SCOTTSDALE, Ariz.—It’s time for the C-Suite to help IT leaders address a growing problem—mounting technology complexity is now being coupled with a complex list of projects to be managed, often by people who have never been trained at that part of their job.
And if the issue is not addressed it could lead to a “death spiral” for some FIs, accelerating consolidation among small and medium-size CUs, according to one consulting firm.
A new report form Cornerstone Advisors has concluded that senior executives at U.S.-based financial institutions cite “too many projects” as a top technology concern for 2015. Demands for new online lending solutions, mobile applications, and HR systems, for example, are testing the bandwidth of limited IT staffs.
The report, “Technology Management Complexity: Drowning in a Sea of Technology Projects,” reveals that from 2014 to 2015, there was a double-digit percentage point increase in planned utilization improvements for 21 technologies among community banks and credit unions.
Cornerstone told CUToday.info that the solution is for upper-level management to recognize this issue is overwhelming the IT team, and then to provide the CIO with the necessary resources—including apps to help IT execs better manage the workload and additional staff to not only tackle the growing list of technology tasks, but also coordinate them.
“These executives are battling less with the complexity of their technology architectures than they are with the complexity of managing all that technology,” said Brad Smith, managing director of technology services at Cornerstone. “It’s all the enhancements, additions, replacements and vendor contract negotiations that are making it harder each day for FI executives to deliver measureable business results from their technology investments.”
According to report findings, institutions with high or moderate “technology management complexity”—defined as the degree to which management is challenged to make coordinated, interdependent technology decisions—plan to improve the utilization of 21 applications in 2015, in contrast to the eight to nine apps for FIs with low technology management complexity. In addition, FIs with high technology management complexity expect to add or replace more than eight apps and renegotiate five to six contracts in 2015.
Sam Kilmer, Cornerstone senior director, said the problem will only worsen if not addressed.
“With all the technology demands facing credit unions—demands that are now stemming from all areas of the organization—this issue has to be tackled proactively,” he said. “The velocity at which these demands are coming is not slowing. This issue is not going away. Either put more resources on this, or we will likely see more consolidation among small and even mid-size credit unions.”
If not addressed the performance of the credit union will be affected, as new technology programs fail to deliver the needed ROI, said Smith. “A death spiral, if you will.”
“Credit unions that don’t address this problem risk implementing a bunch of technology efforts that are half-baked—slammed in, not optimized,” said Smith. “These are the kinds of projects that two years later consultants are called in to help save, with credit unions saying we are paying 100% for the project but getting 50% of the value.”
Kilmer said that the report offers guidance on the key areas on which FIs need to focus to address the problem: IT planning, project management, and contract negotiation. “These are the three major areas that can help.”
What has led to IT leaders facing this issue, said Smith, is that IT governance at FIs in the last few years has not evolved to keep pace with increasing technology demands. “The role of the CIO has changed. This person, who often came up through the network side of the house, is being asked to be more of a strategist and someone who oversees execution. And they are typically asked to do this with limited resources.”
The report, which surveyed 252 senior executives at community banks and credit unions, is available here.