Financial services institutions must focus on IT innovation for radical change or hibernate to survive the economic downturn, says analyst Gartner.
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Organisations that choose the middle ground risk wasting their IT budget on incremental modernisation for little gain, said the analyst.
"Far from being fast followers, companies in between the two options will be ditherers or laggards who waste their IT budget on incremental modernisation, which will have little or no consequence for their business," said Alistair Newton, a Gartner analyst.
Newton provided an outlook on how financial services organisations can innovate during the Gartner Symposium/ITxpo 2008 in Cannes this week.
Gartner said that organisations that hibernate are making a conscious decision to prepare for survival by avoiding IT change until absolutely necessary.
They take a short- to medium-term approach, keeping their systems running for the absolute minimum cost while building up a war-chest of savings for later use on smart, innovative activities as and when market conditions improve.
Gartner defines companies that innovate as being at the leading edge of technology and they embrace the big bang approach. They develop accurate cost-benefit models that link IT changes to business metrics so that they can quantify benefits and justify the radical transformations they encourage.
Newton said, "Financial services companies need to continually assess the external market, especially in today's current turbulent situation. Many new competitors - including non-banks looking to enter the financial services market - see the confusion and uncertainty generated by the current problems as the ideal opportunity to attack the banks and steal their customers.
"Banks need to be aware of this threat and adopt the appropriate response, taking into account their own capabilities and desires to defend their customers from acquisitive aggressors," he said.