In the coming decade the destiny of many a financial institution will be determined largely by whether it has a strategy for guaranteeing the quality, reliability, and continuous improvement of its software-and how well it executes this strategy.

Institutions that aim to meet world-class standards-such as those established by the Software Engineering Institute, the Malcolm Baldrige Quality Award program, and the International Organization for Standardization-will thrive. Those that do not will most likely face unnecessary crises, and some will even fail. The constant, unforgiving pressure on the financial services industry to produce quality software is bound to get even more intense.

The current software challenges will be compounded by the growing appeal of banking by personal computer, the increasing complexity in electronic data interchange, the expansion of trade and international business, and the aggressive evolution of the Internet.

Throw in a merger or acquisition that necessitates integration of software applications and the bar rises even higher.

There is a methodology to address software-related concerns: SPI, for software process improvement.

Its premise is that if you can guarantee the quality of your processes, you can guarantee the quality of the products and services they produce.

To be able to guarantee results, you must be able to predict, and manage the events that will produce those results. To do this you need repeatable, documented processes that provide managers with insight.

If results begin to deviate from predictions, corrective actions can be taken before customers begin to complain about products that are full of errors and do not meet expectations or their time lines.

What software development problems do most financial institutions face that could be improved by adopting an SPI strategy?

The first is in the cultural clash between marketing staff and information technology professionals. Marketing and customer service are usually the first to hear about software problems from customers. However, the sharp divide between these employees and IT professionals often prevent effective collaboration.

These groups often have conflicting goals and perspectives, and communication can be poor or nonexistent. There is often a lack of understanding of each Having processes that provide some guidelines and discipline for each group, including communication between them, is vital to improving software quality and customer service.

SPI methodologies will also help financial institutions attract and retain key IT staff members more cost-effectively.

A study conducted last year by the Information Technology Association of America showed 346,000 IT positions open. People fortunate enough to have these jobs are more inclined to be loyal to an organization that provides an environment where sound management and development practices are a priority, where product quality is just as important as meeting deadlines.

In addition to establishing roles for employees, senior management should set clear benchmarks to gauge software progress and improvement.

The choice of a standard or model such as the Baldrige criteria is critical. Before any improvement effort is begun, however, senior management must understand why a specific model is chosen and should help develop clear targets and expectations for the financial, business, and technical benefits that will result.

Among the steps that can be taken to identify and adopt the most appropriate standard model are:

An objective third-party evaluation of an institution's market, products, services, business objectives, and status.

An assessment of existing practices versus those recommended by the chosen methodology, which can help to identify needs and priorities.

Implementation of a rigorous program to measure conformance to the model.

A primary reason that SPI efforts fail is the absence of senior management involvement in selecting and implementing a strategy.

The chief executive officer or designated senior manager needs to support the program from the start.

This person must understand its basic framework and concepts, be prepared to communicate its importance, provide and protect necessary resources, and arbitrate any turf battles that may arise.

When SPI works, customers appreciate top-notch service and reward it with increased business and referrals. The information technology staff is empowered, more loyal, and satisfied. Shareholders also win, because assets and fees increase, compensation costs are reduced, and unwanted surprises are mitigated.

Software process improvement efforts driven by goal-oriented senior managers will help financial institutions maximize growth and profitability.

These issues are no longer confined to defining the "technological health" of a financial institution. They are becoming pivotal organization and management issues and are critical to overall success and survival. Ms. Bloodworth is founder and president of Bloodworth Integrated Technology Inc. of Reston, Va., a consulting firm that serves financial institutions and government agencies.

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