American Banker  |  Thursday, November 13, 2008

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Many bankers consider technology an expense, but for Paul Johnson, it must always have a return.

"If you think about it, we make business decisions," said Mr. Johnson, the chief information officer at the $137 billion-asset BB&T Corp. "And on occasion, those business decisions require the use of technology. So we never forget the fact that the reason we exist, the IT organization, is to provide some level of business value."

His Winston-Salem, N.C., company has grown significantly in the past several years through acquisition, but now it is focused on organic growth, and Mr. Johnson said that change is also working its way through its technology operations, which are now about halfway through a three-year effort to shift the focus to generating value.

"About a year and a half ago I took a transformation program to our executive management team," he said, "to basically shift the mind-set from expense management to value generation."

Moving away from mergers and acquisitions created new pressures on the technology team, Mr. Johnson said, because a strategy based on organic growth often forces bankers to be more aware of spending and returns.

"Now you're much more working on what I'll call the direct-revenue-generating opportunities, where you are directly touching the end client," he said.

Decision-Making
When evaluating new applications, "we would adopt a mentality of a fast follower approach" rather than being an innovator, Mr. Johnson said. "We will not utilize bleeding-edge technology. We prefer to follow and make sure that the technologies are proven before we actually deploy them."

Once customers have shown what they want, "we try to lead in the application of proven technologies that actually drive business value itself" by being quick to market with products that are starting to show potential, Mr Johnson said.

When tech investments are made at BB&T, they are typically introduced in phases, and after each phase, the project is put under fresh scrutiny before it can move forward.

Projects typically go forward "based upon the value to be generated back, instead of making very large investments, which may be three years out before you realize any benefit, and on occasion you may not realize the benefit you expected," he said. "So we just tend to take a more incremental type of approach."

The Economy
The poor economy could provide BB&T's technology group with an opportunity to surpass some of its rivals, Mr. Johnson said.

"At a time when a large number of our primary competitors are significantly cutting back on what they're doing with technology, we're actually expanding our technology capabilities," he said.

"We've just got to make sure that any incremental investment we're making is closely aligned to the business value that it's going to generate," Mr. Johnson said.

"In this kind of an environment that we're in, … when you go into the executive team, and you start making a case for why they should invest in technology, versus some other investment, you've got to close that gap for them and make sure they understand the business implications."

The Future
Clearly, that is an argument that Mr. Johnson has been able to make.

"Our budget is significantly higher this year than it was last year, and that's due primarily to the transformation program," he said, though he would not give the size of BB&T's technology budget.

He said his efforts to refocus BB&T's technology operations are aimed mainly at satisfying customer demand in an increasingly electronic world, and the strategy is based on four main "pillars."

The first pillar is built on "creating highly available infrastructures that allow for this 24/7 fast access for all of our clients," Mr. Johnson said.

The second is about improving BB&T's risk management capabilities, so the banking company can keep up with the increasing number of transactions that are handled electronically.

The third pillar is aimed at uncovering ways to utilize the existing resources efficiently. through initiatives such as combining data centers. Those efforts are "really about value generation," he said.

The fourth pillar is "trying to make the IT organization measure itself and run itself like a line of business," he said.

"A third of what we do is to basically keep the lights on and keep the doors open … [and] a third of what we concentrate on is all of the work brought to our IT organization."

According to Christine Barry, a research director at Aite Group LLC of Boston, "BB&T is focusing a lot more on their technology and making sure that they get their money's worth. We're finding that a lot of the largest banks right now are taking more of a wait-and-see approach when it comes to new investments."

Many of the vendors that serve large banking companies are reporting longer sales cycles, she said, reflecting an increasingly conservative attitude toward spending.

However, the big banking companies generally have more flexibility than small ones in the kinds of technology projects they are able to undertake, Ms. Barry said.

Even though the economy is putting more pressure on their budgets, "technology is really an area where the largest banks are still able to differentiate themselves," Ms. Barry said, particularly in their efforts to attract more business customers.

"A bank's online capabilities is still the No. 1 consideration for a small business choosing a large bank," she said.

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