New Bank IT Projects are Dead in the Water

The productivity of current bank IT staff reminds me of the Y2K days. Two years prior to Y2K, every programmer who worked for a bank or a bank tech vendor was busy doing something to make sure systems would perform their functions correctly on Jan. 2, 2000. As necessary as the work was, and as successful as it was, how productive was it when you consider nothing new was added during the two-plus years worth of pedestrian tech work?Today, as Yogi Berra would say, "It's deja vu all over again." This time, I think a lot of IT guys in banking are getting a huge dose of R&R. There's no Y2K threat, and there's nothing brand new to implement. So they're taking it easy waiting for something good to happen with the banking crunch and the economy. Of course, unlike Y2K, the ticking of the clock isn't going to end today's problems. This R&R could last a very long time, and IT guys could get used to fat, dumb and lazy. Will they be in shape to handle the spike in technology spending in 2012? Don't believe any optimistic projections closer in.

Picture this scene at the top three banks in the U.S. If one were only to read the financial news this past week, it would provide a pretty good idea of this nail-biting industry. Vikram Pandit is breaking up the giant Citigroup into smaller pieces hoping to rescue parts, and avoid the demise of the whole. Jamie Dimon is sending out warnings that 2009 has more bad news ahead, even though JPMorgan Chase was the least to hemorrhage of the three. And Ken Lewis is going back to the TARP well to draw more capital for BofA.

Given the state of the three largest U.S. banks, how receptive do you think the management committees of those banks would be these days if Marty Lippert, Guy Chiarello and Marc Gordon were to request an audience of their superiors to present a plan to take the banks to a new level of technology (aka, conversion from a legacy core system environment to a modern architecture infrastructure)?

The answer is, new IT projects in banking are dead in the water for some years to come, especially where they require billions of dollars of precious capital and 10 years of development/implementation time.