Smart IT Evolution, What IT Does and Doesn’t Know About Itself (CWO Presentation)
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Introductory presentation on the current challenges facing IT in the Financial Services industry. Presented by Micro Focus at the Chief Wine Officer event, at the Balmoral Hotel, Edinburgh, Scotland, October 2012.
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Smart IT Evolution, What IT Does and Doesn’t Know About Itself (CWO Presentation)
- 1. Smart IT Evolution What IT Does and Doesn’t Know About Itself CWO Scotland, Balmoral Hotel Edinburgh, October 2012
- 2. Vanson Bourne Research (April 2012) Demographics – 590 senior IT decision-makers • ...countries across the globe ...a wide range of business sectors IT and software UK 100 Manufacturing 3% 11% France 100 Financial services 3% 30% Germany 100 4% Retail, distribution, tr ansport 5% USA 100 Business and 5% professional Brazil 100 Government 8% Australia 35 Education 19% 12% New Zealand 15 Healthcare Hong Kong 15 Other commercial sector Singapore 25 Other public sector ...respondents were from mainframe organisations with over 500 employees 2
- 3. Understanding “IT Debt” • 46% of IT decision-makers admitted that they did not know the value of their IT debt (the cost to bring their applications up to date) • Gartner estimates that global IT debt will rise to $1 trillion by 2015 • 44% of survey respondents confirmed they don’t have a structured process for measuring and managing IT Debt • 45% without a process are not planning to implement one • 57% say they have an unclear picture of their application portfolio 3
- 4. Disruptive Forces • New Generation technology is taking up a lot of mindshare – Cloud – Mobile – Social Media – Big Data • Gartner and Forrester agree – Gartner: Innovations to Change the Face of Business • 10 Critical Trends for the Next 5 Years – D. Cappuccio, ITXpo, Orlando, October 2012 (#1 – “Disruption”) – Forrester: Digital Disruption – CIOs, are you disruptive enough? • Fujitsu Survey in Computer Weekly (October 2012) shows growing focus. Of the top 3 priorities for the next 3 years: – 20% includes mobile – 18% includes Cloud 4
- 5. Governance and Legislation • Economic woes causing anxiety – Shareholder equity returns yet to return to half the average pre-2007 value • 2011 – 60% of FSA fines due to “weakness in the risk management systems of FS organizations” • Other industry “failures” have created further concern – LIBOR – High-profile outages – US litigation – PPI – Money laundering – ... • Politicians and regulators “no shortage of excuses to launch ... clampdown”, Harry Wilson, Daily Telegraph 8th October (“Bleak Future for the Banks of Tomorrow”) • Boston Consulting, September 2012, “New products that function immediately and quick cycle times are more necessary than ever” 5
- 6. Smart IT Evolution: the time is now Computer Weekly (12th October 2012) – • 55 bank CIOs are investing in IT to help them emerge stronger Mounting IT CIOs were asked for their top three IT priorities for the next Debt three years: • 51% listed reducing cost as a top priority Disruptive Legislative • 27% said upgrading IT systems Technology Pressure • 22% improving customer experience • 20% mobile banking • 18% said moving to the Cloud Innovative Investment Sunday Telegraph (21st October) • One bank undergoing an “£80 million IT overhaul ” of its “mainframe systems”
- 7. Smart Evolution? The Modernisation conundrum (Vanson Bourne) • There is no one preferred way to upgrade core systems - • 46% would prefer to further develop code 13% • 41% would opt for an off-the-shelf solution • Some prefer an off-the-shelf solution : 41% • Primarily because they think it would be easier to implement (56%) • Though other factors score highly: • Availability of skills (33%) 46% • Being used to off-the-shelf packages (33%) • It being less risky (32%) • A cost reduction (30%) Replace the application with an off-the-shelf package Further develop current code Do nothing due to the cost/time/resource implications 7
- 8. Smart IT Evolution: Application modernisation plans • Contradictory viewpoint – Standish Group’s report – “Modernization: Clearing a Pathway to Success” – 53% success with Application Modernisation – 30% success replacing application with a COTS package – 4% success when re-writing application from scratch 8
- 9. Group Question: What is driving your IT priority? 9
Editor's Notes
- An independent survey was undertaken by Vanson Bourne in April 2012. It covered 590 IT decision makers in nine countries including UK , France, Germany, USA, Brazil, Australia , New Zealand, Hong Kong and Singapore. The respondents were from mainframe organizations with 501+ employees, covering multiple industry sectors. They were asked how they assessed their mainframe applications and whether they understood what their IT debt looked like.
- What do we mean by IT Debt? IT Debt is defined as the cost of clearing the backlog of maintenance to bring the corporate applications portfolio up to date.46% of them admitted that they do not know the value of their IT debt. This lack of knowledge creates a hidden balance sheet liability for those organizations as well as a growing business risk. In 2010, Gartner estimated global IT debt to total $500 billion rising to $1 trillion by 2015. Their report recommended that CIOs and IT leaders produce an annual assessment of the application portfolio to quantify and plan the reduction of their IT debt. Two years on, 44% of IT decision makers confirm that they still don’t have a structured process for measuring and managing their IT debt, or don’t know if they have one, and 45% of those without a process are not planning to implement one. There is an acknowledgement that application modernization needs to happen but the real cost is poorly understood.
- Meanwhile, the next generation of technology is changing the face of corporate and end-user computing, and how technology is used in corporate life. The analysts and press are extolling the virtues of technology such as cloud, mobile and social media as new corporate opportunities. Many CIOs see these as in their top 3 priorities for the next few years...
- All the time, and especially in financial services, recent economic conditions and high profile industry problems have caused a backlash from government and regulatory bodies. It will be important that any new offerings from FS IT work quickly as well as complying with all new legislative requirements.
- With 3 conflicting pressures, the pressures on IT are unprecedented. The time is now to think about how to act smart. A recent survey indicates that this is happening right now, with all CIOs surveyed looking to invest to help them emerge stronger. One bank is reported as earmarking £80M for an IT overhaul.
- The question is how is that investment going to be made. How should IT be best changed? The Vanson Bourne study also explored the CIO and IT Directors’ understanding of the modernization choices available to them. For nearly half (46%) of the respondents, developing the current mainframe application was the preferred approach for delivering new functionality. A further 41% preferred to replace the application with a commercial off-the-shelf (COTS) package. Of those choosing COTS, 56% believed it would be easier to implement over the alternatives because it was less risky, would result in cost reduction and avoided issues with the availability of mainframe and COBOL skills.
- Contradicting these beliefs, The Standish Group’s independent report Modernization: Clearing a Pathway to Success, delivers an objective comparison of the cost, risk and return on investment associated with rewriting, buying a COTS package, and modernizing a particular application. The study found that application modernization had the highest likelihood (53%) of being completed on time, on budget and with critical features included. This compares to a 30% success rate for replacing the application with a COTS package and just 4% success when re-writing the application from scratch using the latest tools and techniques.
- We leave this introduction to today’s IT challenges with an audience question. What is driving your IT priority?