Strategic IT planning and management is still not widely used in banking as an enterprise architecture tool, but analysts predict that forces shaping the industry today may speed the adoption of this technology, which, on the highest level, tries to solve the information breakdown that often occurs between the goals of the business architects and the realities of the IT architecture.
Banks must cope with complicated, unexpected relationships between business processes and IT when trying to roll out new projects; they also must understand the implications of cost cutting or delayed implementation; finally, at a time when M&A is on the upswing, banks must rationalize their IT architectures with others.
"There's a growing awareness among complex organizations that they have little understanding of the relationships between applications, processes and technology in the organization," says Greta James, a vp at Gartner. "This is particularly problematic for banks," she says. "In the current economic environment this is important. If an organization wants to make cuts, this tool allows them to understand the implications of those cuts. Say an upgrade is delayed. What business process does that support? How important is that business process? How much revenue is attached to that business process?"
Erik Masing, CEO of alfabet, a software provider in strategic IT planning and management, says, "About 35 percent of IT budgets are wasted because the business really didn't want what IT delivered, the initiative brought little value, the company already had it, or in the midst of the initiative the business environment changed."
Companies need to make assessments about what they have and what needs to get done across the enterprise, but most cannot because the information is not connected, and certainly not available for viewing in real time. The result is poor communication and a lot of guess work around costs and results. "Business architects and IT architects need to be collaborative, but there can be hundreds or thousands of people at the interface of business and IT," Masing says. "The business and IT folks on some abstract level may agree on a project, but they don't really understand the implications."
Alfabet counts WestLB as a client, as well as another European bank, reportedly the world's fifth largest with operations in 85 countries, including a significant and growing presence in the U.S. That bank signed up in November, but Masing could not disclose the name. He did say the bank is using alfabet's planningIT solution for its fixed income group's IT roadmap initiative. Initially, the bank will use the tool to gain an overview and depict a roadmap of the group's current and planned initiatives and their relation to the IT architecture. Currently the bank uses a large Excel spreadsheet, but it's difficult to maintain and offers limited functionality.
When using alfabet, the first step is pulling all relevant data into a central repository, explains Masing. Then planningIT allows a company to see, analyze, control and align IT initiatives with business priorities continuously. The idea is to create a holistic, integrated and collaborative approach that offers continuous transparency into how IT and business information, processes and roles are changing and need to be managed over time. Dieter Fehser, the IT strategy and architecture project leader at WestLB, said in a statement: "Our CIO can quickly discover synergies, overlaps, redundancies, inefficient processes and use of non-standardized products in planned projects, which can amount to considerable cost-saving when remedied,"
By understanding how each IT systems touches each other, unintended consequences are less likely. That's clearly valuable information to make sure cost cutting or a new project, related to an SOA initiative for instance, do not cause chaos somewhere else in the organization. In preparation for an acquisition, IT planning also helps banks choose which systems to adopt and drop.
Just as important is governance of projects - tracking projects to make sure they are doing what was expected at the outset and are adhering to the conditions of approval. For enterprise architecture to work, says James, "it's got to change the behavior of projects. It's about getting the best results across the organization, not just for the project. It's about global optimization, not local optimization."
The problem for banks is made worse, says Henry Peyret, a principle analyst at Forrester, by the need for banks "to make decisions faster. The need for agility is increasing." He's heard of one instance where the team was given just a week to assess the IT architecture of an acquisition candidate. Peyret cites Troux and Telelogic, bought by IBM in May, as alfabet's chief competitors.