The Changing Role of the Bank CIO

The role of the bank CIO has changed dramatically since the financial crisis, as technology leaders have had to take on new responsibilities within their banks in response to a rapidly changing business environment.

More than ever before, bank CIOs are integral members of the C-suite. In fact, it seems business acumen is almost as much of a key skill to doing the job well these days as being tech-savvy. And today, CIOs also must help their banks navigate the tumultuous waters of domestic and international regulations. In a world where customer experience and channel integration are paramount, exactly what skills does a bank CIO need in order to succeed? And is having a tech background less important for today's CIOs than for their predecessors?

Bridging the Past, Present and Future

Rob Rubin (pictured to the right), Partner, Head of the Banking Practice, Novarica (New York)

Today's bank CIOs must have one foot in the old world of legacy systems and data centers, and the other foot on the pedal driving innovation within their institutions. Ultimately, successful CIOs will understand how to unwind layers of legacy systems and infrastructure to reduce costs, leverage internal data for new revenue-generating applications, and provide the agility to scale technology services up or down based on business demand.

But there is a tendency to believe the skills of a modern bank CIO mirror those of a technology start-up CTO: leading innovation, managing teams of agile software developers, focusing on the customer experience, and partnering with sales and marketing to deliver on the CEO's direction. While bank CIOs need to possess these skills, they operate in a more complex environment than technology start-up CTOs. For example, they must deal with regulatory requirements and manage high fixed-cost infrastructures.

So for the foreseeable future, bank CIOs must straddle the world of legacy systems and lead innovation of new applications and services. Today's CIO must possess some of the skills of an "old school" CIO, but with two important differences:

• Leading, versus containing, innovation. Many bank CIOs contain innovation by creating rules and restrictions to inhibit how non-IT teams use internal data, networks and technology. Instead, CIOs must lead innovation by anticipating requirements for new applications and services and by enabling access to internal data with the proper controls in place to manage risk and network security.

• Partnering with, versus supporting, sales and marketing. In many banks, the IT department -- led by the CIO -- considers itself an internal support organization. The result? IT relies on its internal "clients" for direction. Partners determine direction together. Therefore, bank CIOs must spend more time in the C-suite planning the future and less time in the data center sustaining the past.

Proving Technology's Worth

Ed O'Brien (pictured to the right), Director of Banking Channels for the Advisory Service, Mercator (Maynard, Mass.)

The financial services industry continues to be challenged by a number of factors today. These include regulatory and compliance changes, revenue replacement, and constant cost pressure; the pressure of more nimble competitors that offer products and services outside of the industry's regulatory burden; and customers who have increasing expectations for the financial institutions with which they choose to do business, including bundled products, 24/7 cross-channel capability, consistent interactions, greater customization, and preference recognition.

With its increasing number of access channels and changing technologies and customer expectations, this new environment presents particular challenges for IT in general and for the CIO in particular. For financial institutions to be successful today, CIOs must understand the changing dynamics brought about by these technologies and adjust accordingly. This takes true IT and business alignment, which starts with CIOs having relevant skill sets to understand and address the changing business issues in the marketplace. In fact, given estimates that CIOs spend only about 10 percent of their time on technology matters (with a large proportion of time filled with budget issues and internal meetings), increasingly it is likely that more CIOs will lead IT with a business background, which could include experience in marketing, product management and/or customer service.

Regardless of background, however, CIOs must be greater strategic partners for the businesses they support, especially in meeting customer expectations. While many CEOs and CFOs understand the value of IT and the role of the CIO, too often IT operations are misaligned as another cost center supporting the business and not changing or challenging it. Therefore, CIOs must continue to work hard internally to convince and capture the attention of other business executives and relay the fact that IT is not only necessary but also an activity that can positively impact the organization and its customers.

Understanding the Customer And the Business

David Potterton (pictured to the right), VP, Global Research, IDC Financial Insights (Framingham, Mass.)

In today's ever-changing and evolving banking environment, the skill sets needed to be a successful bank CIO must be both broad and deep, and encompass a combination of IT and business acumen. A core competency for CIOs remains managing data -- often too much data -- much of which today comes from social media and is text-based and unstructured. Consequently, bank users have little knowledge about what it all means, or even what nuggets might be truly valuable to customers.

Because of this, banks continue to search for the elusive goal of truly understanding their customers' wants and needs, and this is the job of today's CIO. Modern CIOs must construct effective strategies to manage this data, which is often in large databases or centralized data warehouses and creates headaches in such areas as storage organization, availability, costs, access requirements and permissions. Another issue with the use of big, unstructured data is the network size and bandwidth capabilities. Often, the ability to transmit large amounts of data throughout the system is a limiting factor in network performance.

But wait, there's more. Today's banking CIOs must also have a deep understanding of business issues and business drivers, and how the IT department profoundly influences bank performance and profitability. Understanding business includes understanding the needs of key stakeholders throughout the organization, including finance, risk and compliance, sales, marketing, operations, and individual lines of business. He or she must be adept at working with, managing and influencing people throughout the organization -- including leading and inspiring them -- and not just residing in a silo and droning on about computer code, servers, network speeds and cloud computing.

These challenges have created a need for a new breed of CIO, one that is equally comfortable discussing database tables and server specs as well as balance sheets, income statements, and risk and compliance issues. While understanding technology remains an important skill set for these individuals, today's CIOs need to be more well-rounded and business-centric than ever, and be an integral part of banks' inner circle.

[ELITE 8 2012: Charlie Lai Overachieves in the Name of the Customer.]

Bryan Yurcan is associate editor for Bank Systems and Technology. He has worked in various editorial capacities for newspapers and magazines for the past 8 years. After beginning his career as a municipal and courts reporter for daily newspapers in upstate New York, Bryan has ... View Full Bio