Spending Speedup Projected for '92

After a Lull, Systems Budgets to Rise 5.3% on Average

Banks and other financial firms plan to boost their spending on information systems by an average of 5.3% in 1992, more than twice the increase that was projected for 1991, according to a new study.

The numbers indicate that while banks are not increasing spending dramatically, they do plan to bring technology spending to more normal levels after the severe curtailment of growth this year.

CSC Index Inc., based in Cambridge, Mass., conducted the study, polling 43 banks, thrifts, and financial services companies in September and October.

Pulling Ahead

The study found that the average expected budget increase by financial service companies was higher than most other industries. Of the 444 companies that CSC Index surveyed, the average projected increase for 1992 was 3.5%.

In 1990, banks and other financial companies projected only a 2.2% budget increase for 1991, lower than the industry average budget increase of 5.3%.

Bank One Corp., for instance, plans to increase its technology budget by 15% in 1992, as opposed to 10% growth in 1991.

The Columbus, Ohio-based bank is spending money this year on major conversions to bring retail branches on disparate systems onto a common system, according to Edward Winnick, chief financial officer, Bank One Services Corp.

Prime Targets

In the study, the two biggest concerns that management had were aligning business goals with the technology function and streamlining workflows to improve areas such as customer service.

Most technology dollars would go toward redesigning work processes, bankers said. Such "reengineering" involves a fundamental change in the way that a company operates.

About 44% of the technologists questioned said their banks had started to reengineer their business processes. Of those bankers whose institutions had not, 78% said they expected reengineering programs to start over the next two years.

In turns of generating interest and enthusiasm, image processing was overwhelmingly the highest rated new technology by the bankers.

A full 87% said it was of the greatest interest, compared with 28% who cited expert systems and artificial intelligence.

About 23% of the bankers surveyed said client/server technologies were of greatest interest, and 16% cited computer-aided software engineering.

But George Rusznak, vice president at CSC Index and head of the banking practice, said that new technologies are not necessarily the answer.

Reengineering

The real key, he said, is redesigning workflows. But many banks say they are reengineering when they are merely making marginal improvements in areas such as productivity.

Banks often use new technologies to make processes faster, or cheaper, or more accurate, he said.

"We are seeing some of the past mistakes [associated with implementing technology] being repeated with the new technology," Mr. Rusznak said.

File-folder imaging applications, for example, merely improve productivity but do not change the way the loans are originated or processed.

The difference between marginal improvements and reengineering is "the difference between speeding up a process and eliminating that process," said Mr. Rusznak.

Productivity Versus Flexibility

About 73% of bankers said most new investment would be in service delivery areas or new branch automation systems. But in replacing retail branch systems, bankers need to take into account new requirements, Mr. Rusznak said.

"Bankers will readily agree they require productivity and flexibility, but those two factors have historically been at odds, and one could only be obtained at the expense of the other," said Mr. Rusznak.

Systems which have both features are necessary in the future, to allow banks to obtain economies of scale and still introduce new products and services quickly.

"We will not have as many standard processes as we have had in the past," Mr. Rusznak said.

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