Video: Use IT to innovate, says Gartner

Banks and financial services companies need to use IT to promote innovation rather than focusing on cutting costs, according to analyst group Gartner.

Banks and financial services companies need to use IT to promote innovation rather than focusing on cutting costs, according to analyst group Gartner.

Gartner research vice-president, Peter Redshaw, said innovation is essential to firms as they prepare for recovery. However, many firms are too focused on the short-term goals of surviving the downturn, he said (see video).

"It has been a tumultuous year for banks and financial services providers and some will continue to face a rocky path for the next two years ," Peter Redshaw said.

"IT departments have been fighting frantically to help keep their organisations' heads above water and they'd be forgiven for thinking that the worst is over. That may be true but it is no time to relax."

Redshaw warned that financial services companies should start thinking of IT as a way to introduce innovative services and to retain customers, rather than simply to cut costs.

"Banks are becoming excessively risk-averse and that could generate a culture that is too introverted and too inflexible. That in turn leads them to think of IT as something that is only suitable and only fit to reduce costs," he said. "That is a problem. It means that tactics start to dominate over strategies."

"They are spending so much about automation, about streamlining their processes, that they have no time left to focus on their strategic goals," he said.

Banks and financial services companeis must start by making radical changes to their IT governance and the way their IT organisation is structured, said Redshaw.

"You have got to start thinking about how you win back the trust and confidence of your customers and IT has a really big part to play in that."

"It needs quite a critical shift in thinking and attitude, investments and plans, to change from this introverted, back office type mentality to be much outward focused on what can we do to raise more revenue, to get more stuff to customers, to retain customers."

"At some point your CEO will be bringing you a new operating model. The world is going to change. We are not going back to the go-go years of 2006 and 2007. It's going to be a world of small margins, low growth, high volitility and heavy regulation. You need to be prepared for that."

e_SBlt Research by Gartner from May 2009, with 92 executives at banks worldwide, showed that the most important innovation goals were to improve product or service quality, to extend a product range, to replace products and services, to comply with regulations and to protect market share.

But only 30 per cent of financial services companies in North America, 53 per cent in APAC and 66 per cent in Europe have established a formal innovation process.

Peter Redshaw, Gartner, discusses the challenges facing Financial Services Providers

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