Ms. Seymann is president and chief executive of M One Inc., a Phoenix-based consulting finn. Mr. Faulkner is the firm's managing director of technology services.

This is the second of four parts. Subsequent articles also will appear in the Technology/Operations section.

For executives who grew up in an era of ledger cards and typewriters, the myriad new technologies currently available may seem confusing and suspect.

But the future of banking holds great promise for leaders who can apply their knowledge and wisdom to new organizations that emphasize customer-driven processes over functional departments.

The next generation of banking leaders will be those who understand and exploit the technologies currently reshaping the financial world.

Our company has collected some of the technology questions most frequently asked by senior banking executives. Although this is by no means an exhaustive discussion of these issues, we hope this general information provides a conceptual road map for your continuing technological journey.

Every year my management information systems department tells me there's a new system out there that we should buy.

How can I know when we really need a new system without funding a technology fad that will be obsolete before it's installed?

First, recognize that the technology is not just changing rapidly - it is also shifting in fundamental ways. What is occurring now is substantively different, and more powerful than any previous technical change in the industry.

In the first of two major technology waves, mainframe computers in a distributed data environment processed customer transactions, and provided limited responded based on pre-defined menu choices.

These large-scale systems were either custom-built or relied on proprietary applications, and were principally related to operations rather than strategic and executive management support.

Though they excelled at processing and auditing transactions, many of these systems were restricted to single data bases, and failed to provide real customer relationship information.

The second wave may be summed up in two words - interactivity and intelligence. New technology architectures like client-server place substantial computing power at the desktop PC level, and allow the users - customers or internal staff- to access data from a range of sources based on their own needs.

Unlike its proprietary ancestors, client-server is an open architecture that encourages thirdparty developers to design flexible tools and applications that adhere to industry standards.

These standards are important - for they mean that more and more PC software is being designed to access information across multiple platforms, retrieve the information, import it onto the PC, and allow users to integrate it in new ways.

Furthermore, users finally have a consistent environment in which to work since Windows is the de facto interface standard. The net result if this standardization is stability in the midst of rapid advancement.

Client-server is not a fad. It's not going away.

Why can't we get complete customer relationship information into our central information file?

The central information file used by most banks today was never originally designed as part of an integrated information system or strategy.

Instead, they were designed over time as appendages to existing, account-based mainframe applications.

Because the information resided on incompatible systems and platforms, the programming effort to extract the desired data from each system is expensive and must be tailored to meet specific data needs on a product-by-product basis.

The expense of writing these custom extraction programs and the time delays caused by the inflexibility of the original systems - make it nearly impossible for existing central information files to respond quickly to the addition of new products and regulatory requirements.

It is also becoming more difficult to find programmers who can support these older systems and software languages.

This growing scarcity compounds the delay in making changes rapidly, and renders existing central information files even more vulnerable.

Finally, as more and more products and their supporting processing are outsourced, it may become even more difficult to share information easily and rapidly among applications including central information files.

I get hundreds of pages of reports, but I don't get the information I need to run my bank. Why can't I get simple, concise, and accurate reports that give me the information I need?

As with CIFs, management information systems must extract data from multiple incomplete data bases.

Production-based data may require substantial restatement to ensure accurate management-level consolidation, and often demand extensive systemby-system data mapping to accommodate the product and organizational restructuring necessary in a competitive market.

The result of these incompatible, inflexible, and production-oriented systems is that you are data rich, and information poor.

Two years ago we installed a new loan origination system. Now we are replacing the loan servicing system, and discover that we must replace the equipment and software used for origination.

How can we prevent this type of mistake when investing in future technology?

History is strewn with the costly carcasses of proprietary dinosaurs that were too inflexible to adapt to rapid changes in technology.

Fortunately, there are fewer and fewer of these systems being sold, and the likelihood of making this expensive mistake has been reduced by attrition.

However, to minimize your risks in the future, we recommend that you follow these guidelines:

* Purchase hardware and software that utilize "open" architecture supported by multiple vendors, and which conform to industry standards.

* Continue moving toward the use of personal computers on the desktop connected with a localarea network (LAN).

* Connect physical locations using wide-area networks (WANs).

I just received a request to instal networked personal cornputers in each branch. Is this expense justified?

First, make sure you clearly understand the reason to install a networked system.

If is this part of an overall strategy to deploy an information architecture that will ultimately allow the bank to deliver more and better products to key markets over the next few years, it is worth further investigation.

If it meets this strategic test, determine if the system's impact on expected revenue and expense can be recovered over a two-year horizon. Lastly, recognize

that in the near future you will need to invest in new systems.

Changes in the industry, regulation, technology, and consumer expectations will ultimately make any system obsolete.

Invest in open-architecture systems that offer you the best flexibility and adaptability.

Beyond the purchase price of hardware and software, what are the hidden costs of user computing?

MIS professionals have mastered the operation of large data centers, which provide highquality, reliable service.

Remember that it has taken decades to reach these levels of cost efficiency and reliability. With desktop computing, each location in an office is a small data center linked to other small data centers by complex highspeed networks.

Make sure your planning addresses the following additional costs.

* Service and support. Desktop power and networked connectivity require staff trained to trouble-shoot a wide range of hardware, software, and telecommunications problems.

Delivering this on-demand support to decentralized locations is an expensive and critical factor in success.

* Reliability testing and backup. There will be missteps on the trail. Your plan should involve extensive system-testing to ensure the highest possible reliability, Make sure that the plan addresses the backup of all data - especially information on local desktop machines.

* Training and user education. This is by far the most crucial - and most often ignored factor in making your new system a strategic and operational success. Desktop power is wasted without knowledgeable staff excited about the system and its ability to support better customer service. If you are unwilling to commit the resources to train users of the new system, you will significantly limit your return on investment.

What are the most important ingredients for success when implementing new technology?

Use these principles as guidelines when selecting a project for conversion:

* Limit your exposure. Select a project that is used by a relatively small group of users. By limiting the size you will have time to evaluate the development cycle, the flexibility of the system, processing performance, and user training and support needs.

* Control your risk. Select an area for pilot conversion that is not mission critical. If the new system will replace an existing one, plan to run the old system in parallel while you develop and evaluate the new system.

* Select strategically. Even though you must limit your risk and exposure, target a business area strategically important to your long-term vision for new technology. Choose an are that can potentially bolster your current efforts - building graphically powerful product demonstrations, on-line employee, manager, and procedural manuals, or new-loan processing review and approvals.

* Reinvent your business. Remember, you are not simply replacing one transaction processor for a newer model. Fully exploit the potential of the new technologies to change fundamentally the way you do your business. Take the time to understand how the business area currently functions, and how the overall process can be approved.

Apply principles of continuous quality improvement first, then build a new system to reflect those improvements. Engage staff in all aspects of the project - they are the ones who know the detailed aspects of the business, and can be the most creative problem solvers. Empower them with a stake in the success of the new system.

* Define your goals. Have clearly articulated goals for the project, and define measurable success criteria. Remember, this is new technology with sometimes sharp learning curves. Often, projects are doomed because the time allotted for development and prototyping was truncated to fit an unrealistic delivery date.

Don't define goals that totally cripple creative exploration of the new technology. Balance the initial investment with your commitment to your long-range vision. Ultimately, for all of its glitter, the new technology must contribute significantly to your strategic goals.

* Evaluate honestly. There will be speed bumps on the superhighway. Any new technology, any software application may- will - take longer, cost more, and perform better or worse than anticipated. Be prepared to take a long view of these projects, and use them to build the internal expertise needed for the future.

Encourage honest project post mortems in which all aspects of the project - positive and negative - can be discussed openly without fear of recrimination.

* Invest in your people. As we've noted, understanding the training costs of new systems is critical. Many projects fail because not enough time or money was budgeted for application usability testing and user training.

Make a long-term commitment to your people. Provide well-trained support staff, and provide introductory and advanced training to users of new systems. Investigate using the PC environment of the new systems to provide on-line training and support.

So what does all this mean? What are the potential impacts of this new technology on my customers and on my organization?

When the technology is installed as an integral part of your bank's strategic plan, it can have a profound impact on both your customers and the culture of your organization. You must honestly assess the scope of this internal impact, and shift your internal procedures and management styles in tandem with introducing changes.

As you begin addressing these changes, bear the following in mind:

* The power relationships are different. Banks no longer own all the information they supply to their customers. Just as interactive television will change the way people select their entertainment. new technology in banking will allow people to customize their own information choices, select their own types of product mixes, and evaluate how well their current financial institution meets their needs.

Your MIS division no longer has absolute control over data and their format, display, or use as a strategic resource. This is a major shift in the internal power relationships within your organization.

Rather than being keepers of the data, your MIS department should become key members of your strategic planning and development committee. Rather than building transaction tools, the MIS department can become more focused on pending technology solutions that synchronize with strategic goals.

* The technology will .flatten out your organization. As more and more information becomes available, layers of management and technical intermediaries may be removed from the information chain as end users in the organization have the tools to directly query data.

Approval procedures, authority limits, signing authorities, and many other symbols of a hierarchical chain of command may be electronically controlled.

* Customer expectations change with the technology. Customer contact may become increasingly electronic, but it must become less depersonalized.

This is a paradox of the information age.

As baby boomers and their children - who have much less resistance to technology than their parents - access an increasingly bewildering array of data sources, tools must be simpler and more forgiving.

It is psychologically important - and empowering - for customers to have the ability to set data filters, and to control information.

Furthermore. the new technology may soon permit voice, data, and video combinations that may further redefine a customer's relationship to the institution.

Institutions that can provide simple access to complex data from multiple sources across divergent platforms - and deliver those products in a humanized technology - will have created branch offices in each PC or interactive TV.

All that glitters is not strategic. New technology is seductive. As the wave of multimedia functionally and on-line services increases, it's easy to get caught in the glamour of new media.

MIS departments sometimes do want the latest toy, and it is difficult to distinguish fad from necessity. Make your technology decisions based on your strategic goals, and not on the basis of what your competitor is doing.

What are the major technology trends for the next two to five years? What type of planning horizon should we set?

There are three the major trends that will continue to accelerate over the next five years - outsourcing, downsizing, and migrating to client-server architecture. As a general guideline you should:

* Outsource those functions that a service provider can perform at lower cost. For instance, many providers offer excellent transaction deposit systems at a modest cost.

* Downsize where it is strategically possible. Migrating data from the legacy systems to smaller, powerful servers opens the access to the data. It is a fundamental shift that must happen to support enterprise computing.

* Migrate to client-server architecture strategically. Systems that combine the full functionality of desktop PCs with the data integrity and power of networked servers offer unprecedented interactivity. This migration is moving toward critical mass, and represents a major shift in the capabilities of information providers like banks.

Because the technology is changing so rapidly, set longterm strategic goals for a 10-year horizon. Your tactical technology goals should be based on one-, three-, and five-year time frames.

Next: The two waves of technology change.

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