How centralized should my I.T. department be and what should I do if it’s not?Here in gonzo land, we spend our days working with people from all corners of banking. It never ceases to amaze us how different the organizational structures are at the banks we deal with. I don’t think there’s a department within a bank that varies more in organization style than the I.T. department. Like the snowflake, we think there are indeed no two I.T. organizations out there quite alike. And since we have a true Gonzo mindset, we endorse this diversity in all its splendid glory. We’ve never been one for a cookie cutter mentality, and we ain’t about to start now.
Having said that, we would suggest there be some common goals and expectations for your I.T. department – no matter how it is organized. These include:
With few exceptions, we think the I.T. departments at the financial institutions we deal with deliver magnificently on these expectations to the extent they are able to. In fact, I would hold up the skills and effort of I.T. departments in banking against I.T. departments in any field. Having good skills and effort doesn’t necessarily equate into satisfactory delivery, though. We work in a fast paced environment where technology is changing, regulators are increasing their focus, and cost control demands are forcing us all to do more with less. All of this is affecting banks’ ability to deliver technology smoothly, cost effectively and in a timely manner. It wouldn’t be much of a stretch to say that we are going to have to do everything we can to increase our ability to deliver needed technology in today’s environment. In other words, this is a great time to position our I.T. departments for success.
With all of these external factors pressing on the I.T. department, what we don’t need are internal constraints. Probably the single largest gripe we hear from I.T. departments is that the I.T. department is expected to deliver on technology across the enterprise but is only given control over pieces of the technology. Common complaints we hear include:
There is an age old management maxim that says if you have a responsibility, you should have the command and control in place to perform that responsibility. Does the banking industry allow its I.T. departments to perform at the levels they could by giving them the control they need? Or is there something preventing higher performance? I would say there is something indeed preventing some of our I.T. departments from performing at higher levels. It is our old friend and perennial bug-a-boo, decentralization. But rather than use the politically incorrect term of decentralization when it comes to technology, let’s use the more progressive term, “lack of centralization.” What are we talking about here? Let’s all take a short quiz to see where we stack up on the Centralization of Technology Chart:
|1. I have a technology steering committee that is healthy and engaged.|
|2. My I.T. manager/CIO has responsibility for all contracts for technology service providers including telecom, core, EFT, IP, Internet banking and bill pay.|
|3. My I.T. manager/CIO prepares a budget that includes all of the hardware, software and services for technology throughout the organization (including desktops, printers, teller equipment, ATMs, voice equipment in all locations).|
|4. I.T. procures all technology throughout the organization.|
|5. All staff supporting technology currently reports to the I.T. Manager/CIO.|
How’d you do? Based on our quiz, if you answered False to any of the above you are not a fully centralized I.T. department. Ironically, when we ask the people in the corner offices whether they feel their I.T. departments are centralized, we usually get a resounding “Yes!” But when we start digging into the corners, we find exceptions galore. In reality, it appears as if many banks have given up on any further centralization of technology and/or decided that the role of I.T. is simply to install and support solutions chosen by others (“and we want that new system in yesterday!”).
So what’s wrong with that? Well, folks, how is I.T. going to meet our expectations for reducing technology costs and putting in better solutions if we don’t allow them to research the technology, own the contract or deal with the vendor? In addition, they are the only department at the bank charged with providing for information security and business continuity for technology. How in the world can I.T. gauge the effect of a new system if Fred down in accounting is inking the contract for a new accounts payable system without giving them a chance to do their due diligence? For that matter, as “installers of other people’s technology,” how does I.T. come up with a realistic technology budget so that your institution can get a better handle on I.T. spending (which is second only to personnel costs)?
There are other factors at work here as well. If I’m a qualified CIO looking for a job in banking, do I take seriously a job in which I’m going to be given only the pieces of it nobody else wants? It would seem to me that we are going to start losing some of our best I.T. talent to other fields if we can’t get this worked out.
The most compelling reason for centralizing all of your technology under the I.T. department should be the reduction of your technology costs. As an industry we are leaving too much money on the table when we allow different departments to control pieces of the technology puzzle. Vendors love it when they can deal with one person on the core maintenance and another on EFT services, and yet another on Internet banking, etc. They stand a much better chance of keeping their particular solutions in place and are less exposed to the significant discounts that would be expected if all of the products were being negotiated by one person with one vendor.
Don’t take me wrong here. I firmly believe that the lines of business outside of I.T. should be the final choosers of their solutions based on functionality and price. But does that preclude the I.T. department from owning the technology and the vendor relationship? I don’t think so. (Full disclosure here: I came from the I.T. ranks of banking.) But rather than rail on the injustices and the history of how this bizarre situation has come to pass, let me offer some thoughts on how we can improve the process.
I’m not thinking that my ideal of centralization of technology into I.T. is just around the corner for the banking industry as a whole. But I am seeing progress. Hopefully some of the items above will help your organization get some of the gains of centralization of technology and avoid the pitfalls of decentralization in the meantime.
Cornerstone Advisors’ Technology Assessment provides your organization with pragmatic recommendations of how to more effectively leverage your investment in technology and bring your organization’s overall technology management to best practice levels.
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