Blending With the Business
Transforming Banks for a Digital Future: The Winners, The Losers, and the Strategies to Beat the Odds
Blending With the Business
Almost half our survey respondents say IT and business work together to guide their companies' cost management decisions. Yet when asked what techniques would best help their companies control costs more efficiently, 60 percent pointed to better collaboration between the two sides.
While the business-IT dynamic pays dividends, there's clearly room--and desire--for improvement. For many companies, collaboration between business and IT is a mandate from the very top. In early 2005, Countrywide president David Sambol told CIO Richard Jones to put a "laser focus" on expense management. "'I want you to really go after savings for the bottom line,'" Jones recalls Sambol saying. "Now, we basically have very aggressive goals each year that we track on a monthly basis as to how many millions of dollars we'll save the company over the year."
But it wasn't just IT: Countrywide, the largest U.S. mortgage lender, appointed David Smith, a former strategic planning executive with DHL Express and veteran of Bain & Company and Pricewaterhouse- Coopers, managing director charged with monitoring expenses across the company. Beyond that, the company established an IT finance and optimization unit to work with Jones and other department heads to identify opportunities where IT can drive cost savings and process improvements.
That group operates under Countrywide's version of Six Sigma Lean, dubbed FASTER (Flow, Analyze, Solve, Target, Execute, Review). The group also has introduced a project management schema around that process-improvement approach. "What that requires is tight collaboration with many organizations [within Countrywide]," says Michael Parkinson, executive vice president of IT finance and operations, who heads the optimization unit. "So when an opportunity shows itself, we pick subject matter experts, and they become part of the team."
For 2007, Jones believes the IT department will save $30 million in operating expenses across the company, through initiatives such as virtualization and storage optimization. On the books for 2008 is a virtual desktop rollout: Countrywide will move servers out of branches and deploy software from a central data center, decreasing the need for on-site maintenance and software disdistribution while improving data security and privacy and time to provision new local offices. Preliminary estimates are unquantified but point to several millions in cost savings, Jones says.
Following the collapse of the subprime mortgage industry this summer, Countrywide took out billions in credit to help stave off the impact. Jones says the company is adjusting its operations to meet the challenge, but declined to be more specific. But the results he's seen so far coincide with the findings of our research. More than eight in 10 survey respondents say their companies will meet strategic goals for 2007 based on current spending levels. Respondents also say their 2006 IT spending came in below budget (28 percent) or on budget (58 percent); few say they overspent.
At insurance giant AIG, cost management policies emanate from a CIO council, where top IT executives from each business unit meet with the global CIO and his deputies to set strategies around planning, architecture and emerging technologies.
A key objective of that council is to identify IT initiatives the company can undertake companywide, instead of unit by unit. If one division is looking to deploy a new technology, the council considers where else that technology could work within the company's various global insurance and investment divisions. That structure saves the costs they could incur by duplicating evaluation, planning or deployment of the same hardware or software tools across different units at different times, says Jim Klinck, a senior vice president and top deputy to AIG's CIO, Lou Amato. The "horizontal" view of the company's initiatives, inspired by CEO Martin Sullivan, "let units be responsive and fast, but make sure the things they're doing are in line with AIG's scale," Klinck says. "We end up finding ways to save money on IT initiatives and reduce costs and make more strategic investments."
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