Smart IT spending

A small number of European banks get more business value from information

technology-including faster, more flexible support of business objectives-than

do their peers, and at a far lower cost. How? Our research found that this

select group combines superior IT management with a tight focus on using IT to

help improve business performance.






We surveyed 37 retail and wholesale banks to understand how they manage
technology and to identify the IT-management practices of the top performers. In

the course of the effort, more than 70 variables of management practice-ranging

from the management of data centers and application portfolios to IT governance

models and outsourcing contract provisions-were examined. We collected

quantitative and qualitative data on the banks' IT spending and on their

staffing levels for internal personnel and contractors.






The survey found that IT spending varied widely-from 10 to 30 percent of
operating costs, or 4 to 18 percent of operating income. Higher levels of IT

spending didn't increase the effectiveness or efficiency of the business.

Indeed, the banks that appear to get the most business value from IT spend up to

40 percent less than the weakest performers.






We discovered that the best performers were separated from the rest by fewer
than 20 statistically meaningful variables associated with two factors: the

quality of a bank's IT management and the ways the bank uses IT to support the

needs of the business. There was no correlation between the performance of a

bank and either its size (as measured by revenues or head counts) or its mix of

retail and wholesale business. Taken together, these results strongly suggest

that the way banks use and manage IT will continue to be a crucial factor in

their performance.

Source: McKinsey Quarterly

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