• Cognizant 20-20 Insights
CIO Priorities: Striking the Right Balance
Between Growth and Efficiency
As a slowdown looms, Indian financial firms’ CIOs are turning to
technology to rein in costs without hampering growth initiatives.
Executive Summary
Insights from the Survey
India has grown at a rapid pace over the past
decade, and the financial services industry has
grown in line with the market. New products
and services were introduced, based on market
requirements. As time to market was the most
important consideration during this phase,
efficiency ended up being compromised.
Our discussions reveal that firms are focusing
on driving operational efficiency to rein in costs,
while continuing to keep an eye on market
trends and growth avenues to explore when the
economic tide turns (See Figure 1).
Efficiency
Reorganizing to Exploit Synergies
Now, with signs of a slowdown emerging, organizations can focus on analyzing the alignment
between technology and operations and undertake
initiatives to improve overall efficiency. Also, with
a negative IT budget outlook, firms are looking
at ways to reduce the total cost of ownership by
streamlining systems and/or processes.
Cognizant Business Consulting (CBC) conducted
discussions with leading buy-side firms and
diversified financial firms during May-June 2012
regarding their short-/medium-term priorities
in the current market scenario. A set of themes
emerged around the often conflicting focus areas
of “growth” and “efficiency.” Firms seek value
for their operations spend while continuing to
prepare themselves for future opportunities.
Technology is considered key to achieving the
right balance between these two objectives.
cognizant 20-20 insights | august 2012
A majority of the firms surveyed have added new
lines of business or new products and services
to their offerings over the past decade. Such
expansion has, in many cases, resulted in business
divisions operating in silos, often leading to a lack
of integration across the enterprise. Consequently, firms are undertaking rationalization initiatives
to increase enterprise-wide integration.
• Operations optimization: The aim is to reduce
the cost of operations while improving scalability and flexibility to be able to respond quickly
to market changes. It involves:
>> Optimizing
middle- and back-office workflow to remove process redundancies.
>> Building a shared services model to rationalize the organization structure.
Key Imperatives for Buy-side Firms
Growth
Efficiency
How to effectively drive growth in
business by adapting to changing
customer needs, regulations and
technologies?
How to drive efficiency in
operations to reduce the total
cost of ownership?
Key Imperatives
• Enhancing customer alignment.
• Reorganizing to exploit synergies.
• Increasing focus on regulation
and risk management.
• Restructuring capital expenses.
• Investments in “SMAC.”
Figure 1
>> Adopting
a service-oriented architecture
for better enterprise-wide integration.
>> Automating key processes to reduce manual workflows.
• Infrastructure rationalization: The focus is on
reducing business risk by keeping the core
team in-house but using vendors to provide
flexible capacity as and when required.
Growth
Enhancing Customer Alignment
>> Optimizing IT assets across lines
In order to improve customer engagement levels,
firms are increasing their client-centric focus and
investing in technology that helps them provide
multi-asset, multichannel capabilities.
>> Leveraging the existing enterprise infra-
• 360-degree
increasing firm-wide infrastructure integration
and sharing best practices. It involves:
of business.
structure wherever possible.
views: All the firms surveyed
consider a comprehensive 360-degree view of
each client relationship as essential to deliver
more personalized service and improve crossselling/up-selling revenues. In addition, many
firms are also investing in an external view
that allows a client to view their relationship
and transaction history with the firm across
all services to help strengthen the client’s
engagement with the firm. A critical piece in
this initiative is ensuring data reliability. Firms
are therefore investing in projects related to
enterprise data management.
>> Reducing maintenance costs by taking a
holistic view of the infrastructure setup.
Restructuring Capital Expenses
The challenging conditions in the Indian market
are expected to continue for longer than initially
estimated. Companies are therefore taking a conservative approach and reducing up-front capital
expenses. Key initiatives include measures to
convert capital expenditures to operating expenditures.
• Infrastructure costs: Given the falling cost of
• Customer
service: Firms view customer
service as a key differentiator in securing a
larger share of wallet. As the industry services
customers across a number of channels
(internet, IVR, mobile, in-person), firms are
directing their efforts towards ensuring a
consistent level of service across channels.
technology, most firms are entering into shorter-term contracts for infrastructure services
and renegotiating terms more often to get the
best value from their infrastructure spend.
• COTS
products pricing: Firms are seeking
innovative pricing models from their COTS
vendors to reduce the up-front investment. Fees
based on assets under management (AuM) or
per-transaction pricing are increasingly being
discussed with the vendors to align product
license fees with business performance.
• Outsourcing:
Firms are using the core-flex
model for their IT staffing requirements,
cognizant 20-20 insights
Increasing Focus on Regulation
and Risk Management
Our survey indicates that compliance through
technology enablement is becoming ever more
critical, especially given the growing number of
financial products and the rapidly increasing
regulatory requirements.
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Risk management is another area where
organizations are employing additional measures
to ensure calculated exposure to market uncertainties.
>> Increased automation in the compliance
• Compliance:
>> Re-architecting applications to support
The cost of meeting regulatory
requirements in India is increasing. One of
the survey participants indicated that their
data storage requirements have increased
by over 300% in the past three years. This
trend is expected to continue over the next
few years. The cost of compliance is impacting
the firms’ margins and may become a threat
to the viability of the businesses. Hence, all the
firms surveyed are focusing on reducing the
cost of compliance to prepare for growth. The
measures taken include:
division.
>> Streamlining operational processes to
reduce cost.
increasing data requirements.
• Risk
management: Firms are taking a
proactive approach to risk management as any
lapse has a significant impact on the brand. All
the firms surveyed have an in-house suite of
applications for enterprise risk assessment and
management. These applications are continuously enhanced to better manage risk while
maintaining smooth business functioning. The
key risk management attributes include:
Quick Take
Below are excerpts from the responses of participants in our survey:
Head of business solutions & IT, diversified financial services firm:
“We are seeking innovative pricing from products and services vendors.
Pricing models that allow us to customize our mix of capital and operating
expenses are the need of the hour.”
Chief information officer at a large capital markets firm with
brokerage, asset and wealth management offerings:
“Given the constant downward pressure on margins owing to market
conditions and escalating regulatory costs, we have stepped up our
efforts to improve operational efficiency to ensure profitability.”
Managing director, global private bank:
“There is an element of novelty associated with mobile applications.
However, the associated payment and technology ecosystems are still
evolving. We expect them to gain wider acceptance in the near future.”
Partner, financial advisory firm:
“Although investors are aware of the risks associated with investing in
financial markets, they are disappointed every time they experience a
downside. Proactive risk management is essential to build a reliable brand
in the marketplace.”
Chief operations officer, large asset management company:
“We firmly believe that customer-centric products and excellent customer
service drive customer satisfaction and loyalty to brand.”
cognizant 20-20 insights
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>> Enterprise risk views for different lines of
customers. However, most of the firms do not
see a clear business case for investing heavily
in building such applications. There is ongoing
debate in the industry regarding the value of
investing in standalone mobile applications
vis-à-vis developing device-agnostic Web sites.
businesses.
>> Risk reporting aggregated at various levels
(e.g., client, region, etc.).
>> Continuous updating of risk thresholds.
Investments in SMAC (Social, Mobility,
Analytics and Cloud)
The survey participants believe that while
emerging technology trends have significant
potential for making an impact on how businesses
operate, that potential has not been fully realized
yet. However, as the technology and regulatory
ecosystem evolve and pave the way for implementation and innovative usage of these technologies, they will go from being “nice to have” to
becoming a necessity in the industry.
• Analytics: A majority of the firms surveyed are
investing in third-party analytics solutions and
are subsequently customizing them in-house
to meet their specific requirements. As firms
undertake projects to improve customer
focus and infrastructure integration across
the enterprise, they are exploring opportunities to leverage existing customer data to gain
insights and improve cross-selling revenues.
• Cloud: Most survey participants use a private
cloud (or virtual environment). However, they
were wary about putting customer data on
a public cloud given security and regulatory
concerns. There is nonetheless a strong
business case for the use of a public cloud, the
advantages being reduced capacity wastage
and minimized capital expenses. However, these
benefits can be realized fully only when the
privacy and regulatory concerns are addressed.
Till then, firms plan to use public clouds only for
processes with no privacy requirements.
• Social
media: While most firms have a
presence on popular social media platforms
such as Facebook and Twitter, they have not
fully ventured into this space and are adopting
a wait-and-watch approach. In addition, there is
uncertainty around regulatory policies on the
use of these technologies and significant risks
of loss of data privacy and confidentiality. A
number of the firms surveyed have made social
media applications available internally for use
by employees (financial advisors, field representatives, etc.) to facilitate better interaction.
However, they believe these applications are
not being used to their full potential yet.
• Mobile:
The survey participants considered
the availability of an online interface on mobile
platforms, such as smart phones and tablets,
to be a must-have. There is some demand
from customers for mobile applications and
most firms have provided or are planning to
provide a basic mobile application to engage
Conclusion
Our discussions with the survey participants
indicate that, going forward, both growth and
efficiency in technology must be managed to
drive sustainability in business operations. Any
imbalance can have a long-term impact resulting
in the company being under-prepared to tap
into industry growth. Technology is expected to
contribute ever more significantly to the overall
performance of the organization, making it a
strategic differentiator.
About the Authors
Dheeraj Toshniwal is a Manager with Cognizant Business Consulting and leads the Wealth
Management Consulting Practice for APAC. He has experience leading business and IT transformation engagements with global banking and wealth management firms. Dheeraj can be reached at
[email protected].
Siddhi Chanchani is a Senior Consultant in the Banking and Financial Services Practice at Cognizant
Business Consulting. She can be reached at [email protected].
cognizant 20-20 insights
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Acknowledgments
The authors would like to thank the senior executives from leading financial firms who participated
in the survey. The authors also thank Aamod Gokhale (Director of Consulting, Cognizant Business
Consulting) and Saurabh Bhandari (MDI, Gurgaon Batch 2011-2013) for their contribution to the research
design and execution.
About Cognizant
Cognizant (NASDAQ: CTSH) is a leading provider of information technology, consulting, and business process outsourcing services, dedicated to helping the world’s leading companies build stronger businesses. Headquartered in
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and business process expertise, and a global, collaborative workforce that embodies the future of work. With over 50
delivery centers worldwide and approximately 145,200 employees as of June 30, 2012, Cognizant is a member of the
NASDAQ-100, the S&P 500, the Forbes Global 2000, and the Fortune 500 and is ranked among the top performing
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