By Colin Rowland, senior vice president, operations, for the Emea region at OpTier
Published: September 28 2009 10:47 | Last updated: September 28 2009 10:47
An IT department was once relatively simple. A server, a few computers, perhaps some firewalls, internet connection and a help desk. Staff came to work to write documents, make phone calls and not much more.
Today, work is supported by computing almost every step of the way. In turn, IT departments vary in size, budget and platform but have come to share one striking element – complexity.
As businesses have become ever more reliant on technology, so IT has built an intricate jigsaw puzzle of technologies.
A typical scenario: no business in its right mind is going to install a hugely expensive infrastructure without taking steps to ensure it works properly. So another system has to be installed to ensure the first one is performing.
This layering of solutions and systems to monitor the solutions has spiralled out of control. Our recent research in the UK found that three quarters of businesses admit they are blinded by the complexity of their IT management set up.
But what surprised us more is the estimated cost. Almost two thirds of respondents admitted that complex and ineffective IT management is costing their company £4.64m each year in downtime and staff time, on average.
So how has it come to this?
It is partly because there is no holistic, end-to-end picture IT that its managers need: CIOs have been forced to take a segmented approach to performance management by implementing partial solutions that monitor individual technology silos. We found that almost one fifth of companies were using more than five tools to monitor the performance of IT.
This partial approach is financially draining and does not give businesses the support they require.
For example, when a performance issue hits online banking, often the first time the IT department knows about it is when customer complaints flood in. In spite of the five monitoring tools, pinpointing the problem will still be like trying to find a needle in a haystack – or multiple haystacks. Industry analyst group Enterprise Management Associates estimates that more down time (54 per cent) is spent finding problems than fixing them.
In seeking to protect investments and ensure they deliver, IT departments have ended up with information overload that hinders resolution efforts.
What businesses need is for their IT departments to be able to assess quickly where the problems are, and avoid them.
IT is made up of many applications and systems each performing small tasks to get user transactions completed. By generating visibility into these transactions IT management can be simplified.
Each transaction from a user “travels” through the system. By capturing and tracking all transactions, across all IT tiers, all the time, organisations can see the impact that transactions have on the business.
But most importantly each business transaction provides clear evidence to how an application is performing and if there is trouble on the horizon.
Another advantage is that transactions also tell the cost side of the IT story; they make it easy to identify and resolve performance problems swiftly but also to optimise the cost of performing those transactions.
An approach that was fit for purpose 10 years ago, simply no longer cuts the mustard. Businesses have to be leaner and meaner – they cannot afford to have a reactive technology infrastructure where the systems manage the business rather than the other way around.
Simplifying IT management is, in many ways, akin to clearing out your wardrobe. It might be painful to part with that tan leather jacket from the 1980s but you know it has to be done.
Copyright The Financial Times Limited 2009. Print a single copy of this article for personal use. Contact us if you wish to print more to distribute to others.
Showing posts with label Information Technology. Show all posts
Showing posts with label Information Technology. Show all posts
Tuesday, October 27, 2009
Sunday, June 08, 2008
Information technology
Information technology
Published: June 8 2008 19:07 | Last updated: June 8 2008 19:07
Who has not, when confronted by the daily exasperation of office technology, questioned the parenthood and purpose of information technology departments? Advocates of computing in “the cloud” hope to make them largely superfluous.
Instead of going to the effort of installing and maintaining computing locally, all those tricksy applications, not to mention storage and data processing, can be provided centrally from shared infrastructure. Merrill Lynch estimates that more efficient management of resources – such as servers – could provide services at a cost five to 10 times cheaper than that provided by a more traditional in-house approach.
The revolution has been a long time coming. Computing on tap as a concept was floated as far back as the 1960s. Sun Microsystems has been actively pushing grid, or utility, computing for almost a decade. What has changed is the rise of viable business models such as software-as-a-service. Salesforce.com is the most high-profile of these companies, but Oracle, Microsoft and SAP are all investing in subscription-based services aimed at small businesses – typically those with fewer than 1,500 employees.
So there are some valuable niches to exploit. On current growth rates, Saas sales should double between 2006 and 2011. And if subscription services can show real economies of scale in distribution and sales – not something that Salesforce.com has yet demonstrated – sky-high valuations for Saas companies might be justified.
But the segment’s sales of about $3bn remain a small fraction of a global $270bn software market. The impact of inertia should not be discounted either. Chief executives tend to dislike replacing equipment that still works. Mainframes were superseded by servers decades ago but IBM still makes and maintains them. Important security and regulatory questions have to be answered before large companies will consider the cost of moving any form of critical data into the cloud. To hope for more than slow, if steady, progress over several years is to build castles in the air.
Copyright The Financial Times Limited 2008
Published: June 8 2008 19:07 | Last updated: June 8 2008 19:07
Who has not, when confronted by the daily exasperation of office technology, questioned the parenthood and purpose of information technology departments? Advocates of computing in “the cloud” hope to make them largely superfluous.
Instead of going to the effort of installing and maintaining computing locally, all those tricksy applications, not to mention storage and data processing, can be provided centrally from shared infrastructure. Merrill Lynch estimates that more efficient management of resources – such as servers – could provide services at a cost five to 10 times cheaper than that provided by a more traditional in-house approach.
The revolution has been a long time coming. Computing on tap as a concept was floated as far back as the 1960s. Sun Microsystems has been actively pushing grid, or utility, computing for almost a decade. What has changed is the rise of viable business models such as software-as-a-service. Salesforce.com is the most high-profile of these companies, but Oracle, Microsoft and SAP are all investing in subscription-based services aimed at small businesses – typically those with fewer than 1,500 employees.
So there are some valuable niches to exploit. On current growth rates, Saas sales should double between 2006 and 2011. And if subscription services can show real economies of scale in distribution and sales – not something that Salesforce.com has yet demonstrated – sky-high valuations for Saas companies might be justified.
But the segment’s sales of about $3bn remain a small fraction of a global $270bn software market. The impact of inertia should not be discounted either. Chief executives tend to dislike replacing equipment that still works. Mainframes were superseded by servers decades ago but IBM still makes and maintains them. Important security and regulatory questions have to be answered before large companies will consider the cost of moving any form of critical data into the cloud. To hope for more than slow, if steady, progress over several years is to build castles in the air.
Copyright The Financial Times Limited 2008
Thursday, June 05, 2008
Technology and financial services – with power comes responsibility
Technology and financial services – with power comes responsibility
By Neville Howard of Deloitte
Published: June 5 2008 10:09 | Last updated: June 5 2008 10:09
Financial services institutions were early adopters of technology and have used it to transform their businesses. The earliest areas of IT spend were on accounting software in the banking and insurance sectors where technology could automate highly manual processes, dramatically increase accuracy and reduce costs.
This spending was initially focused on process automation in areas where benefits were clear and easy to define, such as clearing and settlement. The entire middle office was, in effect, removed, resulting in huge savings.
The trend of replacing people with technology gathered pace during the 1990s and vast technology departments were created, often employing as many staff as traditional non-IT banking.
However, by the end of the 1990s rapid expansion of technology across all areas had led many financial services organisations to create huge IT silos that were not always aligned to core business strategy and were too large to be agile and responsive to rapid changes in market conditions. More and more ways to introduce technology were found and the business case for investment became increasingly blurred.
Fast forward to 2008 and we are now seeing a change in direction. The most progressive financial service institutions are dismantling their IT silos and realigning their IT teams with the business units they serve.
Now the chief information officer will often come from an operations background, bridging the gap between the business and technology. And CIOs are receiving recognition and a place on the board where they can help define business strategy, rather than simply provide a commodity service.
Today, the trend is for technology spend to be focused on business value and clearly aligned to strategy. For example, investment banks are using technology to automate trading where the risk levels can be set and activity monitored. And clients are offered on-line portfolio aggregation where they can move between asset classes at the press of a button and the entire process is completed quickly and accurately using straight-through processing.
Technology has helped the financial services industry become the being it is today. Without technology, traders would still wear bright coloured jackets and leap around energetically, insurance claims would take weeks to settle and banks would not be able to offer products such as offset mortgages. It has also allowed investment banks to exploit tiny arbitrage differences to make vast sums of money, enabled back and middle offices to be dismantled creating huge cost efficiency and enabled the creation of highly complex financial instruments.
Technology can also produce problems: we are going through a banking crisis in which technology played a part. The creation and globalisation of collaterised debt obligations (CDOs) was based on complex packaged debt rapidly sold via cross border, electronic trading.
To move forward, the financial services industry needs to ensure that the business drives technology and that the right people, with the right skills are retained to ensure that governance and controls can be put in place. If this is progressed the technology can remain centre stage and continue to shape, benefit and enhance the financial services industry.
Technology can certainly deliver great benefits, without creating dependency, but with it the need for controls and governance grows ever more important. With power comes responsibility. And the financial services industry is now realising the responsibility that the use of technology entails.
Neville Howard is a partner in Deloitte’s consulting practice.
Copyright The Financial Times Limited 2008
By Neville Howard of Deloitte
Published: June 5 2008 10:09 | Last updated: June 5 2008 10:09
Financial services institutions were early adopters of technology and have used it to transform their businesses. The earliest areas of IT spend were on accounting software in the banking and insurance sectors where technology could automate highly manual processes, dramatically increase accuracy and reduce costs.
This spending was initially focused on process automation in areas where benefits were clear and easy to define, such as clearing and settlement. The entire middle office was, in effect, removed, resulting in huge savings.
The trend of replacing people with technology gathered pace during the 1990s and vast technology departments were created, often employing as many staff as traditional non-IT banking.
However, by the end of the 1990s rapid expansion of technology across all areas had led many financial services organisations to create huge IT silos that were not always aligned to core business strategy and were too large to be agile and responsive to rapid changes in market conditions. More and more ways to introduce technology were found and the business case for investment became increasingly blurred.
Fast forward to 2008 and we are now seeing a change in direction. The most progressive financial service institutions are dismantling their IT silos and realigning their IT teams with the business units they serve.
Now the chief information officer will often come from an operations background, bridging the gap between the business and technology. And CIOs are receiving recognition and a place on the board where they can help define business strategy, rather than simply provide a commodity service.
Today, the trend is for technology spend to be focused on business value and clearly aligned to strategy. For example, investment banks are using technology to automate trading where the risk levels can be set and activity monitored. And clients are offered on-line portfolio aggregation where they can move between asset classes at the press of a button and the entire process is completed quickly and accurately using straight-through processing.
Technology has helped the financial services industry become the being it is today. Without technology, traders would still wear bright coloured jackets and leap around energetically, insurance claims would take weeks to settle and banks would not be able to offer products such as offset mortgages. It has also allowed investment banks to exploit tiny arbitrage differences to make vast sums of money, enabled back and middle offices to be dismantled creating huge cost efficiency and enabled the creation of highly complex financial instruments.
Technology can also produce problems: we are going through a banking crisis in which technology played a part. The creation and globalisation of collaterised debt obligations (CDOs) was based on complex packaged debt rapidly sold via cross border, electronic trading.
To move forward, the financial services industry needs to ensure that the business drives technology and that the right people, with the right skills are retained to ensure that governance and controls can be put in place. If this is progressed the technology can remain centre stage and continue to shape, benefit and enhance the financial services industry.
Technology can certainly deliver great benefits, without creating dependency, but with it the need for controls and governance grows ever more important. With power comes responsibility. And the financial services industry is now realising the responsibility that the use of technology entails.
Neville Howard is a partner in Deloitte’s consulting practice.
Copyright The Financial Times Limited 2008
Technology and financial services – with power comes responsibility
Technology and financial services – with power comes responsibility
By Neville Howard of Deloitte
Published: June 5 2008 10:09 | Last updated: June 5 2008 10:09
Financial services institutions were early adopters of technology and have used it to transform their businesses. The earliest areas of IT spend were on accounting software in the banking and insurance sectors where technology could automate highly manual processes, dramatically increase accuracy and reduce costs.
This spending was initially focused on process automation in areas where benefits were clear and easy to define, such as clearing and settlement. The entire middle office was, in effect, removed, resulting in huge savings.
The trend of replacing people with technology gathered pace during the 1990s and vast technology departments were created, often employing as many staff as traditional non-IT banking.
However, by the end of the 1990s rapid expansion of technology across all areas had led many financial services organisations to create huge IT silos that were not always aligned to core business strategy and were too large to be agile and responsive to rapid changes in market conditions. More and more ways to introduce technology were found and the business case for investment became increasingly blurred.
Fast forward to 2008 and we are now seeing a change in direction. The most progressive financial service institutions are dismantling their IT silos and realigning their IT teams with the business units they serve.
Now the chief information officer will often come from an operations background, bridging the gap between the business and technology. And CIOs are receiving recognition and a place on the board where they can help define business strategy, rather than simply provide a commodity service.
Today, the trend is for technology spend to be focused on business value and clearly aligned to strategy. For example, investment banks are using technology to automate trading where the risk levels can be set and activity monitored. And clients are offered on-line portfolio aggregation where they can move between asset classes at the press of a button and the entire process is completed quickly and accurately using straight-through processing.
Technology has helped the financial services industry become the being it is today. Without technology, traders would still wear bright coloured jackets and leap around energetically, insurance claims would take weeks to settle and banks would not be able to offer products such as offset mortgages. It has also allowed investment banks to exploit tiny arbitrage differences to make vast sums of money, enabled back and middle offices to be dismantled creating huge cost efficiency and enabled the creation of highly complex financial instruments.
Technology can also produce problems: we are going through a banking crisis in which technology played a part. The creation and globalisation of collaterised debt obligations (CDOs) was based on complex packaged debt rapidly sold via cross border, electronic trading.
To move forward, the financial services industry needs to ensure that the business drives technology and that the right people, with the right skills are retained to ensure that governance and controls can be put in place. If this is progressed the technology can remain centre stage and continue to shape, benefit and enhance the financial services industry.
Technology can certainly deliver great benefits, without creating dependency, but with it the need for controls and governance grows ever more important. With power comes responsibility. And the financial services industry is now realising the responsibility that the use of technology entails.
Neville Howard is a partner in Deloitte’s consulting practice.
Copyright The Financial Times Limited 2008
By Neville Howard of Deloitte
Published: June 5 2008 10:09 | Last updated: June 5 2008 10:09
Financial services institutions were early adopters of technology and have used it to transform their businesses. The earliest areas of IT spend were on accounting software in the banking and insurance sectors where technology could automate highly manual processes, dramatically increase accuracy and reduce costs.
This spending was initially focused on process automation in areas where benefits were clear and easy to define, such as clearing and settlement. The entire middle office was, in effect, removed, resulting in huge savings.
The trend of replacing people with technology gathered pace during the 1990s and vast technology departments were created, often employing as many staff as traditional non-IT banking.
However, by the end of the 1990s rapid expansion of technology across all areas had led many financial services organisations to create huge IT silos that were not always aligned to core business strategy and were too large to be agile and responsive to rapid changes in market conditions. More and more ways to introduce technology were found and the business case for investment became increasingly blurred.
Fast forward to 2008 and we are now seeing a change in direction. The most progressive financial service institutions are dismantling their IT silos and realigning their IT teams with the business units they serve.
Now the chief information officer will often come from an operations background, bridging the gap between the business and technology. And CIOs are receiving recognition and a place on the board where they can help define business strategy, rather than simply provide a commodity service.
Today, the trend is for technology spend to be focused on business value and clearly aligned to strategy. For example, investment banks are using technology to automate trading where the risk levels can be set and activity monitored. And clients are offered on-line portfolio aggregation where they can move between asset classes at the press of a button and the entire process is completed quickly and accurately using straight-through processing.
Technology has helped the financial services industry become the being it is today. Without technology, traders would still wear bright coloured jackets and leap around energetically, insurance claims would take weeks to settle and banks would not be able to offer products such as offset mortgages. It has also allowed investment banks to exploit tiny arbitrage differences to make vast sums of money, enabled back and middle offices to be dismantled creating huge cost efficiency and enabled the creation of highly complex financial instruments.
Technology can also produce problems: we are going through a banking crisis in which technology played a part. The creation and globalisation of collaterised debt obligations (CDOs) was based on complex packaged debt rapidly sold via cross border, electronic trading.
To move forward, the financial services industry needs to ensure that the business drives technology and that the right people, with the right skills are retained to ensure that governance and controls can be put in place. If this is progressed the technology can remain centre stage and continue to shape, benefit and enhance the financial services industry.
Technology can certainly deliver great benefits, without creating dependency, but with it the need for controls and governance grows ever more important. With power comes responsibility. And the financial services industry is now realising the responsibility that the use of technology entails.
Neville Howard is a partner in Deloitte’s consulting practice.
Copyright The Financial Times Limited 2008
Monday, June 02, 2008
IT in Financial Services: Modernising – innovate or hibernate?
IT in Financial Services: Modernising – innovate or hibernate?
By Peter Redshaw, research vice president at Gartner
Published: June 2 2008 12:45 | Last updated: June 2 2008 12:45
The IT department in a financial services institution (FSI) is a difficult place to be right now. Just as it’s being asked to do more than ever – enabling more personalisation, faster time-to-market, greater agility and tighter compliance and risk management – the sub-prime crisis erupts and its IT budget gets slashed. So the emphasis shifts to efficiency and how it can run ever larger volumes of electronic transactions, for less money, on a creaking infrastructure of legacy applications. Inevitably, the prospect of modernising that old IT portfolio is raised again.
The problem is that there is so much of it and it is all tangled together in a Gordian knot of home-built IT. For many years, the conventional approach in this industry has been to chip away at it a little bit at a time. That approach can work in other industries, such as manufacturing, retail or utilities, where they may eventually rationalise and consolidate their IT portfolios.
However, the trouble with an FSI and its intangible assets is that IT is at the very core of everything it does and part of every customer contact. It is what defines its products and processes, the customer experience, the communications and distribution. Increasingly it is how it innovates. Hence, the tendency is for the IT portfolio at a bank to swell faster than any chief information officer (CIO) can chip away at it and the legacy application set remains stubbornly rooted in its operations.
The alternative “big-bang” approach to IT modernisation is usually dismissed as too risky. IT tends to be even more conservative than the trading or asset management activities it supports. But the barriers to modernising IT at an FSI are mostly nothing to do with IT – the barriers are to do with people, culture, politics, bureaucracy, and so forth. It is much more about project management issues, job security and incentivisation – how many CIOs are sufficiently encouraged to take on risk or to break up their own empires?
Making subtle tweaks to the IT portfolio achieves very little and certainly isn’t going to make a trailing bank suddenly competitive. If a CIO is saddled with a risk-averse culture and a heavily regulated industry (that insists on the banking equivalent of emission controls and crash safety tests), is it really worth modernising IT at all? After all, most banks are still making lots of money, even after the impact of the credit crunch.
IT modernisation needs to address two key issues: one is that simply running-the-bank soaks up about 70 per cent of the IT budget at a typical FSI, and the other is that poor IT hits profitability. High operating expenses mean that very little IT budget is left for innovation, and that means differentiation is being eroded. Poor IT means that product margins are also getting squeezed and that customers show less loyalty, which diminishes the bottom line.
What a CIO needs to do to turn this around is to develop much more sophisticated financial models for calculating the economic value added to the FSI, replacing the current models for calculating the return on investment that technology X offers over technology Y. They need to be able to see if a big-bang approach would radically reduce their cost/income ratio or transform their return on equity. Without a radical boost to shareholder value, why change?
The net result of this would be to polarise the current continuum into two opposite camps – the dichotomy of “innovate or hibernate”. The innovate camp is at the leading edge of technology and embraces the big-bang approach, while the hibernate camp adopts the ultra-conservative approach that avoids IT change until absolutely necessary.
Innovate has developed accurate cost-benefit models that link IT changes to business metrics, so that it can quantify benefits and justify the radical transformations it encourages. Meanwhile, hibernate concentrates on using the “oil-can” by keeping its systems running for the absolute minimum cost (maybe through offshore outsourcing) while building up a war-chest of cash with the money it saves. Ultimately this must be a short-to-medium term approach; hibernators must constantly monitor the market and be prepared to buy up small, smart, innovative FSIs (that may have had the luxury of a green-field start) and then use them as incubators. The hibernator can then gradually migrate its customers and its data over to its protégé once the local contextualisation and scalability is in place.
These are not easy options – the innovators must find the tools needed for more sophisticated financial modelling of IT and the hibernators must efficiently manage global sourcing and spot their potential acquisitions. The vital thing is to avoid the worst-case scenario which for an FSI is to sit in the middle between these two extremes. The in-betweeners will fritter away their IT budget on incremental modernisation for little gain. Far from being fast followers – as they might like to think of themselves – they will be ditherers and laggards.
Copyright The Financial Times Limited 2008
By Peter Redshaw, research vice president at Gartner
Published: June 2 2008 12:45 | Last updated: June 2 2008 12:45
The IT department in a financial services institution (FSI) is a difficult place to be right now. Just as it’s being asked to do more than ever – enabling more personalisation, faster time-to-market, greater agility and tighter compliance and risk management – the sub-prime crisis erupts and its IT budget gets slashed. So the emphasis shifts to efficiency and how it can run ever larger volumes of electronic transactions, for less money, on a creaking infrastructure of legacy applications. Inevitably, the prospect of modernising that old IT portfolio is raised again.
The problem is that there is so much of it and it is all tangled together in a Gordian knot of home-built IT. For many years, the conventional approach in this industry has been to chip away at it a little bit at a time. That approach can work in other industries, such as manufacturing, retail or utilities, where they may eventually rationalise and consolidate their IT portfolios.
However, the trouble with an FSI and its intangible assets is that IT is at the very core of everything it does and part of every customer contact. It is what defines its products and processes, the customer experience, the communications and distribution. Increasingly it is how it innovates. Hence, the tendency is for the IT portfolio at a bank to swell faster than any chief information officer (CIO) can chip away at it and the legacy application set remains stubbornly rooted in its operations.
The alternative “big-bang” approach to IT modernisation is usually dismissed as too risky. IT tends to be even more conservative than the trading or asset management activities it supports. But the barriers to modernising IT at an FSI are mostly nothing to do with IT – the barriers are to do with people, culture, politics, bureaucracy, and so forth. It is much more about project management issues, job security and incentivisation – how many CIOs are sufficiently encouraged to take on risk or to break up their own empires?
Making subtle tweaks to the IT portfolio achieves very little and certainly isn’t going to make a trailing bank suddenly competitive. If a CIO is saddled with a risk-averse culture and a heavily regulated industry (that insists on the banking equivalent of emission controls and crash safety tests), is it really worth modernising IT at all? After all, most banks are still making lots of money, even after the impact of the credit crunch.
IT modernisation needs to address two key issues: one is that simply running-the-bank soaks up about 70 per cent of the IT budget at a typical FSI, and the other is that poor IT hits profitability. High operating expenses mean that very little IT budget is left for innovation, and that means differentiation is being eroded. Poor IT means that product margins are also getting squeezed and that customers show less loyalty, which diminishes the bottom line.
What a CIO needs to do to turn this around is to develop much more sophisticated financial models for calculating the economic value added to the FSI, replacing the current models for calculating the return on investment that technology X offers over technology Y. They need to be able to see if a big-bang approach would radically reduce their cost/income ratio or transform their return on equity. Without a radical boost to shareholder value, why change?
The net result of this would be to polarise the current continuum into two opposite camps – the dichotomy of “innovate or hibernate”. The innovate camp is at the leading edge of technology and embraces the big-bang approach, while the hibernate camp adopts the ultra-conservative approach that avoids IT change until absolutely necessary.
Innovate has developed accurate cost-benefit models that link IT changes to business metrics, so that it can quantify benefits and justify the radical transformations it encourages. Meanwhile, hibernate concentrates on using the “oil-can” by keeping its systems running for the absolute minimum cost (maybe through offshore outsourcing) while building up a war-chest of cash with the money it saves. Ultimately this must be a short-to-medium term approach; hibernators must constantly monitor the market and be prepared to buy up small, smart, innovative FSIs (that may have had the luxury of a green-field start) and then use them as incubators. The hibernator can then gradually migrate its customers and its data over to its protégé once the local contextualisation and scalability is in place.
These are not easy options – the innovators must find the tools needed for more sophisticated financial modelling of IT and the hibernators must efficiently manage global sourcing and spot their potential acquisitions. The vital thing is to avoid the worst-case scenario which for an FSI is to sit in the middle between these two extremes. The in-betweeners will fritter away their IT budget on incremental modernisation for little gain. Far from being fast followers – as they might like to think of themselves – they will be ditherers and laggards.
Copyright The Financial Times Limited 2008
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