acquisitions, points out Ekaterina Walsh, research director for Boston-based research firm Aite Group. "After a merger, banks need to ensure that the IT team is trained and that formerly disparate systems can now operate seamlessly," she says. "If these systems are integrated poorly, the basic level of daily customer service is in jeopardy."

Talent 'Triple Crown'

With a multitude of IT systems and projects on their wish lists, banks need a diverse range of skills from their IT staffs. For example, multichannel strategies and upcoming mobile banking applications are priorities for many banks. To ensure that these applications are developed and maintained effectively and efficiently, banks are seeking candidates who possess Web-based skills such as Java, C++, HTML and XML.

Simultaneously, security concerns and compliance burdens at financial services firms are intensifying. To beef up networks that support these operations, banks need candidates that can support automated enterprise information security, monitoring and auditing tools.

"Banks need an IT staff that can understand all levels of applications, user security and compliance," says Madhavi Mantha, a senior analyst with Celent's banking team. "Candidates also must understand how to respond to security and compliance vulnerabilities and threats."

While there may be many candidates who possess these skills on a basic level, there appears to be a shortage of experienced senior IT professionals to head technology teams. "Senior [technology leaders] understand the complexity of code and how it all fits together," said Raymond Karrenbauer, group chief architect for financial services firm ING Group, in a recent article in InformationWeek ("Retention Tension," Nov. 7, 2005), a CMP Media property. "It's that need for senior-level experience and superior performers that's driving up the salaries of certain key skills."

Beyond technical expertise and leadership abilities, banks also require their IT managers to have strong business acumen. "This has become a strong requirement within the banking community," says SAP's Lange. "With a fundamental understanding of areas within banking, banks can develop a more valuable workforce."

Clearly, innovative banks demand this "triple crown" of talent. "There really is a large crunch on talent," says the SVP of a major national bank who is involved in managing relations with outsourced partners and requested anonymity. "For us, it is ideal to attract candidates who possess a blend of business and technological talent, as well as senior leadership talent."

Evansville, Ind.-based Integra Bank ($2.8 billion in total assets) follows the same guiding principle with IT talent. "We want our project managers to be knowledgeable as well as current with the latest technologies and skill sets," says Amy Drake, the bank's senior vice president of IT. "When project managers combine their business knowledge with technological savvy, they are not just implementing technology," she adds. "They are adding solutions so we can take our business to a new level."

The Right Mix

Still, to take their businesses to the next level, most banks realize that outsourcing must be part of their strategic mix, even if they have solid internal IT teams. In fact, U.S. banks will spend 25.8 percent of their technology budgets on externally provided services and 15.5 percent on third-party software this year, according to the Celent report.

While outsourcing is a common trend across the banking industry, it is not a "silver bullet" IT solution, however. "Companies need to look at their internal IT resources and understand where their core competencies lie," says Darryl Demos, CEO of Norwell, Mass.-based Demos Solutions, a provider of workforce management solutions for the financial services industry. "If technology has become a cost center for a bank, it makes sense to rely on outsourcing," he continues. "However, if IT is a strategic enabler for a company, they will tend to outsource less." [For more on the outsourcing trend in banking, see "Perspectives," page 42.]

Like many companies, Integra Bank dabbles in outsourcing. Typically, it weighs which projects will be outsourced based on whether the best resources are available in-house or externally, according to the bank's Drake. "We always analyze our needs to determine how we can best support the project from a resource and cost level," she says. "We always consider if a project fits into our core competencies, or if it will be cost-effective to outsource the project."

For example, Integra recently outsourced its PC support to a third-party provider. "We operate 75 branches in four states -- asking our IT team to drive four hours between branches to fix PCs didn't make sense," Drake relates. By partnering with a vendor that had more-dispersed regional locations, "We were able to rely on their expertise in this area," she adds. Drake declines to name the technology provider. "By eliminating this responsibility from our internal staff, our team could work on other projects."

As a result, Integra has been able to bring previously outsourced functions back in-house, including network support. "We learned that by bringing network support back in-house, it would be cheaper, more organized and more secure," Drake contends, noting that the move saved the bank $65,000 in 2004. She adds that the only operations the bank currently outsources are PC support and intrusion-detection monitoring.

Clearly, outsourcing is here to stay, "and this trend will continue to mature," says John Goullet, founder and president of West Long Branch, N.J.-based information technology consulting firm Info Technologies. However, he adds, "Companies need to have a tight lockdown of requirements from project managers and business analysts."

Many experts argue that this lockdown of requirements must be homegrown and enforced through banks' internal staffs. Thus, it is crucial for banks to create a global IT force that integrates its internal and external IT sources. "Projects can be developed inexpensively overseas," says Ty McBride, executive vice president for Charlotte-based staffing and consulting firm Via-Source. "However, banks still need to Americanize the project to meet American standards and deliver the project to the enterprise."

Staying on Terra Firma

Therefore, banks should keep their most skilled resources in-house, urges Celent's Mantha. "These individuals understand the business, as well as the constraints and capabilities of existing systems," she says. "While using external sources may be critical, an open line of communication and interaction with internal IT is imperative."

Of course, many banks are turning to technology to help them determine the optimal mix of in-house talent and outsourced support. "We use these tools to evaluate available IT talent and determine which resources are truly needed," says the SVP of vendor relations who requested anonymity. He explains that his bank uses talent planning and performance management software to determine the ideal offshore contractors for certain jobs.

Often called job scheduling software or workforce management software, these tools balance work factors and create a plan that ensures the optimal team is working on an IT project. The software analyzes multiple parameters, including optimal staff levels, anticipated workloads, timetables, resource availability and technological capabilities. It also considers variable elements such as unexpected absences.

"Banks are using these tools to ensure that they are optimizing each individual's skill sets and performance in a way that will meet business requirements," says Laura Hills, vice president of marketing for Parsippany, N.J.-based CyberShift. Hills explains that CyberShift's Web-based workforce management software provides a global view of the workforce and its impact on enterprise systems. Sitting between a company's human resources and payroll systems, CyberShift pulls employee information, skill sets and accrual balances, as well as timekeeping and scheduling information, she adds. Hills identifies Chelmsford, Mass.-based Kronos and Atlanta-based Workbrain as CyberShift competitors.

"Managers can access employee skill sets and even schedule individuals on projects based on business requirements and anticipated demand," says Morne Swart, CyberShift's vice president of product management. "It helps banks efficiently utilize their IT talent."

The key to a truly efficient, global IT workforce, according to SAP's Lange, is strong central management. "It is critical for banks to manage disparate areas, regardless of where projects are developed," he says. "The key is to seamlessly bring data together at the [bank] source."