New Technologies in Banking: Hype or Reality?

1. New Technologies in Banking: hype or reality? Oldřich Příklenk Country Director 27.5.2008

2. 2 Hype Cycle for Banking and Investment Services Front-Office Technologies, 2007

3. 3 Technologies moved off-hype cycle • Linux in Banking Delivery Channels (not taken off as a technology trend with specific applicability to banking beyond the trend for enterprises replacing or upgrading desktop computers and servers) • Deposit ATMs (was incorporated in the Advanced ATMs and Kiosks element) • Bank Document Imaging/Archive/Retrieval at Front Office (no specific applicability to banking and is tracked in other Gartner Hype Cycles) • Customer Natural Language Speech Recognition in Bank Telephone and Call Centers (and replaced by Speech Recognition in Contact Centers) • Real-Time Analytics, Profiles and Detection (broken into two technologies: real time analytics and centralized customer profiles) • Alert Technologies (it has reached the Plateau of Productivity)

4. 4 Priority Matrix

5. Implications Peak of Inflated Expectations Visibility The Hype Cycle Explained Gartner’s Hype Cycle helps enterprises decide when to implement emerging technologies. As with all technology investments, there is no simple answer. Business needs and philosophies should determine when it makes sense to invest in a particular new technology. Plateau of Productivity Technology Trigger Slope of Enlightenment Trough of Disillusionment “Type A” Adoption “Type B” Adoption “Type C” Adoption Maturity • Type A, Type B and Type C Enterprises • Enterprises are identified as Type A, Type B and Type C, based on the aggressiveness with which they adopt and use technology, which typically varies based on industry: • Type A enterprises are technology-driven, often using immature, cutting-edge technologies to gain an edge. • Type B enterprises are moderate technology adopters, implementing new technologies thathave entered the mainstream. • Type C enterprises are technologically risk-averse and are usually among the last to adopt new technologies.

6. 6 Hype Cycle for Banking and Investment Services Front-Office Technologies, 2007

7. 7 Recommendations • You own your technology-related strategy, not your vendors • Innovators: Compete at the cutting edge of innovation and use IT as a weapon only if you have people/culture/strategy for that • Mainstream: Use IT to improve productivity, product quality and customer service, wait for technology to be tested • Laggards: Wait for a technology to become absolutely stable before deployment

8. Taming IT Costs in Banking Felix Enescu EXP Executive Partner 27.5.2008

9. Key Findings • IT spending has to continue for run-the-bank operations and "must have" projects. • Must also continue for those discretionary projects that can differentiate a bank in an increasingly commoditized industry with fickle customers. • Avoid "me too" spending that copies peers — but note that targeted IT investments have a direct impact on profitability at banks. • Whatever routes CIOs take to reduce costs aspects such as governance and cultural fit will be more important in the long term than short-term savings on price.

10. Use cost containment techniques that not only save money but also provide business benefits Some techniques just save money or delay expenditures Others also provide business benefits because they reduce complexity and/or provide flexibility Improve service levels Increase agility Reduce risk AGILITY SERVICE RISK REDUCTION Spend Less, Get More | EXP Special Report | Oct. 2006 Page 10

11. Understand your costs at the macro and micro levels Use activity-based costing (ABC) to understand major cost drivers Use total cost of ownership (TCO) to understand life cycle costs of major assets ABC traces the cost of each activity to the reason why organizational resources were consumed in support of the necessary activities. TCO for Desktop User Spend Less, Get More | EXP Special Report | Oct. 2006 Page 11

12. Compare your costs to peers carefully Use common ratios and indexes carefully to identify areas for analysis Use benchmarking for more accurate comparisons and insights and compare your costs to peers carefully Benchmarks can also show where further cuts are unwarranted or increased investment is required Spend Less, Get More | EXP Special Report | Oct. 2006

13. Use the 25 common IT cost containment techniques framework to identify opportunities Manage Demand 3. IT Governance 1. Chargeback 2. IT PMO Link costs to demand Shift to Variable Cost 4. Contingent Workers 5. Software as a Service 6. Capacity-on- Demand Reduce Labor Cost 7. Staff Reconfiguration 8. Selective Outsourcing 9. Offshore Outsourcing 10. Automated Software Distribution Reduce Resource Costs IT cost containment Reduce Technology Cost 11. Server/Storage Virtualization 12. Voice/Data Network Reengineering 13. Voice over Internet Protocol 14. Open-Source Software Change IS Operating Model 15. Data Center Consolidation/ Automation 16. Standard Operating Environment 17. Teleworking 18. Refresh/ Upgrade Delay Change Operating Practices 19. Asset/License Management 20. Print Fleet Rationalization 21. Telephone Expense Management 22. Telephone Bill Audit Improve IS Business Practices 23. Contract Renegotiation 24. IT Operations Process Improvement 25. Apps Dev Process Improvement Spend Less, Get More | EXP Special Report | Oct. 2006 Page 13

14. Recommendations • Resist calls to slash the IT budget, but do examine how IT can be run more efficiently. • Benchmark operations to assess how technology investments can support the business strategy. • Fight to preserve the IT budget for new projects that will make the bank unique and able to stand out from the herd. • Make provisions for IT spending on customer onboarding systems. • Bargain aggressively with IT providers and seek out emerging vendors

15. Contacts Oldrich Priklenk Country Director KPC-Group, s.r.o. Independent Gartner Representative in Romania 10 Montreal Square Bucharest , Romania M: +420 603461866 E: oldrich.priklenk@gartner.com T: + 420 257322524, F: + 420 257325085 gartner.com

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