Bank CIOs Must Continue to Innovate While Cutting Costs

More than ever before, bank CIOs must provide business value through technology innovation while also finding ways to improve efficiency. But innovation and cost cutting aren't mutually exclusive, experts say.

Today's bank CIOs are challenged perhaps like never before. While the global economy appears to be on the slow road to recovery, banks continue to face pressure to adapt to a changing business climate in which cost cutting and doing more with less are the norms. Bank CIOs are charged with finding new ways to innovate and add business value while keeping in line with budget constraints. Those tech executives who can get a handle on this delicate formula will lead their companies to the head of the pack once the economy is at full steam again.

Part of this effort requires a change in the role of the CIO, says David Potterton, VP of research with Framingham, Mass.-based Financial Insights. "While the CIO's role in financial services had been undergoing a transformation before the latest economic crisis, the pace of that change [and the implications] have become more accelerated," he says.

According to Potterton, as always the CIO must understand product managers' needs and requirements in order to provide efficient and cost-effective solutions. But forward-thinking CIOs and their firms more than ever must equate innovation to business benefit.

Meanwhile, Potterton adds, the CIO must innovate within the risk appetite of the organization. Some banks may be more risk-averse and, subsequently, the pace of innovation should be phased accordingly, he suggests. Finally, the CIO must have final say on technical solutions -- both customer-facing and internal -- in order to develop a long-term strategic plan. These changes, says Potterton, will lead to a better relationship between the business and IT organizations, and a more successful business overall.

Of course, a large part of the changing CIO role will involve a bit of creativity when it comes to spending, notes Paul Sussman, VP with First Manhattan Consulting in New York. "A CIO has to find ways to address critical business needs with limited resources," says Sussman. "To do so, CIOs need to have a clear and compelling case for investment in capabilities to help the business achieve its strategic goals -- for instance, by reducing time to market for customer-friendly products and services, streamlining account opening and servicing processes, or improving the coverage and granularity of risk analytics."

David Boyle, an Accenture senior executive and financial industry technology expert based in Philadelphia, stresses that bank CIOs must drive innovation by reducing IT costs strategically. "Indiscriminate cost cutting or freezing all discretionary spending can impede growth and is not, therefore, a long-term solution," Boyle notes. "Rather, cost cutting should be viewed as part of a broader efficiency effort."

Some out-of-the-box thinking definitely is needed in times like these, says Celent (Boston) SVP Bart Narter, who is based in San Francisco. But simple, straightforward moves -- such as migrating products and processes to less expensive platforms -- also can pay dividends, he adds.

Everybody Sells Every Day

When CIOs do look to spend, they'd better brush up on their sales skills. While senior technology executives always have had to present a business case for technology investment, executive management is watching every penny more closely than ever.

In particular, the CIO must present a convincing argument for architectural initiatives, such as customer data integration and service-oriented architecture, according to First Manhattan's Sussman. These are projects whose business benefits may be harder to describe, he notes, but that can deliver material and sustainable customer satisfaction benefits and cost efficiencies. "The most important innovations will be in finding creative and effective ways to engage bank executives in sponsoring and designing solutions to current challenges," Sussman says.

And there certainly are opportunities amid the crisis for innovation and improvement, points out Nancy Atkinson, senior analyst with Boston-based Aite Group. In fact, now is the time for CIOs to drive change, she says, since "A crisis disrupts the status quo and makes companies willing to consider solutions they otherwise would not."