WILLIAMSBURG, Va. - Technology budgets stick out like a sore thumb, especially during a tight economy-so managers better have good analytical tools and make sure IT spending is in line with the CU's strategic plan, information technology execs were told last week.
"IT is where the big dollars are spent in an organization," Erin Mendez, SVP-finance and IT at SchoolsFirst FCU told the CUNA Technology Council Summit here in remarks themed, "How Technology Can Assist the Bottom Line in These Economic Times."
"You have to understand where IT contributes and detracts from a business during a contraction cycle," she continued. "Controlling costs takes priority. You can judge whether Tool A is more important than Tool B by aligning all your initiatives with our strategic objectives."
Mendez repeatedly pointed her finger at the crowd of about 30 and didn't mince words. "If you're not there to carry the business, you're in the way of the business," she said.
During a shrinking economy, IT should be at the beck and call of the finance department, ready to use analytical tools to hand over data, said Mendez. "If you don't have analytical tools, you'll have to perform data extractions, which will be inefficient," said Mendez, who chairs the CUNA CFO Council.
"This is when finance will drive IT nuts," she suggested. "Someone from finance just wants data now. They don't care if the technology is ad hoc, structured, data marts or data warehouse."
Bad data can make for bad decisions, added Mendez. The $8-billion SchoolsFirst, formerly Orange County Teachers FCU, learned first-hand how "poor" the credit union's loan charge-off forecasting tools and methodologies were as the California housing market began to collapse, said Mendez. "We were behind predicting the charge-off rates."
Outsourcing IT may help during an economic contraction, she said, and other speakers at the Summit echoed her sentiments. The Santa Ana, Calif.-based CU now outsources 90% of its technology, said Mendez. "It's easy to outsource IT."
As a tight economic cycle bottoms out into a "trough" cycle, IT must run bare-bones and offer flexible technologies, she said. "Just-in-time architecture is critical. For example, provisioning a server needs to happen in one day, not a week or more." Mendez predicted that California won't hit the trough until at least third quarter 2009.
Whether the economy is crashing or peaking, IT managers can rely on three rules of thumb to help the CU, said Mendez.
First, IT can help "preserve the brand," she said. That means making sure that the CU can communicate with members-and gauge their opinions-using the website, Web 2.0 and electronic messaging and notices, she said.
"Preserving the value proposition," or return to member, is the second rule, continued Mendez. Here, technologists should try to automate as many processes as possible with tools such as CRM (to understand what the member is looking for) and homebanking. The result: efficiencies, she said.
Finally, IT should help "preserve differentiation," she said. Analytical tools and Executive Information Systems (EIS) can help a CU cater to its membership with unique products. "The bigger you get, the more tools you need for information and analysis to understand how to differentiate."
Although an economic upswing may not begin until 2010, recovery is always the most important business cycle for IT: it's the time for IT to lay a plan for expansion, said Mendez.
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