Where's the Bang for the Technology Buck?
As Investment Rises, Many Bank Executives Are Looking for Profits
Technology is playing an ever-bigger role at banks, but many bankers are dissatisfied with the results, according to a survey by a leading computer journal and Andersen Consulting.
Over half of the banking executives in the survey said they did not believe their institutions were getting the most bang for their technology buck.
The survey was conducted by Andersen Consulting, Chicago, and Computerworld, a trade journal, and included responses from 38 bank chief executives and financial officers.
The responses indicate that bankers are disappointed by the extent to which technology spending has reduced operating costs, increased market share, and widened profit margins.
Bigger Role for Technology
Ninety percent of the bankers surveyed said that the role of technology was increasing at their institutions, and almost all said that they believed technology should have a significant effect on the bottom line.
Sixty-three percent said their computer systems should do more than "only modestly change the way the company does business."
Hard to Measure Effect
Bankers say part of the problem is that it is difficult to quantify the direct benefits of technology.
Indeed, nearly one-fifth of the bankers surveyed said the benefits are not measurable; 78% said they are.
"The banking industry does not do a good job and never has done a good job in measuring the benefits of technology," said David Van Lear, chief executive BancOne Services Corp., in an interview earlier this year.
BancOne Services is the automation arm of Banc One Corp., Columbus, Ohio.
Many banks try to measure the benefits of automation by analyzing whether individual projects will increase productivity, reduce labor costs, and speed banking operations.
Link to Business Goals
"But this not an appropriate way to measure the return on investments in technology," said Mr. Van Lear.
Consultants say that banks need to tie technology strategies more closely to business goals.
"CEOs will see a bigger payback once they apply information technology to create real across-the-board change in the way they do business, not just isolated applications," said Jim Fischer, Andersen Consulting's managing partner for technology services.
Ironically, 86% of the bankers surveyed said that information technology is very closely or somewhat closely linked with their banks' business strategy.
Thirteen percent said that technology was not closely linked to the business strategy. [Graph Omitted]