Dealing with a large variety of IT challenges in the
coming years
Summary in Swedish
Hantering av en stor variation IT utmaningar under de närmaste åren
Framtida utmaningar kommer fortsättningsvis sätta hög press på finansbolagens IT-avdelningar. Fyra
drivkrafter tillsammans utgör basen för framtida förändringsbehov: (1) fortsatt implementering av nya
regelverk som exempelvis MiFID 2, OECD CRS och Basel Kommitténs BCSCS 239, (2) digitalisering av
ekonomin och IT-drivna distributionslösningar, (3) utökad konkurrens från nischaktörer och nya aktörer
samt (4) nya implementeringstandard med bland annat Agila arbetsmetoder för systemutveckling,
distribuerade lagrings och big data verktyg för datahantering. Samtidigt som höga krav sätts, sätts kraven
i mycket varierande områden, därför blir det svårare än någonsin för IT avdelningar att sätta
prioriteringarna rätt och för verksamheter att bedöma effektivitet av dessa IT avdelningar. zeb
presenterar i denna artikel huvudprinciper för best practice om hur IT-Strategin kan definieras
tillsammans med affärsmodellen för att säkerställa att IT-avdelningarna integreras med verksamheten på
bästa sätt för att möjligöra uppfyllandet av verksamhetsmålen.
Dealing with a large variety of IT challenges in the coming years
The coming challenges
The financial sector saw radical changes since the 2008 financial crisis and this trend will accelerate in
the coming years with the combination of the four following factors that will put extremely high pressure
on the IT departments of financial institutions:
1. First, regulators are changing the rules of the game for financial firms. To cite only a few, FATCA
and the OECD CRS are regulations issued by states that force firms to completely review the way
they manage customer information, the European Directive on markets in financial instruments
(MiFID 2) will transform the world of trading in financial instruments and wealth management,
and the Basel Committee on Banking Supervision is issuing both Basel III and the Principles for
effective risk data aggregation and risk reporting which will transform the way banks control,
measure, value and report risk taking. These regulations are transforming the business
operations and reporting workflows in financial institutions, and are therefore forcing these
institutions to conduct extremely large transformation programs which will be mostly handled by
the IT departments.
2. Second, the digitalization of the economy provides new distribution channels for financial
products and services, and beyond this completely transforms the way customers choose
products and interact with financial institutions. Customers no longer need to physically meet
their bankers to set up a mortgage or a pension scheme and efficient back-end systems
connected to web portals and smartphone apps can now handle similar transaction volumes to
entire brick and mortar retail branch networks.
3. Third, new and non-traditional actors are now entering the financial sector, which threatens the
incumbent financial institutions. In Sweden, niche brokerage firms such as Avanza or Nordnet
are broadening their offering to a full range of banking services while young companies with only
a few years of existence such as iZettle and Klarna quickly establishing themselves as leaders of
payment services. Large international technology firms such as Apple, Amazon and Google
recently launched mobile wallets or integrated payment services with the ambition to compete
with traditional payment solutions such as banking cards.
4. Fourth, new standards are now emerging that increase both IT velocity and efficiency of the IT
organizations upon which the financial institutions and highly reliant. Put it simply, organizations
who manage to implement new standards such as service oriented system architectures, big
data analytics tools, cloud services and Agile or Devops development methodologies gain the
possibility to launch more customized financial products and services at a much higher pace and
at a lower cost than their competitors.
These factors are diverse in their nature and each of them is transforming the competitive forces in the
financial market and calls for radical changes in the way IT solutions are developed, sourced and
operated. The very fact that all of these changes occur at the same time means that many stakeholders
now set very different requirements on IT which brings confusion. As a result firms now struggle to
assess their IT efficiency and redefine their IT Strategy. This is why zeb believes that executives in banks
and other financial institutions must apply new frameworks to systematically deal with technology.
First step to react: alignment to the institution’s priorities
The initial starting point for a financial institution to react is to understand how well the IT strategy of the
organization is aligned to the priorities of the company. Such an alignment presupposes first that the
financial organization has developed the capacity to quickly grasp and internally spread knowledge about
the implications of the upcoming regulations and other changes for the financial institution in general
and specifically the IT. The best practice observed by zeb is to develop a systematic model to summarize
for each upcoming regulation and challenge all the known impact on firm’s business model, costs,
internal processes and system design. Such a tool becomes very valuable to increase awareness about
the regulations as well as a practical source of information for implementation prestudies.
Figure 1: Example of zeb.regulatory.radar to present the implications of the MiFID 2 the legal framework
The second part of this alignment is to conduct an assessment of the level of maturity of the IT
organization along multiple dimensions based on benchmarking with peers and self assessment. The zeb
methodology to define and assess IT strategies in an organization is built around the following three core
pillars:
1. Functional and IT architecture, which covers all activities around optimal design of processes,
applications, and infrastructures
2. IT management, which covers all aspects related to positioning of the IT organization as well as
processes and organizational design of the department
3. IT governance, which covers topics such as benchmarking, governance, roadmaps and cost
management.
Figure 2: Example of IT assessment overview report
General principles to set the IT Strategy
Once and only once this alignment of the IT and business priorities has been clarified a qualified
prioritization of issues for the IT organization can be made, with a natural following step to craft an
implementation roadmap covering target IT strategy principles, target landscapes, roll-out plans and
migration approaches.
Finally we at zeb propose to observe five guiding principles which we learned from extensive project
experience in order to articulate this re-definition and implementation of an IT Strategy:
1. The IT strategy is not a derivative of the business strategy – rather both strategies need to be
aligned and explicit enough to support and enable each other. While obviously new business
strategic initiatives, such as the entry of a new geographic market needs reflection in the IT
capabilities, IT strategy enables new products by providing technological readiness, e.g. for
mobile banking solutions.
2. The IT strategy must be developed independently of the business strategy in part. Strategy
development and implementation cycles vary – as e.g. the change of sourcing relationships or
the migration of the core banking platform takes years to implement, these initiatives are usually
not subjected to frequent changes driven by the business (focus efficiency and stability). Areas
that are exposed to high degree of change, e.g. data warehouse (regulation), front ends and
sales channels (customer behavior) call for flexibility and speed instead.
3. Organizational and IT strategy are highly integrated—The objective is to have viable and
matching ORG and IT solutions. Not all problems call for IT solutions but if the solution is IT a
strong focus on business process needs to yield the design. Therefore close interaction of
process experts, operations and IT is required on all levels.
4. The IT has to be involved in the management of the value added at an early stage. In the past: IT
must deliver whatever the business wants / needs and justify the costs afterwards. Present and
future: joint discussion on solution design and overall budget allocation
5. The IT strategy must be based on an integrated approach. The strategy along functional and IT
architecture, IT management and IT governance needs to be defined and managed along a
seamless and highly integrated framework in order to unfold the strengths needed to manage
the variety of challenges of IT.
Zeb contact persons
Romain Babelon
Manager
E-mail
[email protected]
Phone
+46 8 670 57 14
Stockholm Office
Biblioteksgatan 11
S-111 46 Stockholm
Dr. Jan Saat
Manager
E-mail
[email protected]
Phone
+49 25197128839
Münster Office
Hammer Straße 165
48153 Münster