The evolving relationship between banks and IT suppliers
Customers today are looking for organisations that care about their needs in a way that is personalised, responsible, transparent and – of course – secure. In recognising this, banks are stepping up to the challenge and addressing the fundamentals of how they do business. And just as technology is at the heart of this business, so their relationship with IT suppliers is a key component of this value shift, writes Anne MacRae.
Banks and insurance organisations have in recent years sought to rationalise their supplier portfolios: rather than spreading various elements of the IT infrastructure across multiple vendors, they are now developing deeper and longer term relationships with a small number of IT partners.
How customers receive financial services is no longer defined by the operating models put in place by the provider: it’s defined by the customer. Banks need to work with technology suppliers who understand the trending technology choices of consumers and can anticipate the future needs of customers. It is now the business divisions of financial services organisations that need to work with technology suppliers to establish how they can effectively bring together their business priorities, innovation and differentiators with the most compelling technical service presentation to gain the all-important competitive edge. In order to do this, banks now require a supplier that not only knows technology but has specialist knowledge of human-centric IT.
As infrastructure services increasingly move outside the bank, trust must define an operating model where greater control sits with a third party, or multiple third parties.
As modern banks try to navigate in a world where security concerns and regulatory control often sits uncomfortably with customer requirements for web based interaction and the economic benefits cloud services can bring, FIs need partners that share their priorities and can be trusted with their reputation, partners that understand business priorities, are invested in the banks’ success through shared risk models, and who demonstrate responsible business values.
Another factor that is changing the relationships between banks and IT suppliers is the rapid pace of innovation. Innovators no longer need scale and sponsorship to take their ideas to market, they can access funding and development resources online and rapidly achieve exponential growth. These developers offer exactly the sort of innovation that will allow FIs differentiate themselves, and are also the type of businesses that banks want to promote., but their dilemma is two-fold: firstly, banks must consider how to access this innovation without putting their security and reputation at risk, and secondly they much establish how they can manage a technical environment where individual enterprises bring just one small, albeit business critical, piece of the jigsaw.
In order to remain competitive, banks need a technical integration partner which they trust to sift through this myriad of technology choices and present a joined up service that’s aligned to their business models and values. It needs to be presented securely and responsibly. But is this just a move back to a more traditional technology outsource or service integration? I don’t believe so. Service measures must move from measures of provision to the organisation to metrics of service enablement for customers, e.g. time to deploy new products, speed to scale. In a world of commodity IT and cloud services, banks will truly be buying service outcomes with limited ongoing visibility of the underpinning capability and delivery model.
Just as operating models change so the approach of financial services organisations towards technology procurement must change. As procurement seeks to fulfil the technology demands of business divisions as much as IT departments the priority becomes seeking a partner rather than a technology.
The criteria for this selection becomes the credibility of the supplier organisation as a highly secure, human centric, technology provider which shares the client business values, and its willingness to take risk and invest in outcomes for the clients customers. Procurement must help their business to shape the right long term mutually beneficial relationship to secure their partners of choice.
We can already see this happening. For example Barclays, ME Bank and Lloyds have all appointed new chief information officers in the last year.
Suppliers are also getting greater access to heads of business than ever before as organisations look to give them insight to shape best solutions.
These are not the only changes, we have also seen the increasing appointment of chief digital officers and chief analytics officers outside of the IT function. Deloitte predicts that by the end of 2015 25% of Tier 1 organisations will have a CDO.
Alongside the evident market changes, it’s reassuring to see the cultural changes in banking permeating from the customer face to the bones of its technology. This level of organisational transformation will only grow in 2015 and it suggests that this new era in responsible customer-centric banking is here to stay.