Banks, whether retail or wholesale, are now demonstrating a voracious appetite for technology investment. But, in these days of “spend”, is all the outlay really necessary? Does anyone take a step back and ask “Is the bank capable of carrying out all these technology projects?” or “Do we really have a clear picture of what we’re spending?”

To illustrate the point, we recently carried out a review for the product operation of a well known bank, to assess whether IT spending was being carried out efficiently or not. In doing so, we found that the bank’s appetite for new projects and the level of change it was actually capable of taking on differed significantly. Both the use made of existing IT systems and the entire technology project portfolio needed careful rethinking.

Initially, we mapped the bank’s IT systems, creating a fact-based picture. Senior business managers were then able to understand what systems existed and what projects were in progress. IT systems, ongoing and planned technology projects were compared against actual business goals, and the bank’s business managers were able to carry out a review of IT systems and spending. Thereafter a plan was drawn up of what the bank’s technology systems needed to look like in the future, plus a “roadmap” detailing the steps necessary to realise that goal.

So what conclusions could be drawn from the review? For a start, the bank had too many IT systems. Of its 250 plus systems, over 100 were “non-strategic”, in other words, only about half of the number were really needed. The large number was attributable, in part, to the fact that no systems had been decommissioned for six years. Additionally, while the firm intended to spend well over £300m on a variety of technology projects, during the course of three years, this was a far greater number of projects than were either needed or that the bank was realistically able to cope with. Furthermore, as “spend appetite” exceeded the bank’s ability to take on projects, tens of millions of pounds worth of projects were simply pushed from one year to the next. Even worse, certain areas of the bank were overwhelmed by change - some departments were inundated with as many as thirty-five technology projects at a time.

Importantly, the bank also realised that IT spending was not managed in a coherent fashion. For a start, the product processing operation was structured around a series of largely separate silos. One department had little contact with another department, and there were no systems in common nor was there any sharing of data. Critically, governance of IT investment was carried out in silos and so there was no overall supervision of spending. In addition, departments had very significant dealings with vendors that were not managed adequately, for example, there were no service level agreements with IT vendors and outsourcers in place.

Following the review, the bank has been able to cull £27m worth of projects and to introduce proper oversight of IT spending. A new committee responsible for supervising IT spending has been set up, incorporating all the heads of business. This senior executive team now gives permission to spend on large technology projects taking into careful account whether the projects align with the bank’s overall business strategy. The bank is also introducing better governance of IT suppliers, for example, putting service level agreements in place and renegotiating contracts, and this is generating many millions in savings. Indeed, the renegotiation of a contract with one major outsourcer alone has saved the firm the region of £20 million

In conclusion, while much of the investment in technology made by banks is necessary - the pace of change in the modern banking world is rapid, new products are constantly devised and technology must support innovation. Banks must also invest considerable sums of money in technology in order to improve security, prevent fraud and comply with regulation - banks do need to review the true extent of their spending on IT. However, when an in depth review is carried out, the truth can sometimes prove unpalatable: senior business people are shocked by the number of IT systems in operation, the spate of new projects in progress, and the frequency with which technology projects fail to align with business strategy. As the case history above illustrates, banks need to take a careful look at expenditure on technology, asking how much they don’t need to spend.