As banks struggle with an overload of technology projects, the remedy is having more technology—not less technology, says a new research report from Cornerstone Advisors.
The report found that half of 252 surveyed senior executives at U.S.-based financial institutions—both banks and credit unions—cite "too many projects" as a top technology concern for 2015.
"These executives are battling less with the complexity of their technology architectures than they are with the complexity of managing all that technology," says Brad Smith, managing director of Technology Services at Cornerstone Advisors. "It's all the enhancements, additions, replacements, and vendor contract negotiations that are making it harder each day for financial institution executives to deliver measureable business results from their technology investments."
Deeper you go, deeper you’re in
Smith refers to the concept of "technology management complexity"—the degree to which management is challenged to make coordinated, interdependent technology decisions. According to report findings, financial institutions with high or moderate complexity—they plan to improve the utilization of 21 applications in 2015, in contrast to the eight to nine apps for financial institutions with low complexity. In addition, financial institutions with high technology management complexity expect to add or replace more than eight apps and renegotiate five to six contracts in 2015.
"As the number of technology projects a financial institution is managing increases, the likelihood that these projects will fall short of achieving their intended business benefits also rises," says Ron Shevlin, research director at Cornerstone. "The best way for banks and credit unions to manage this ever-growing complexity is to improve their existing technology capabilities."
Juggling racks up costs
Roughly eight of ten financial institutions in the high complexity category will spend more on technology in 2015, the report states, with approximately one in four investing much more. This compares to 65% of moderate complexity financial institutions and barely half of financial institutions with low technology management complexity.
Among other key findings of the report:
• On average, financial institutions will improve the utilization of 17 apps, add or replace nearly five apps, and renegotiate two to three contracts in 2015.
• Financial institutions plans to improve, add/replace, or renegotiate lending apps are not on par with their plans for other technologies. Among five lending-related apps, none are in the top five for utilization improvement, addition/replacement, or contract negotiation.
• From 2014 to 2015, there was a double-digit percentage point increase in planned utilization improvements for 21 technologies.
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