Data-System Reviews Pay Dividends
Many banks are wasting financial resources buying mainframe equipment that is not necessary to expand the capabilities of their data processing systems.
According to a study by Ernst & Young, the banking industry owns computer hardware and software worth more than $200 billion.
This may indicate that banks are often too willing to buy new equipment.
Many hardware companies are eager to sell the latest equipment regardless of the bank's needs.
Instead of buying more equipment to increase the power of their computer operations, banks should improve the cost-efficiency of these systems. This would reduce operating costs and help bolster earnings.
Over the past 25 years, banks' heavy investment in computers has focused on reliability, availability, and serviceability.
This focus has created information processing environments that are highly effective. But effectiveness and efficiency don't always go hand in hand.
Impact on Profits
As information systems have expanded, a bewildering array of operating environments, new hardware, software packages, and procedures have been adopted and installed piecemeal.
The systems assembled this way, though meeting the bank's daily needs, are prone to low efficiency (because of duplication,) misuse or wasteful use of capacity, and other problems.
These inefficiencies may be small enough to escape detection. However, they can have a devastating impact on market position and profitability.
The challenge for information-services executives at financial institutions is to assess and improve the efficiency of their systems.
That is not easy - especially if the assessment is to be done by the same people who designed and maintained the systems.
An Outside Review
One way to gain a more valid perspective - and the potential for cost savings - is by hiring a consultant to review your information-processing system.
The consultant should evaluate the entire data-processing and information-delivery system. The review should pay for itself - typically in 3 to 18 months - by eliminating waste or enhancing productivity.
Areas that need to be addressed include:
Technology. It's necessary to review current technologies employed and their effectiveness in supporting business objectives. Hardware and software should be examined in detail. Among potential improvements are the elimination of duplicate systems or software and the replacement of existing software with better products.
Also, trends should be assessed to help provide an effective plan for future purchases. Such assessment helps to forestall investment in hardware and software that will become obsolete. It also provides a baseline for long-term strategic planning of information services.
Methodology. Methods now used to assure system efficiency, reliability, availability, and performance should be studied. The review should include system and software installation, capacity planning, telecommunication support, and procedures used for quality assurance and storage management.
Among the potential benefits are redeployment or reduction in staffing levels, streamlining of paper flow, and better system performance.
Business priorities. The impact of business priorities, goals, and objectives on information processing should be evaluated. The review should determine how well the system is supporting business goals and what changes may be needed in the future.
Reliable data and fast access to it can mean healthy margins and a secure market share, so an outside review of the information delivery system can pay dividends.
A system review can reassure a bank about its existing system and help provide direction for growth.
But more important, such a review can reduce operating costs and help banks stay cost-competitive.
Mr. Fishman is the senior vice president of marketing for Software Support Group, a delivery-system consulting firm based in Cleveland.