Can a big blunder on technology bring down a bank? It hasn't happened yet, of course.

But already a number of major banking companies have cited the prospect of having to make huge investments in systems as a factor in putting themselves on the block. And for banks that want to go it alone, the need to generate profit growth - while keeping a firm grip on costs - makes systems and strategy choices more important than ever.

That's the subject of our cover story this month. We found a growing sense among industry experts that the perils of falling behind in technology or betting on the wrong horse are likely to create more accountability in the executive suite.

"Historically, it has been very difficult to correlate higher levels of profitability with technological prowess or sophistication," said James McCormick, president of First Manhattan Consulting Group. In part, he said, the correlation was masked because a bank that underinvested in systems could still post earnings growth rivaling that of banks which had spent more. In other words, what those banks sacrificed in revenue growth they largely made up for by spending less on technology.

But with the market rate of growth for mature core banking products shrinking, it will be harder to produce profit growth without using better technology for marketing, he said.

"One's ability to use technology for marketing purposes - generating new profitable accounts, maximizing the profitabilty that you get from existing accounts - will start to stand out in clearer relief," said Mr. McCormick.

Donald R. Hollis, a former First Chicago executive vice president who now heads DRH Strategic Consulting, said, "Technology is moving so fast that you can indeed fall way behind the curve and then look at a momentous expense. In some respects, that means you've been overstating your earnings because you've been robbing Peter to pay Paul."

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