By Daniel Wolfe
When it comes to technology spending, chief information officers are becoming more important.
The industry's upheaval is prompting many institutions to revamp their decision-making, often giving more authority over technology purchases to their CIOs, according to vendors.
The institution's size does not seem to matter. Big companies are taking spending decisions away from business-line managers, so the CIO can ensure the purchases benefit the entire operation. And small banks, trying to retain the depositors who have fled troubled financial giants, are trying to make deals happen faster by taking the decisions out of the chief executive's hands and giving the CIO more authority.
"The CIO has a whole lot more power in 2009 and it started in 2008, actually than they had in the past," said Jeanne Capachin, a research director at Financial Insights Inc., a Framingham, Mass., research unit of International Data Group Inc. "They really have to manage the purse strings of the institution."
Though numerous vendors say the CIO has become the gatekeeper at banking companies, bankers are reluctant to discuss their purchasing processes. Despite calls to many financial companies, only First Horizon National Corp. was willing to discuss the trend.
"Over the past year we have elevated the position of the CIO," Bruce Livesay, the Memphis company's CIO and executive vice president, wrote in an e-mail. He now reports directly to the CEO a reflection of the "strategic value of technology and technology investments."
Brian Brunner, the division president for Fiserv Inc.'s depository institution sales group, said small-banks' buying decisions are often driven by efforts to attract and retain deposits from bigger rivals, and the CIO has often been given the authority to vet various proposals.
Community banks have had an influx of deposits from consumers and businesses seeking "a little bit of a flight to safety," Brunner said, but these banks may lack some of the services available at bigger financial companies and are trying to catch up.
"The need to be able to deploy quickly has also accelerated the process of approvals," he said, and the CIO is in a position to approve deals more quickly than the CEO.
This trend has been more obvious for products that can be offered directly to customers, such as remote deposit, rather than for core deposit systems, which require the input of top executives.
Geezeo Inc. said buying decisions also seem to be coming from marketing teams. This year the Framingham, Mass., company began white-labeling its personal financial management software for use at bank Web sites.
"Everyone who has reached out to us in all the active discussions we have, they're all in the marketing world," said Shawn Ward, a Geezeo co-founder. "They're the decision-makers to approve the spend."
While small banks are trying to move faster, big ones are taking a more deliberative approach and trying to use technology to cut costs a task well suited for the CIO's centralized office.
Joseph Polverari, Yodlee Inc.'s senior vice president of strategy and development, said that just a few years ago big-bank purchasing decisions were often made by the heads of various business lines, who were less concerned with the costs than the capabilities of some favored projects.
"They never really stopped to see how much it was costing them, and now they have to," he said.
Now bankers are scrutinizing each purchase to determine the cost and the total impact on the company, Polverari said, and the decisions are "taken at very high levels within the bank," rising to the CIO or higher.
S1 Corp. has observed a similar trend among big-bank clients of its Enterprise business.
Neil Underwood, S1's general manager for the Americas for Enterprise, said his business signed up four U.S. customers in the last four months. One of the deals closed Dec. 26, pulling Underwood back to the office during his holiday vacation. (He said he did not mind.)
"The economy is driving acceleration of reducing costs across the board and taking a look at holistic platforms, whether it's ours or anybody else's," Underwood said.
The Enterprise line includes modules for different channels that are designed to communicate with one another. The vendor says that capability has begun to resonate with CIOs seeking to cut integration costs.
"What I get a sense of is that not through just one or two, but multiple conversations CIOs have always have had a tremendous amount of pressure on them. We've had repeated conversations with CIOs, and they're direct. They say, 'We've got to change the way we buy now. We can't buy these point solutions,' " he said.
Stan Viner, the general manager of banking sales for Jack Henry & Associates Inc., said the way bankers are altering their spending "is directly dependent on their style and what their balance sheet might look like today," though size still plays a role in some of the decisions.
"Banks $20 billion and below are going back to their roots and are gaining market share from many institutions considered 'too big to fail.' That favors vendors like us," he said.
Viner said small-bank CIOs have been working more closely with chief financial officers since January of last year, and the trend grew stronger as the year progressed. The CIO is "very, very focused on bringing things to the table for the CFO," who "is now in the loop in a higher percentage of decisions."
Virginia Garcia, a senior research director at TowerGroup, a Needham, Mass., independent research firm owned by MasterCard Inc., said, "Technology investments are being viewed as a much more strategic investment, and as a result, there are a lot more eyes on it."
One of the reasons technology is so appealing today is that it has advanced even when bankers have not been a willing audience, she said.
"This hasn't all happened overnight. Over the past decade there has been much better alignment of technology to business objectives," Garcia said.
And even though vendors have long emphasized how updating technology can help bankers meet those objectives, the message has come through only when the objectives came under pressure, she said. "This crisis has reinforced the notion that technology upgrades in financial services are long overdue."
This article can also be found at AmericanBanker.com.
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