Financial Services CEO Agenda, 2011

Gartner RAS Core Research Note G00211829, David Furlonger, Mark Raskino, 31 March 2011, RA18 07272011

Our 91 financial services CEO responses reveal strong interest in how technology will fortify growth. Dampening this interest is a lack of technology vision among the CEOs, which is aggravated by stereotypical views of CIOs and IT capabilities.

Key Findings

• Enhancingthecustomerexperienceisthecornerstonetobuildinganewfranchise.

• Regulatorycomplianceisperceivedasasubstantialfrictionalcostandnotanopportunityforperformanceimprovement.

• Restructuringoftheindustryandbusinessmodelsisacorepartofthecorporaterehabilitationprocess.

• Organizationalresponsivenessdominatescost-optimizedefficiencygains.

RecommendationsCEOs:

• Ifgeneraleconomicconditionsnolongerdominatetheplanninglandscape,thenCEOsshouldtakecaretoensurethattheirCIOsunderstandtheprimarydriversoftheplanninglandscapeandtherequirementtorebalancetheirfocusinfavorofgrowth-orientedworkplans.

• Communicateinternallyandexternallyaboutthetechnology-relatedprogresstheyadmire–wherevertheyseeit.Thisaidsacultureoftacit“permissiontoinnovate”andattractstalent–particularlyinyoungerITprofessionals.

• Carefullyevaluatethelong-termstrategicvalueaffordedbysometechnologiesandtheirimpactontheoverallcustomerexperience.Adigital“armsrace”fortransactionalbusinesswillbeacriticalprice/performanceleverforIT,butnotthesolecompetitivedifferentiator.

• Listallthethingsgoingoninthefirmthattheyconsidertobe“technologyrelated,”andthencomparethemwiththeroleandscopeofthecurrentCIO.Whyisthereagap?Doyouhavetheroleshapedcorrectly?Isitmotivatedwithrespecttobusinessperformance?

2CIOs:

• Checktoseewhetherthethree-tofive-yearROIrange–whichamajorITprojectoftenneeds–isviableagain.Afteracoupleofyearsof“short-termism,”planninghorizonsarenowextending.

• GetaneutralthirdpartytoasktheCEOandotherseniorexecutiveswhattypeoflevelofcontributiontheyexpecttechnologytomakeduringthenextfewyears.Notetheemphasis:Getthethirdpartytoaskaboutwhattechnologymightachieve,ratherthan“whatdoyouwanttheITdepartmenttodo”foramoreexpansiveresponse.

• Developaninternalexecutiveeducationprogramofeye-openingenlightenmentformiddleandseniormanagersonnewertechnologycapabilities,suchasadvancedmobile(m-commerceandaugmentedreality)social,cloudandothers.

• AnticipaterevenueresponsibilitiestobefactoredintoCIOperformancemeasureswithinthenextfiveyears.Notethisresearchfindingwithcare.Althoughthenumberishigh,therevenuedependencyofbusinessesonITcapabilitiesisundoubtedlyrising.

SURVEY OBJECTIVEThisresearchisintendedforfinancialservicesindustryCEOs,seniorbusinessleaders,strategicplannersandCIOs.ThepurposeoftheresearchistoprovideinsightintoglobalCEOthinkingandprioritiesfor2011.Readersareaffordedtheopportunitytobenchmarktheirownplansandinitiativesagainsttherankedprioritiesfrompeerswithintheindustry.Thisresearchshouldalsobeconsideredaspartofthebroader,allindustriesCEOsurveyconductedbyGartner(see“ExecutiveAdvisory:CEOandSeniorExecutiveSurvey,2011;DetailReport”).

DATA INSIGHTS

Key TakeawaysUnlikemanyindustries,thisyear’sfinancialservicessurveyresultsshouldmakebusinessleadershipteamsfeelmorepositivethanpreviousyears.Readsuperficially,muchofthemacrofocus,intermsofbusinesspriorities,seemssimilartoearlierstudies.However,clientinquiriesandadeeperanalysisofthedatarevealthatCEOprioritiesshowaclearswitchofemphasisbacktowardconfidenceandgrowth.Imperativessuchasresponsiveness(tomarketsandcustomers),innovationandcustomercollaborationarerisinginimportance,despitesomeconcernsabouttalentretentionandincreasingregulation.

AlthoughITbudgetsarenotsubstantiallyimprovedfromthepastcoupleofyears,thecashisavailabletostartinvestingforgrowthagain,andITisviewedasahigh-prioritycategory.Scratchthesurfacealittle,andsurveyresponsesrevealsomenewerthinkingonwheretospendthatmoney–andespeciallywithrespecttoIT.Businessexecutivevisionandgoalsettingforwhattechnologycontributestoorganizationalgrowthhaveimproved.However,thesecretforgettingmoreoutofITwillmeanremovingtheblindersappliedtoITperformance.BeinginabetterpositiontounderstandandanalyzehowITcontributestothebusinessperformanceoftheenterprisewillnotonlycreategreaterefficiency,butwillalsoimprovesustainableITleverage.

Lastyear’ssurveydiscoveryofbusinessleaders’long-termbeliefinthestrategicbusinessvalueoftechnologyisconfirmedthisyearviatherevenuetheywouldattributetoit.However,whenaskedaboutthequalitiesoftheCIOswhowillbekeytodeliveringthatrevenue,thesameoldclichésabout“lackofbusinessacumen”and“toomuchtechnicalfocus”cometotheforeground,andarereinforcedbythecontinuedinabilityofCIOstobedirectlyinvolvedinbusinessdecisionmaking.

CEOpriorities–thingslikecustomerretention,talentretentionandorganizationalflexibility–won’tbebest-servedbyaninternalITconversationthatkeepsreturningonlytotechnologycostmanagement,forlackofamoreprogressiveagenda.MostITfunctionssimplydon’thavemuchmaterialcostlefttosqueezeoutanyway.Moreover,through2011,thepressureonCIOstobalancethecompetingforcesof“runthebank”and“transformthebank”isgrowing,andmore-radicalstrategicthinkingwillberequiredthaniscurrentlyapparenttoresolvethisdilemma.

Putsimply,thereisagapbetweentheperceptionofIT’sstrategicvalueandthecapabilitymechanismsbusinessleadershavetogetaccesstoandevaluateit.CreativedestructionisneededintermsoftheindustryandinstitutionallyinrelationtoIT’soverallportfolioandenterprisewidebusinessactivities.Otherwise,it’sdifficulttoseehowtechnologycapitalcanbedeployedbyadvancedeconomiestoreturntohealthy,sustainedproductivityimprovementandeconomichealth.The20thcenturyITmanagementcaricaturerole-playingbehaviorsstillatworkwon’thelp.

Tosummarizethekeytakeawaysofthisresearch,CEOsandCIOsshouldreviewthefindingcolumninTable1toseewhethertherearefactorsthatmayapplyintheirownfirmsand,ifso,considertheactionswesuggest.More-detailedexplanationofthedatacanbefoundinthebodyoftheanalysis.Technologycanhelpfinancialinstitutionstooverachieveinthecomplexandchallengingbusinessconditionsthatfaceusallintheyearsafterthefinancialcrisisandrecession–butonlyifbusinessandITleaderscollaboratecloselytobuildconfidenceandshakeusoutofapostcrisis,back-to-normalmentality.

©2011Gartner,Inc.and/oritsaffiliates.Allrightsreserved.GartnerisaregisteredtrademarkofGartner,Inc.oritsaffiliates.ThispublicationmaynotbereproducedordistributedinanyformwithoutGartner’spriorwrittenpermission.Theinformationcontainedinthispublicationhasbeenobtainedfromsourcesbelievedtobereliable.Gartnerdisclaimsallwarrantiesastotheaccuracy,completenessoradequacyofsuchinformationandshallhavenoliabilityforerrors,omissionsorinadequaciesinsuchinformation.ThispublicationconsistsoftheopinionsofGartner’sresearchorganizationandshouldnotbeconstruedasstatementsoffact.Theopinionsexpressedhereinaresubjecttochangewithoutnotice.AlthoughGartnerresearchmayincludeadiscussionofrelatedlegalissues,Gartnerdoesnotprovidelegaladviceorservicesanditsresearchshouldnotbeconstruedorusedassuch.Gartnerisapubliccompany,anditsshareholdersmayincludefirmsandfundsthathavefinancialinterestsinentitiescoveredinGartnerresearch.Gartner’sBoardofDirectorsmayincludeseniormanagersofthesefirmsorfunds.Gartnerresearchisproducedindependentlybyitsresearchorganizationwithoutinputorinfluencefromthesefirms,fundsortheirmanagers.ForfurtherinformationontheindependenceandintegrityofGartnerresearch,see“GuidingPrinciplesonIndependenceandObjectivity”onitswebsite,http://www.gartner.com/technology/about/ombudsman/omb_guide2.jsp

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Finding Implication CEO Action CIO Action

CEOsandseniorexecutivesareswitchingfrompostrecessioncautiontoagrowthposture.

CIOprioritiesforITmustchangequicklytomatchthisvision.

CEOsshouldmaketimetoprivatelyadvisetheirCIOsonvariousgrowthscenarios,ratherthanrelyingonasimplifiedsingleviewofthefuture.ThiswillallowITtoplantheflexibilityneededandbetteralignkeyperformanceindicators.

Projectstargetingcustomerexpectations,talentretentionandorganizationalflexibilityaretheonesCIOsshouldmakevisibleintheirportfolios.

Compliancecosts,mergersandacquisitions(M&As)andputtingcashtoworkaresignificantmacroenvironmentbusinessscenariofactors.

TheseexternalfactorsconcernCEOsin2011,andarelikelytoshapetheirdecisionsandpriorities.

CEOsshouldaskCIOswhethercorporatedataanalyticsmighthelpwinkeyregulatoryarguments.CEOsshouldchallengeCIOstosuggestcompellingnewbusinessideasthatleverageriskmanagementspending.

CIOsshouldproposeideastohelpputmoneytowork.M&AandregulatorycomplianceshouldbeleveragedtointroduceotherprogressiveIT-enabledproductivityimprovements,suchasm-commerce,social,locationintelligence,customeranalysisandautomation.

Fewexpectdeflation,inflationorrecessiontotroublethemin2011or2012.

CEOsarepositiveandconfident.CIOsshouldassumethatreturntogrowthisreasonablyunimpeded.

Ifgeneraleconomicconditionsnolongerdominatetheplanninglandscape,thenCEOsshouldtakecaretoensurethatCIOsunderstandwhatdoes.

Afteracoupleofyearsofshort-termism,planninghorizonsarenowextending.CIOsshouldchecktoseewhetherthethree-tofive-yearROIrangethatmajorIToftenneedsisviableagain.

Fewerthanonein10oftoday’sbusinessleadersseeITasjustacostofdoingbusiness.Mostseeitasatoolforsustainingcompetitiveadvantageorstrategicinnovation.

CEOsaremorebullishabouttechnologythanCIOsassume.Postrecessionexpectationsarehigh.

CEOsshouldspeaktheirminds,internallyandexternally,aboutthetechnology-relatedprogresstheyadmire—wherevertheyseeit.Thisaidsacultureoftacit“permissiontoinnovate”andattractstalent—particularlyinyoungerITprofessionals.

CIOsshouldgetaneutralthirdpartytoasktheCEOandotherseniorexecutiveswhattypeofandlevelofcontributiontheyexpecttechnologytomakeoverthenextfewyears.Notetheemphasis:Getthethirdpartytoaskaboutwhattechnologymightachieve,ratherthan“whatyouwanttheITdepartmenttodo,”foramoreexpansiveresponse.

AlmosthalfofCEOswillincreasetheirITinvestmentsin2011.However,evenmorewillinvestinsalesandriskmanagement.

ITinvestmentswillrise,butwhatitshouldbespentonwillchange.

CEOsmustrecognize/acknowledgethatITperformanceislargelya“blackbox.”Forinvestmentsinsalescapabilitiestobesuccessful,CEOsmustensurethatthereisaclearrelationshipandlinkagebetweenbusinessinvestmentsandITenablement.

CIOsshouldcarefullymonitorgovernanceprocessestoensurethatITisn’tjustanorder-takingfunction.Toaidgovernanceactivities,anyseriousinterestincollaborationtoolsortheinternaluseofsocialnetworkingshouldbeencouraged.

Seventy-fivepercentofCEOsandseniorbusinessexecutivesthinktheyknowwhatthenextIT-enabledstrategicinnovationfortheirfirmswillbe.

OursurveyresultsshowthatlargefinancialinstitutionsaremoreaggressivelypursuingdigitalstrategiesastheyrelatetoIT-enabledcapabilityinvestments.Thisappearstobearacefortransactionalmarketshare.

CEOsshouldcarefullyevaluatethelong-termstrategicvalueaffordedbysometechnologiesandtheirimpactontheoverallcustomerexperience.Adigitalarmsracefortransactionalmarketsharewillbeacriticalprice/performanceleverforIT.

CIOsshoulddevelopaninternalexecutiveeducationprogramofeye-openingenlightenmentformiddleandseniormanagersonnewertechnologycapabilities,suchasadvancedmobile(m-commerceandaugmentedreality),socialandcloud.

Morethan62%ofCEOsseerisingexternalinterestintheirfirms’ITactivitiesandcapabilities.

Although this trend is stronger intheU.S.thaninEurope,moreinvestorandregulatorinspectionisanticipated.

CEOsshoulddecidewhethertoputCIOsinfrontofinvestors,getanexternalreviewofcapability,includeanITsectionintheannualreport—oracombination.ExternalinterestinITshouldnotnecessarilybeconsidereddetrimental.BrandpromotionandrebuildingtrustcanbepositiveoutcomesifITispositionedcorrectly.

CIOsshouldpreparetoengagewithinvestorsandexternalpartiestoexplainthelevelofcurrentandplannedITcapabilities.Publicrelationscoachingmaybeawisepersonaldevelopmentinvestment.

Table 1. Key Takeaways

continued

4

Macrobusiness EnvironmentThisyear’s2011CEOagendaallowsustotakestockofthecurrentandanticipatedfuturestateofanindustrythatisstillrecoveringfromtwoyearsofturmoil.Althoughmanyseniorfinancialservicesexecutivesfeelthattheworstisoverintermsoffinancialandperhapseconomiccrisis,volatilityandrestructuringremainsignificantchallenges.However,financialservicesfirmsareagainlookingtowardgrowthandtodiversificationofrevenuestreams,forexample,reducingtherelianceonwholesalefunding.FromGartnerclientinquiries,themajorityoffirmsseeimprovingthecustomerexperience(see“BanksMustRecognizeThatCustomersHaveLivesOutsideofBanking”)asbeingacriticalfoundationonwhichtobuildanewfranchise.Thefocusonriskmanagementisunchanged,andtheonusontechnologytoimproveoperationaleffectivenessandenhancethecustomervaluepropositioncontinuestohighlightsomeoldinternalbattlegroundsaroundgovernance,business-ITalignmentandreturn.

Core Messages

• “Thepatienthasleftintensivecare.”Surveydatapointstoafocusongrowthforthedevelopedfinancialmarketsandanacceleratedexpansionofregionalandemergingmarketactivities.

• Industryandcorporaterestructuringareseenasacorepartoftherehabilitationprocess.

• Enhancingthecustomerexperienceisthecornerstonetobuildinganewfranchise.

• Regulatorycomplianceisperceivedasasubstantialfrictionalcost,asopposedtoacatalyticenablerofperformanceimprovements.

Atamacrolevel,thisyear’ssurveytookthetemperatureofseniorfinancialexecutives’opinionsabouttheirperspectiveofthebusinessenvironment.Here,weshowtheresultsandofferinsightintotheimplicationsforseniorITleaders(seeFigure1).

CEOsthinkthatCIOsoverselltheirtechnicalcapabilitiesandneedmorebusinessacumen.

Thiscaricaturerelationshipdifficultyisalmostcertainlyinhibitingcommunicationandperformance.

TheCEOmusthelptheCIOdevelop.Avoidingcontacttimedoesnotsolvetheproblem.Technologymatterstoomuchtothisindustry.Frank,patient,deliberateandrepeatedfeedbackisneeded,aswellasawillingnessonthepartoftheCEOtolistentowhatinitiallymaybeconsideredunrelatedtobusinessissues.

CIOsmustwatchandlearnfromthebehaviorofotherC-levelexecutives.Tryusingyourindustry’sterminologyinmetaphoricreferencetotechnologymanagementissues(e.g.,ITinvestmentportfolio).Displaypragmaticawarenessofinternalbusinessrealities,ratherthanrepeatingexternalPRversionsofthingslikecompanystrategy.

Onaverage,CEOsattribute24%ofrevenuetotheITcapabilityoftheirfirms.

ThevalueperceptionofITislikelytobeanoverestimate.TheperceptionofthecostofITtothebusinesscertainlyis.Theunderstandinggapistoowidetoignore.

CEOsshouldlistallthethingsgoingoninthefirmthattheyconsidertobe“technologyrelated,”andthencomparethemwiththerolescopeofthecurrentCIO.Whyisthereagap?Doyouhavetheroleshapedcorrectly?Isitmotivatedwithrespecttobusinessperformance?

CIOsshouldnotethisresearchfindingwithcare.Althoughthenumberishigh,therevenuedependencyofbusinessesontheirITcapabilitiesisundoubtedlyrising.CIOsshouldanticipaterevenueresponsibilitiestobefactoredintotheirperformancemeasureswithinthenextfiveyears.

Source:Gartner(March2011)

Althoughtheongoingdiscussionsaboutregulatoryreformcontinuetocastapalloverthemarkets,theconsensusCEOviewhasturnedpositivecomparedwith2010,frombothaneconomicandbusinessstandpoint.Strongercapitalizedbanksthatwereabletobuildcashreservesand/orrepairtheirbalancesheetsearlierinthecyclearenowwell-positionedtotakeadvantagebywhatisperceivedasamorepromisinginvestmentenvironment.

Business and IT ImplicationsTheimplicationofimprovedeconomicconditionsforbankbusinessisthatsurpluscorporatebalancesheetcashwilltranslateintoincreasedcorporatefinanceopportunitiesandmoreactivityinthegeneralwholesalebankingbusiness.Thisimplicationissupportedbytheincreaseininterestduringthepastsixmonths(intermsofvolumeofGartnerinquiries)inclientswantingtobetterunderstandthechallengesandtechnologiesassociatedwithonlinecorporateinteractions,transactionbankingandfinancialsupplychainintegration,treasuryandtradingplatforms,assetandliability,andliquidlymanagement.

ThesurpluscashbalancesoncorporatebalancesheetsalsoreinforcethefindingthatM&Aactivityisexpectedtobestrongduring2011and2012,havingrebounded23%in2010fromthepreviousyear(accordingtoReutersandInternationalHeraldTribune,17February2011).Thisislikelytobethecaseinthebankingindustryasmuchasinthegeneralcorporateworld.ItisGartner’sbeliefthatasignificantnumberofbankshavealreadyanalyzedtheirbusinessmodelsandhaveembarkedforsometimeonaprocessofre-engineeringto“getbacktobasics”intermsoftheunderlyingbusinessmodeland/ordevelopingamoreprogressivestrategythatfocusesoncreatingthecustomers’bankofthefuture.SuchanalysiswillmeanthatanyM&Aactivityismoretargetedthaninthepast,andwilllikelyincludedivestmentsofsomepreviouslycorebusinessunitsthatcannolongersupportadequatemarginsinaliquidityandregulatorycapitalenvironmentthatismarkedlydifferentfromthepastdecade.

Forfinancialinstitutionsindevelopedmarkets,theopportunityforM&Asisnotjustintermsoflookingforopportunitiesintheirdomesticornearshoremarkets.Emergingmarketsstillholdanauraofgrowthpotentialthatisunmatchedeconomicallyand

5Figure 1. To What Extent Do You Agree or Disagree With Each of the Following Macrobusiness Environment Change Hypotheses?

Source:Gartner(March2011)

3.61

3.96

4.13

4.17

4.18

4.37

4.41

4.62

4.69

5.08

5.27

5.49

1 2 3 4 5 6 7

America and most of Europe will experience deflation (falling prices) in 2011 and 2012.

America and most of Europe will experience serious inflation (more than 4%) in 2011 and 2012.

Africa will be the post-BRIC (Brazil, Russia, India and China) 20-year emerging

markets megatrend.

In 2011 and 2012 "austerity" program expenditure cuts by various governments will impact

your revenue.

America and Europe will experience another recession between 2011 and 2012.

Asian economic growth will be unimpeded, even if America and Europe turn downward again.

There is a "China bubble" of excessive speculative investment, and it will implode

before 2015.

Competitive devaluation "currency wars" will cause serious business disruption in 2011 and 2012.

CEOs in the U.S., Europe and Japan will start reinvesting cash surpluses in major capital

and productivity improvements in 2011 and 2012.

The amount of cash sitting on the balance sheets of U.S., European and Japanese

companies will continue to rise in 2011 and 2012.

There will be a major wave of merger and acquisition (M&A) activity in 2011 and 2012 as

the weak are taken over by the strong.

Compliance with anticipated new government regulations will create a material increase in

your operating costs in 2011 and 2012.

Rating

fromapurefinancialservicesperspective.Emergingmarketeconomiescontinuetooutperformdevelopedeconomicgrowthcycles(seeFigure2).Althoughthereissomeconcernexpressedbyrespondentstothissurveyaboutthe“Chinabubble,”developedmarketbankCEOeyesremainfixatedonemergingeconomiesandthepotentialtopropelgrowthbeyondtheexpectationsofespeciallytheU.S.andwesternEuropeanmarkets.

Basedoninputfromourglobalclientbase,suchinteresttranslatesintointerestintransactionbanking(payments,tradefinance,cashmanagementandsettlements)investmentsanddevelopingalargerwealthmanagementfootprintinthemassaffluentandhighnetworthsegmentinparticular(especiallywithrespecttoTier1banks).Suchaninvestmentstrategycanbeafuturestepping-offpointforbuildingamorediverseregionalretailbankingfranchiseandsearchingforliquiditypoolsinothermarkets,ratherthangrowingtheirinvestmentbanking/tradingbusinesses.

AsGartner’sfinancialservicesanalyststravelandanalyzedatafromaroundtheworld,itisclearthatemergingmarketsandtheirrespectivedomesticfinancialinstitutionshavefaredbetterthantheirdevelopedworldcounterpartsduringthepastcoupleofyears.Aspressurefromforeignentrantsincreasesintheemergingmarkets,theimpactislikelytobefeltviaincreasedassetmovementandgreaterpressureonmargins.

FromanITstandpoint,thecomparativegreenfieldsitefoundinmanyemergingcountriesintermsoftechnologicalmaturityhasthepotentialtoresultinlong-termstrategicbenefittothoselocalbanks,providedtheytakeastrategicviewoftheirinvestments.ThelegacyandcomplexityoftheITenvironments,andlong-termsupportintomanyofthesemarketsbyforeignfinancialinstitutions,willundoubtedlyweighontheircost-incomeratiosandpotentiallytheirabilitiestoinnovate.Moreover,localinstitutionshaveamuchstrongerunderstandingoflocalvendortechnologiesandsupportcapabilities(aswellasthesupportofferedbythebiggerglobalvendors),whichshouldstandthemingoodsteadastheyimplementmajorITprojects.

6

Atthegloballevel,compliancewithanticipatedgovernmentregulationsisstillviewedasasubstantialcostpressure.Thisimpliesthatfirmshavenotfullyconnectedtheapplicationofriskmanagementtocorporateperformance,norhavetheyfullyrealignedcapitalcost/allocationwithbusinessstrategiesand2011priorities.Indeed,forseveralGartnerclients,thephilosophicalandpracticalgapsbetweenriskmanagementandcompliancereinforceapplication,processanddataredundancies,andunderminetheirenterpriseriskmanagementcapabilities.Theinfringementonbankcapitalfreedomhasnotbeentranslatedintoamoresophisticatedapproachtothewidespreadevaluationandspreadofbusinessesunderthecorporateumbrella.Unlessanduntilsuchlinksbetweenriskmanagementandperformancearemade,increasedlegislationwillstillbeconsideredacostofdoingbusiness,asopposedtoa“regulator”ofbusinessmodelsanddecisionmaking.

Geographic DifferencesSomedifferencesinresponsesbasedonthefourmaindatacollectionregionsshouldbenotedbyreadersofthisresearch(seeFigure3).

Somesignificantstandoutsinthisrepresentationofdatarelatetothematurityofeachmarket,thebusinesssegmentfocusoftheindustryineachregion,andtheextenttowhichtechnologyisinforming/enablingseniorbusinessleaderdecisionmakingandstrategy.

Figure 2. Regional Real GDP Growth Rates, 2011

Source:IHSGlobalInsight(February2011)

3.2% 1.6%

4.0%

8.3%

4.0% Japan

4.6%

4.0%

5.1%

1.6% U.K.

18.1% Ghana

-2.8% Greece 9.5%

China

Interestingly,executivesfromEMEAseemtoindicateamoreinsularviewofthebusinessenvironmentbyfocusingmoreonprioritiesthathavepotentiallymoreimmediateandtacticalimpactsontheirbusinesses.Anexampleofthisistheconcernabouttheimpactofregulatorycomplianceandausterityprogramsonoperatingcosts/revenue,asopposedtostructuralchangesbroughtaboutbymovementsinglobalcapitalflows.

CIO ActionsIntermsofthemacroenvironment,thekeymessageforCIOsistoensurethattheyareinvolvedinthebusinessconversationatalltimes.Aswewilldiscussinourcompanionreportonthe2011CIOagenda,theamountoftimetheCIOspendswithseniorbusinessleadersonlyamountsto40%oftheirtotalworktime.ForCIOstobecomemoreengagedinhowthemacrobusinessenvironmentisinfluencingstrategicbusinessdecisionsthatwillatsomepointinfluencetechnologyinvestmentpriorities,thistimequotientneedstoincrease.

CEO Business PrioritiesFor2011,mostseniorbusinessleadersinthefinancialservicesindustrycontinuetofocusonthesametopthreeissuesastheyhaveforthepriorcoupleofyears–namely,customerretentionandenhancingthecustomer’svalueproposition,attractingandretainingskilledworkersandtalent,andattractingnewcustomers.Respondingtoregulatorychangehasaslightlyheightenedprioritycomparedwith2010,indicatingmorelongevityinthispartofthebusinesscyclethaninearlieryears(seeFigure4).

7Figure 3. To What Extent Do You Agree or Disagree With Each of the Following Macrobusiness Environment Change Hypotheses?

Source:Gartner(March2011)

Business Priorities Ranking of business priorities CEOs selected for 2011 and results from past five years

Americas U.K. EMEA Asia/

Pacific

The amount of cash sitting on the balance sheets of U.S., EU and Japanese companies will continue to rise in 2011 and 2012. 5.15 5.4 4.45 5.03

There will be a wave of mergers and acquisitions in 2011 and 2012 as the weak are taken over by the strong. 5.04 5.7 4.64 5.42

CEOs in the U.S., EU and Japan will start reinvesting cash surpluses in major capital and productivity improvements in 2011 and 2012.

5.04 4.21 4.75 4.68

Competitive devaluation (currency wars) will cause serious business disruption in 2011 and 2012. 4.96 4.4 4.33 4.58

Compliance with anticipated new government regulations will create a material increase in operating costs in 2011 and 2012. 4.92 5.95 5.83 5.55

There is a "China bubble" of excessive speculative investment, and it will implode before 2015. 4.73 4.16 3.75 4.55

America and the EU will experience another recession between 2011 and 2012. 4.44 3.5 3.58 4.58

Africa will be the post-BRIC(Brazil, Russia, India and China) 20-year emerging markets mega-trend. 4.37 4 4 4.03

America and most of EU will experience serious inflation (more than 4%) in 2011 and 2012. 4.22 3.85 4.25 3.68

In 2011 and 2012, "austerity" program expenditure cuts by various governments will impact revenue. 4.21 4.42 4.67 3.81

Asian economic growth will be unimpeded even if America and the EU turn downward again. 4.04 4.6 4.17 4.58

America and most of EU will experience deflation (falling prices) in 2011 and 2012. 3.89 3.5 3.17 3.61

Core Messages

• Themorethingschange,themoretheyremainthesame.

• ThecustomerincreasinglydominatesCEOs’strategicthinking.

• Organizationalresponsivenessdominatesbusinessprioritiesovercost-optimizedefficiencygains.

• Transformationviacollaborationisabout“new,”notaboutjustimprovingthestatusquo.

Intermsofrankorderchanges,organizationalresponsivenessisasimportantasitwasin2009(andamarkedimprovementon2010’sposition).Reducingcostsviabetterefficiencyhasthesamerankas2010,althoughthreeplacesworsethan2009,whenitwasrankedthirdinpriority.ThissuggeststhatCEOsareputtinggreaterstockinorganizationaladaptabilityandspeedofresponsetovolatilemarketconditions,ascomparedwithamoresingularfocusoncostcontrol.

Severalitemshavegainedinpriorityforthisyear–allofthemmarkedly:

• Becomingmoreopenandcollaborativewithcustomers–this,atleastfromamarketingstandpoint,isanefforttotryandrebuildtrust.

• Fosteringinnovation–particularlyintermsofcustomer-facingcapabilities,suchaschanneldevelopment,servicingandinformationpresentation.

• Strategicplanning–especiallyasitrelatesto“creatingonebank,”banktransformationrelatedtopayments,orsupplychainmanagementforcorporatebanking.

• Newcompetencydevelopment–forexample,hiringcorporateorprivatebankerstosupportaccesstoemergingmarkets.

• Movingintonewproduct/servicemarkets–particularlyemergingmarketexpansion.

Alltheseitemsspeaktoincreasingattentiontogrowthandrecognitiononthepartofthesefinancialservicesexecutives thattransformationofexistingbusinessmodels,operationalpracticesandasearchforsomethingnew,potentiallyincollaborationorpartnershipwithothers,isnowanessentialpartoftheinstitutional2011valueproposition.Thisassessmentiscorrelatedbythedecliningimportanceinpriorityrankofthefocusonexistingcorecompetencies.

8Figure 4. Using a Scale Ranging From 1 to 7, Rate Each of the Following Business Priorities You Face in Your Job

Theequalssigndenotesthatprioritieswererankedequallyasopposedtoonehavingahigherorlowerrankthantheother.

Source:Gartner(March2011)

Business Priorities Ranking of business priorities CEOs selected for 2011 and results from past five years

2011 2010 2009 2008 2007

Retaining and enhancing existing customers 1 1 1= 1 3

Attracting and retaining skilled workers/talent 2 2 6= 7 10

Attracting new customers 3 4 1= 2 2

Responding to regulatory changes 4 5 17 4 16

Building a responsive, flexible organization 5 10 4= 10 5

Reducing costs via better efficiency 6 6 3 9 17

Becoming more open and collaborative with customers 7 16 13 16 -

Fostering innovation 8 11 10 12 14

Planning and designing the strategy for your business 9 13 5 5 4

Balancing short-term goals with long-term strategy 10 9 7 8 6

Building new competencies 11 14 12= 15 -

Focusing on core competencies 12 7 6= 11 12

Moving into new product or service markets 13 19 11 18 -

Improving mgmt. decision making via better information and analysis 14 8 8 6 8

Investing in quality improvement 15 15 12= 20 -

Understanding the strategies of your competitors 16 12 16 14 11

Investing in productivity improvements 17 17 9 13 9

Creating an enterprise architecture to improve business performance 18 - 15 17 19

Increasing speed to market 19 20 14 21 20

Changing corporate culture and values 20 21 - 24 21

Improving the financial structure of the firm 21 18 2 19 -

Business and IT ImplicationsUnlikelastyear’sCEOagendareport,thereisalsoagreatercorrelationin2011ofbusinessprioritiesbetweenthefinancialservicesindustryandthedatacollectedfromacrossallthoseindustriessurveyed(seetheMethodologysection).Fromtheperspectiveofcompetitionfromotherindustries(forexample,retailingandtelecommunications),itnowappearsasifthefinancialservicesindustryhasfinallywokenuptothepressuresbeingexperiencedfromalternatechannels,aswellastheimpactthatcustomerchoice,enabledbytheconsumerizationofIT,ishavingonthevaluechain.

AGartnerconcernremainsfromthe2010CEOagendareport(see“GartnerFinancialServicesCEOandSeniorBusinessExecutiveSurvey,2010”).Theworldandthefinancialservicesindustryhaveexperiencedsignificantupheavalduringthepastfewyears–andtheprioritiesofseniorbusinessleadersremainlargelyunchanged.Becausebrandvalues,trustandcustomersatisfactionscoreshaveremainedlargelyflatorfallenduringthepasttwoyears(seehttp://brandz.ogilvyeditions.com/top100,http://businesscenter.jdpower.com/news/pressrelease.aspx?ID=2010068andwww.edelman.

com/news/ShowOne.asp?ID=265),itisclearthatexecution,transparencyanddoingwhatisrightbythecustomer(asopposedtothebank)istheingredientmissingorbrokeninthebusinessexecutive’stoolbox.Althoughexecutionissuesmaynotdirectlytranslateintoovertattritionofcustomers,itisclearthatcustomersaremorepreparedtospreadtheirbookofbusinessamongamorediverseproviderset.Moreover,thecontinuedinabilityofbankstoaccuratelycalculate,atasufficientlygranularlevel,customerprofitabilitymeansthatthefullimpactofexecutionproblemsmaynotbeobvious.

ItisalsoimportanttorecognizethatasubstantialproportionofthatexecutioncapabilityrestsontheshouldersofIT.However,thecontinuedconcernsexpressedbyCIOsandseniorITleadersinGartnerclientinquiriesaboutthegapsinbusiness-ITalignmentandgovernancesuggestthatITexecutionsuccessisdirectlylinkedtobusinessdecisionsmademuchearlierintheprojectlifecycle–towhichtheymaynotbeprivy.Itisyettobeseen,forexample,whetherthecurrentslewofmajorcorebankingsystemimplementationswillactuallyconvertintosignificantimprovementsincustomerexperience,acquisitionandretention.Similarly,alot

9oftheinvestmentsweareseeingbanksmakeintermsofchanneldevelopment(forexample,mobileplatforms,branchre-engineeringandsocialmedia)haveundeterminedpaybackcalculationsandoftenpoorlyarticulatedbusinessstrategies.

Geographic DifferencesAswithmacrobusinessconditions,thereweresomemarkeddifferencesinregionalsurveyrespondents’rankingofbusiness(seefigure5).

RespondentsfromtheAsia/Pacificregionindicatedthatrespondingtoregulatorychangeswasonlytheir12thmostimportantpriority,sevenplaceslowerthantheAmericasandEMEA.ThereasonforthisisthenexusforthefinancialcrisisoutsidetheAsia/Pacificregion,predominantlywithU.S.andEuropeanbanks.Althoughthereisgreatercollaborationbetweenregulators(see“InternationalCollaborationofRegulatorsWillImpactFinancialServicesProviders”)aroundtheglobeandconcernsaboutsystemicriskarenotconfinedtoonecountryorregion,thereisatimelagbeforetheimpactofregulationsthatmainlyemanatefromoutsidetheAsia/Pacificregion(forexample,BaselIII)isfeltbroadlyacrossAsia/Pacific.

ItisalsointerestingtonotethatinstitutionswithinAsia/PacificcontinuetoviewinnovationandorganizationalflexibilityasmoreimportantthaninstitutionswithinEMEAandtheAmericas.ThisispredominantlybecauseoftherelativelylowerlevelofmaturityofmanymarketswithintheAsia/Pacificregion,andtherequirementstomeettheneedsofrapidlygrowingandchangingmarketplaces.AcriticalquestionforinstitutionsfromoutsidetheAsia/Pacificregioniswhethertheywillbeabletosustainlong-termgrowthinsomeoftheseemergingmarketsiftheyrelyonstrategiesdevelopedinmaturemarketsthatonlyfocusonexistingcorecompetencies(firmsfromtheAmericasrankthispriorityfourthinimportance),ascomparedwithdevelopingnewonesthatmaybetterfitlocalmarketconditions.

ThegreaterimportancethatfirmsfromtheAmericasandEMEAplaceoninvestinginoperationalqualityimprovementsalsoreflectstherelativematurityofthebusinessandtechnologyinthoseregions.Thisissupportedbytheresponsestothepriorityofplanninganddesigningthestrategyofthebusiness.BasedoncustomerinteractionsinAsia/Pacific,astrongerfocusonstrategydevelopmentisrequired–notjustinthebusinessbutalsowithinIT.

Figure 5. Using a Scale Ranging From 1 to 7, Rate Each of the Following Business Priorities You Face in Your Job — Geographic Variations

Theequalssigndenotesthatprioritieswererankedequallyasopposedtoonehavingahigherorlowerrankthantheother.

Source:Gartner(March2011)

Business Priorities Ranking of business priorities CEOs selected for 2011 specific geographic regions

Americas U.K. EMEA Asia/Pacific

Retaining and enhancing existing customers 1 2 1= 1=

Attracting and retaining skilled workers/talent 3 3 4 1=

Attracting new customers 2 4 5 3

Responding to regulatory changes 5 1 3 12

Building a responsive, flexible organization 7= 7= 1= 4=

Reducing costs via better efficiency 7= 7= 6 7=

Becoming more open and collaborative with customers 6 11 8= 10

Fostering innovation 13= 7= 14= 4=

Planning and designing the strategy for your business 12 7= 14= 4=

Balancing short-term goals with long-term strategy 9= 5= 11= 11

Building new competencies 9= 15 14= 7=

Focusing on core competencies 4 16= 11= 14=

Moving into new product or service markets 16= 5= 11= 9

Improving mgmt. decision making via better information and analysis 16= 12= 10 13

Investing in quality improvement 9= 19 7 19

Understanding the strategies of your competitors 20 14 8= 16

Investing in productivity improvements 13= 18 19= 17

Creating an enterprise architecture to improve business performance 18 16= 22 14=

Increasing speed to market 13= 23 17= 18

Changing corporate culture and values 19 21 19= 21

Improving the financial structure of the firm 22 12= 19= 22

10Fromacompetitivestandpoint,CEOsandseniorbusinessleadersalsoneedtoasktheirCIOswhethertheirfirms’ITcompetencyalignswithbusinessstrategicintent.Forexample,CEOsfromtheAmericasandAsia/PacificratetherelativeimportanceofmanagingM&AsfarhigherthanCEOsintheU.K.orEMEA.ThesameresultisfoundwithrespecttoCEOsfromtheAmericasandAsia/Pacificwantingmoreopennessandcollaborationwithothercompanies.RegionalCIOsinglobalfirmsneedtopayparticularattentiontothesedifferences,becausetheirmandatemaybeverydifferentfromthehomemarket’scorporateview–especiallyiftheyalsohavelocalexecutivereportingrequirements.

Accounting for Respondent AgeApartfromdifferencesinresponsesbasedongeography,analysisofthisdataalsofounddifferencesintermsoftheageofrespondents.Thedatashowsrespondentsfallingintotwomainagegroupings–20to45yearsold,andmorethan45yearsold.

Whenanalyzingtheresponsestothequestionconcerningbusinesspriorities,twoitemsshowsignificantmeandifferencesforthesetwoagegroups(seeTable2).

TheanalysisofthedatausingthefilterforageshowsagreaterproclivityonthepartofyoungerCEOstodemandmoreflexibility,speedofresponse,innovationandsimilarcharacteristics.OlderCEOsarefocusedmoreontraditionalmanagementsciencecapabilitiesandpriorities,suchascostcontrol.Althoughnotnecessarilysurprising,

theabilityforCIOstopursuecertaininitiativeswillbeinfluencedbytheageoftheirseniorbusinessleaders.CIOsshouldaccommodateanypotentialagebiaseswithintheirstrategicplanningactivities.

CIO ActionsDoubleuponinvestmentsthatpromotesimplicityandflexibility(ratherthanfunctionality),especiallyiftheseinvestmentsrelatetoimprovingthecustomerexperience.GaininsightintothecorporatestrategicintentbasedontheageandgeographicfocusofseniorbusinessleadersandtheCEO.UsethisinputaspartofITinvestmentprioritization.Ensurethatprojectmanagementcapabilitiesanddevelopmentmethodologiescanaccommodaterapidlychangingbusinessrequirementsandtruncatedtime-to-marketcycles.ThismayrequireareassessmentoftheITorganizationtoaccommodate“transformthebank”and“runthebank”structuresandworkflows.Expectproductlifecyclestobeincreasinglytruncatedaswell.ThiswillimpactthemeasurementofROI,aswellasputadditionalpressureonITeffectiveness.CIOsshouldmakeanassessmentoftheiroperationsabilitytorapidlybuildanddiscardproduct-specificdevelopments.

CEOs’ View of ITInthe2010CEOagendareport(see“GartnerFinancialServicesCEOandSeniorBusinessExecutiveSurvey,2010”),CEOswereexpectingbigthingsfromITintermsofincreasingthestrategiccontributionitmadetothebusiness.In2011,CEOsstillbelieveinIT’svalueproposition,andalargepercentageprofesstousingITtobuildcompetitiveadvantage(seeFigure6).

More Than 45 Years Old

5.13(14thplace)

5.40(ninthplace)

20 to 45 Years Old

5.80(sixthplace)

5.96(fifthplace)

Q01_21.Balancingshort-termgoalswithlong-termstrategy

Q01_26.Buildingaresponsive,flexibleorganization

Table 2. Business Priorities Ranked By Age of Respondent (by Mean Score and Rank Order)

Source:Gartner(March2011)

Figure 6. Which of the Following Statements Best Reflects Your Primary View of IT?

Source:Gartner(March2011)

2.2% 7.7%

26.4%

44.0%

19.8%

IT is an operating overhead cost to be minimized.

IT is an investment to control business operating costs.

IT is an investment to drive revenue and control business operating costs.

IT is used to build and sustain competitive advantage.

IT is a tool through which we define, operate and innovate our business model.

11Core Messages

• Contrarytopopularopinion,CEOsviewITasbeingakeydriverofandcontributortobusinessgrowth,but…

• ITperformanceisconsidereda“blackbox”bythebusiness,and53%oforganizationshavenoplanstoanalyzeit.

• ITservicelevels,flexibilityandinnovativenessareperceivedasnotbad;however,they’renotgoodeither.

• ManyCIOsremainlockedoutoftheexecutivesuite.

• ITevaluation,auditandpromotionarenowpartofbrandvaluegrowthstrategy.

Business and IT ImplicationsAlthoughITisviewedasanimportantcomponentofbusinessdevelopment,theCEO’sviewofIT’sservicelevels,technologicalflexibilityandtechnicalinnovationcapabilityisonlyratedasaverageacrossallcategories.ThisimpliesthatifCIOswanttobeconsideredanintegralpartoftheexecutivesuite,theyneedtoraisetheirgamewithrespecttoperformanceandthecommunicationofthatperformance(seeFigure7).ThisalsoimpliesthatITservicelevelsareareflectionofthestateofthebusiness–thatis,badinputs/responsesfromthebusinessleadstobadoutputsfromIT,eventhoughtheresultantITperformancemightmeetthetermsoftheSLA.

IntheCIO’sdefense,oneofthekeyproblemswithCEOs’perceptionofperformanceistheirseemingdisinterestinmeasuringIT,orinprovidingbusinessincentivesfortheCIOtoaspireto–forexample,byprovidingpersonalrevenue-generationtargets.This

reinforcestheongoingGartneropinionthatbusiness-ITalignmentintheindustryissubstantiallybrokenandthataccountingmodelsdonottakeintoaccountand/orcannotcalculatehowITimpactsbusinessperformance.Thishasnegativeimplicationsforfirmstryingdesperatelytoreducetheircost-incomeratios.IntermsofITperformancemeasurementandCIOperformanceincentives:

• Only31.9%offinancialservicesorganizationsmeasureITandmotivatetheirCIOs.

• 15.4%oforganizationsareplanningtomeasureITandmotivatetheCIOby2015.

• 52.8%oforganizationsdonotandhavenoplanstomeasureITperformanceormotivatetheCIOby2015.

FromaCEOperspective,whentherestofafirm’sbusinessleadersaredirectlycompensatedonbusinessperformance,andiftheCEOconsidersITandtheCIOtobeintegralpartsofsustainingcompetitiveadvantageandoperating/innovatingthebusinessmodel,thislackofmeasurementandCIOincentiveisamajorfrictionalbarriertosuccess.Also,whenanalyzingthedatamoredeeply,itisapparentthatorganizationsthatprovideCIOincentiveshavethelowest-perceivedrevenue,profitandcostcontributionofIT.Otherorganizationsdon’tmotivateCIOs,butplantohavethehighest-perceivedrevenueandprofitandcostcontributionofIT.OneinferencefromthisanalysisisthatorganizationsthatplantomeasureCIOperformancedosobecausetheythinkthecurrentcostofITisveryhigh,andthatbusinessexecutiveswhoalreadymeasureCIOperformancehaveacloser-to-realityunderstandingofIT’scapabilities.

Figure 7. To What Extent Do You Agree or Disagree With Each of the Following Statements About the IT Organization in Your Organization?

Source:Gartner(March2011)

4.14

4.19

4.27

1 2 3 4 5 6 7

The IT organization delivers the technology innovations needed

by the business.

IT has the organizational and technical flexibility to respond

to changing business priorities.

IT service levels meet business expectations (quality and

responsiveness).

Rating

12CIO CapabilitiesOneoftheissuesrelatingtomeasuringCIOperformanceistheperceivedcompetenceoftheindividualinthatrole.Inthisyear’ssurvey,weaskedCEOsabouttheircareerexperienceforalltheCIOstheyhaveworkedwithandthecandidatestheyhaveconsideredfortheCIOrole.Specifically,weaskedwhatwastheonequalityorcapabilitytheywouldmostliketoseeimprovedinthiscategoryofprofessionals.Theirverbatimresponsesareaswemighthaveguessed(seeTable3).Gartneranalystsareverywaryoftheadvisoryclichéthat“youshouldbemorebusiness-oriented,”butthedataappearstovalidateitsrepetitionadnauseam.Perhapssomeofthisisaboutperception,ratherthanreality,though.CEOs’second-most-popularrequestwasforbettercommunicationskills.Ifthoseareweak,it’sunlikelythatCIOswillfinditeasytobreakoutoftheircaricatureimagethatbusinesshistoryhascraftedforthem.WelookatItems3,4and5ontherankingasbeingcloselyrelated.“Needtoseethebigpicture,”“needtounderstandwhatthecustomerwillwant”and“abilitytoinnovatesufficientlywelltodelivercompetitivedifferentiation”canbeverysimilarsentiments.

ItseemsthatbusinessleaderswanttheirCIOstounderstandbusinesssituationsmorefully–andperhapsgetoutofthetunnelvisionofsystemdelivery,whichcansometimesleadthemtoignorewhat’sgoingoninthevicinity.Inthislisting,it’salsointerestingto

Quality or Capability Requiring Improvement Percentage of Respondents

Improvedbusinessunderstanding,flexibilityandspeed 44

Beabletocommunicatemoreeffectivelybytranslatingtechnicalissuesintoclearandunderstandablemanagementinformation

14

Strategicvisionaryinseeingbeyondthecurrenttrendsandexistingneeds 9

Sales-driven—knowledgeofthecustomer(internalandexternal) 7

Innovative 6

Productivity,efficiencyandaccuracy 2

Staffmanagementandpeopleskills 2

Projectmanagement,andbalancingdemandandsupply 2

Tenacity 1

Quantifytheirtruevalue 1

Riskmanagement 1

Broaderperspective 1

Greaterentrepreneurialskills 1

Leadershiptodrivechange 1

Integrityandnotentitlement 1

Intellectualability 1

Decisionmaking 1

Add value 1

Accountability 1

Cost control 1

Source:Gartner(March2011)

Table 3. CEO View on the Quality or Capability They Would Most Like to See Improved in CIOs (Verbatim Responses Clustered Into Capability Groupings by Gartner)

lookatthebottomoftherankings.OnlyafewCEOs,whengivenafreechoice,offeredriskmanagement,technologyadvancementorentrepreneurshipastheimprovementmostneeded.ButCIOsshouldtakeparticularnoteofthebottomitem.AlthoughCEOscalledforproductivityandefficiencyimprovements,theyhardlyevercalledoutcostcontrolorcostcuttingasacapabilityimprovementneed.PerhapsCIOshaveprovedtobeverygoodatthatinrecentyears.Thisalsosuggests,furthertotheearlierpoint,thatCIOsneedtobemorebusinesssavvy.It’sdifficultforITleaderstojudgehowaggressivelytocontrolcostsiftheydon’tunderstandthebusinessstrategy.Withoutthiscontext,ITleadersmayunnecessarilyattempttocontrolcoststhatthebusinessleadersareverywillingtoincurtoachievenewcapabilitiesforgrowingthebusiness.

ApartfromwhatCIOsmaylackintermsofcapabilities,wealsoaskedCEOswhattheythoughttheonequalityorcapabilitythatwasmostoverratedoroversoldbyCIOs.TheresultsinTable4arewhatweexpectedfromoverestimatingtechnicalknowledgetorelianceonyearsofexperience,butfairlystarkwhenmeasuredanddisplayedmoreformally.ThecommentswerenoticeablydominatedbyconcernsthatCIOsoversellontheirtechnicalcredentials.Tobefair,technologyiscomplex,fast-movingandabsolutelycriticaltoafinancialservicesorganization,andallofthatisfullydelegatedbyCEOstotheirITleaders.CEOsalsoreapwhattheyhavechosentodevelopwithintheirfirmsorhaveselectedviaheadhunters.So,

13thisisn’ttosaythatbeingtechnicaliswrong.Rather,itseemstocreatesomefrictionintheeyesofthebusiness,evenifitiswhat’sneeded–andprobablybecausebusinessleaderschoosetobeignorantof,orembarrassedbytheirshortcomingswhendealingwithit.WealsosuspectthatCEOsseeandreacttothestereotypeoftheCIOrole(justastherearestereotypicalcharacteristicsforCFOs,HRdirectorsandtheothermajorroles).

AcomparativelynewissuethatCIOswillhavetomanageistheincreasedpressureCEOsareplacingonthemtooffermoreinsightintoIT’sroleintheorganization,andcommunicatethisinsighttoexternalparties,suchasregulatorsandshareholders.Thisrequirementisdrivenbytheproblemsthatarewell-documentedaspartofthefinancialcrisis.Inanefforttoimprovecorporatetransparency,CIOsarebeingtaskedwithrepresentingtheiroperationsatinvestormeetings,providinginputtoexternalauditorsandcompilinginformationaspartoftheannualreport.However,asizableminorityofCEOs(around20%)stillexpectnoinputfromCIOswithrespecttodiscussingITcapabilitiesandsystemswithexternalparties.ThisimpliesthattheseinstitutionsseeITasnoncoretotheirbusinessandanoninfluencerofbrandvalue,customerloyaltyandstickiness.ItisalsomorethanlikelythatthesefirmshaveanextremelylimitedunderstandingoftherelationshipbetweenITactivitiesandcorporateperformance.Suchagapinthinkingputsthesefirmsatasignificantcompetitivedisadvantage.

Thisimplicationissupportedbythefactthat21%ofCEOsreallydon’tunderstandtheirITcapabilitiesandthelinktobusinessdevelopmentorinnovation–thesmallertheorganizationthegreatertheconfusion(seeFigure8).

Overrated Quality Percentage of Respondents

Technicalknowledge 35

Abilitytokeepbudgetandprojecttimetable 17

Experience,numberofyearsofservice,age 12

Capabletoinnovateanddelivercutting-edgetechnology 9

Strategicthinking,visionandplanning 8

Deepknowledgeoftheneedsofthebusiness 3

InvestmentsinITwillincreaseresults 3

Thattheyareincontrolofthearchitecture 2

Riskmanagement 2

Capacitytoreducecosts 2

Collaborativeefforts 1

ITwillsolveeverything 1

Reliabilityanduptimetype 1

Best-in-classsystem 1

Systemshortfalls 1

Complexity 1

Source:Gartner(March2011)

Table 4. Most Overrated Quality by CIOs as Reported by CEOs (Verbatim Responses Clustered Into Capability Groupings by Gartner)

SurveyrespondentswhosaidtheyareimplementingorknowwhichIT-enabledstrategiccapabilitytheywillbeimplementingwereaskedtospecifythecapability.Theresponsesweresingle-lineverbatims,whichwemanuallycategorizedtoproduceTable5.Uninterpretableandnullresponsesarelistedas“other.”Ifbusinesscanultimatelybereducedtojusttwoimperatives–winningcustomersandcontrollingcosts–thenthetoptwocategoriesmakeintuitivesense.CEOsprobablyseeERPprimarilyasatoolforbusinessprocessandoperationsmanagementefficiency.CRMandsales-relatedsystemshelpwinrevenue.ManyoftheERP-relatedresponsesactuallyusedtheterm“SAP.”OtherITvendornameswereveryscarce–acrossallcategories.

Variousminorityresponsesshowbusinessleadersworkingatdifferentlevelsofthinking.Someareactingatadifferentlevelofspecificity–forexample,highlightinge-commerce,informationmanagementornamedbusinessprocessapplications,suchasmobilebanking.Othersaremoredetached–lookingatimprovingtechnologicalcapabilitymorebroadly–referringtosystem/legacyupgrades,workflowintegration,andprojectmanagementskill.Theseverbatimresponsesraisequestionsabouttherealunderstandingofinnovation(ERPcanhardlybeconsideredsuchintoday’stechnologyenvironment),ofITenablementasastrategicvaluedriverandperhapsevenIT-enabledstrategicvisionandplanningefficacy.

14Figure 8. Which Statement Best Reflects the Situation Regarding the Next IT-Enabled Strategic Innovation in Your Organization in the Next Five Years?

Source:Gartner(March2011)

51.6%

23.1%

1.1%

20.9%

3.3% We are currently implementing the next major IT-enabled strategic business capability improvement to our organization.

We have identified the next major IT-enabled strategic business capability improvement to our organization, and we are planning the investment.

We know the specific candidates for the next major IT-enabled strategic business capability improvement to our organization, but we have not yet chosen between the possibilities. We do not really know what the possibilities are for the next major IT-enabled strategic business capability.

Other; please specify.

Capability Percentage of Respondents

CRM 14

ERP 7

System/legacyupgrades 7

Customerexperiencemanagement 7

E-commerceexpansion 6

ERM 6

Globalplatformintegration 6

Corebankingimplementation 4

Informationmanagement 4

Workflowintegration 3

Projectmanagementskills 1

Cloudcomputing 1

M&As 1

Mobilebanking 1

Newbusinessoperatingmodel 1

ITsecurityenhancement 1

Back-officeoutsourcing 1

Globalmarketintelligence 1

Supplychainmanagement 1

*Other 24

*OtherwaseitheranullresponseorcorrupteddataSourceGartner(March2011)

Table 5. Specific IT-Enabled Strategic Capabilities

15Geographic DifferencesInterestingly,30%ofCEOsfromtheU.K.(comparedwithanaverageof19%fromtheotherregions)reportednotknowingwhatthepossibilitieswereforthenextmajorIT-enabledstrategicinnovation.Moreover,aswewillseelaterinthereport,U.K.CEOsarenotinfavorofascertainingthisinformationfromoutsidetheindustry.OfU.K.respondents,35%reportedthatopeninnovationwasnotapplicableasameansofdevelopingnewstrategiccapabilitiesinfinancialservices.

OutsideoftheAmericas,thisopacityofknowledgeaboutwhetherandhowITcontributestobusinessperformanceismoremarked.Intheotherthreeregionsanalyzed,42%ofCEOscouldn’testimatetheproportionoftheirorganization’sexpectedtotalrevenue/salesforfiscal-year2010thatwereattributabletotheirorganizations’ITcapability.

Asimilarpictureistrueinrelationtounderstandingprofitattribution.AlthoughasmallerproportionofCEOscouldn’tattributecoststoITcapabilities,morethanone-thirdofrespondentslackedthisinsightineachregion(seeFigure9).

Withrespecttothedifferencesinrespondents’primaryviewofITcapability,noCEOfromtheU.K.believedthatIT’srolewasaboutbusinessoperatingcostcontrolorthatitwasanoverheadtobeminimized.Respondentsfromtheotherregionsweremoreconservative.

FurtheranalysisofthedatarevealsthatU.K.CEOsseeadefinitelinkagebetweenusingITforbusinessmodelinnovationandtheexpectedtotalrevenuereturnattributabletoIT’scapability.ThemoreITisusedinthecontextofbusinessgrowthandinnovation,thegreaterthereturnsinrevenueandsalesgrowth.

WithrespecttoexternalpressureforgreatertransparencyofinformationaboutIT,therewasamarkeddifferenceinhowCEOsfromthedifferentgeographicregionsexpecttheirCIOstorespond(asshowninFigure9).Forexample,CIOsfromAsia/Pacificareexpectedtobefarmoreoutgoingthantheirpeersaroundtheworld.U.K.CEOsaremorereliantonexternalauditstodrivetransparency.Thisuseofexternalauditsshouldnotbeviewedasacompliancefrictionbecause,clearlyfromtheearlierdata,theemphasisintheU.K.isnotoncostcontrolintermsofITcapabilities.

CIO ActionsCIOsshouldreviewITaccountingpractices,andensurethereisanabilitytocalculateinbusinesstermstherelativeperformanceofITinputs.ImprovedocumentationandprocesstransparencywithinITsoauditproblemsaremitigated,andexternalcommunicationismoretransparentandeffective.

Tables4and5formthebasisofaninterestingpersonaldevelopmentchecklistforCIOsandtheirCEOstodiscuss.It’slikelythatthereissometruthandsomemisunderstandingonbothsides.Althoughthetopresultsrepresentaclichésituationwemightalllaughat,astandoffanditspersistencedonothelpustogetthebestoutofIT,nordotheyhelpthefinancialinstitutionbeingpressedfortheCIOtobemoreofanexternalfacefortheenterprise.

IT Investment Plans and Value of Technical CapabilitiesAlthoughITbudgetsarelargelyflatfor2011,themoregeneralinvestmentoutlookpaintedbyCEOsispositive.Fewinvestmentareasareanticipatedtoseesignificantcutbacks.Many,suchassales,productdevelopmentandriskmanagement,arelikelytoseepositiveinvestmentflows(seeFigure10andFigure11).Those

Figure 9. Proportion of Value, Cost and Margin Optimization That Is Attributable to the IT Capability

Source:Gartner(March2011)

0

10

20

30

40

50

60

70

80

Total revenue/sales for FY10 attributed to the IT capability.

Total earnings/net profit for FY10 attributed to the IT capability

Total costs for FY10 attributed to the IT capability

Percent

16interestedinmoredetailsaboutthesizeandspreadofITbudgetchangesfor2011shouldreview“ExecutiveSummary:ReimaginingIT:The2011CIOAgenda.”

Core Messages

• Investmentsinsales,stafftraining,riskmanagementandtechnologyareincreasing.

• CEOsarelookingtoCRM,businessprocessre-engineering(BPR),patternrecognition,dynamictechnologyandwirelessascritical,long-termvaluecontributors.

Business and IT ImplicationsThesurveyalsotackledstrategicIT-enabledcapabilityadifferentway,byofferingalistofsomeofthemanyhigh-levelbusinessvalueconceptsinIT–someoldandsomenew.TheyrangedfromCRMthroughdynamicbusinessprocessmanagement(BPM)tomasscustomizationandsmartgrids(thiswasacross-industrysurveyfromwhichfinancialservicesrespondentdatawasanalyzed).Weaskedaboutvariouslevelsofbusinessvaluethesamewayasinlastyear’ssurvey,solimitedrankordercomparisonscouldbemade.However,weaddedseveralitemstothelistthistime–intangibleaccountingandenhancedreporting,businessprocessoutsourcing,cloudcomputing,andnewbusinesspatterndiscoveryandmodeling.Weusealongphrasetodescribeeachitem–forexample,“Mobilephoneorsmartphone-basedelectroniccommerceandelectroniccustomerservicemethods,”ratherthanitsITindustryshortname“m-commerce”(whichCEOsmightnotbefamiliarwith).TheresultsareshowninFigure11.

Figure 10. Compared With Fiscal Year 2010, for Each of the Following Business Areas Within Your Organization. Please Indicate If Investments Will Decrease, Stay the Same or Increase In Fiscal Year 2011?

Key:Greenisincreasing,yellowisunchangedandredisdecreasingspendinglevelsfrompreviousyear

Source:Gartner(March2011)

Change in Investments Ranking of business priorities CEOs selected for 2011 and results from past five years

Americas U.K. EMEA Asia/Pacific

R&D

Product Enhancement

Marketing

Sales

Staff Hiring

Intellectual Property

Business Services

Partnerships, Alliances and Value Networks

Risk Management

Legal and Compliance

People and Culture Development

Capital Equipment

IT

Property and Facilities

17Analysisofdatabyageofrespondentsdidnotrevealanythingstatisticallydifferent–probablyduetothesmallsamplesize.However,therearesomerankorderdifferencestonote–forexample,thestrategicandlong-termtechnologiesforallagegroupsshowthatCRMisonthetop.But,algorithmicpricingandtradingisrankedthirdforthe20-to45-yearrespondentgroup,andonly12thplaceforthe45ormoreagegroup,witha20percentagepointdifferencebetweenthetwogroups.

Whencomparingthe2010to2011surveys,therewereafewstatisticallysignificantmovementssincelastyear.Althoughsomemovementsoccurredintheshiftfromlong-termstrategicvaluetostrategicortacticalvalue,theoverridingmovementsaremore

relatedtotheCEOs’focusontwocorecapabilities–improvingthecustomerexperience,andusingdataanalysistechniquestobetterunderstandwhatthecustomerisinterestedinandhowtheyarebehaving.

Otherfactorsthatstandoutare:

• Theresponsestothestrategicvalueofcloudcomputingbeingconsideredbymanyrespondentsasnotapplicableorofnostrategicvaluetotheorganization.ThismayreflectalackofunderstandingbyCEOsastothetechnologyandorthewayithasbeendescribedbyITprofessionalsintermsofbusinessvalue.

Figure 11. For Each of the Following Technology-Enabled Capabilities, Please Indicate the Level of Value You Believe This Will Bring Through Being Applied to Your Organization

Source:Gartner(March2011)

0% 20% 40% 60% 80% 100%

CRM

Re-engineering business processes

New business pattern discovery and modeling

E-commerce/e-service

Algorithmic pricing and trading

Knowledge worker productivity/collaboration

Wireless-born products/services

Remote and home teleworking

Mass customization

Data-driven decision making

Cloud computing

Production cost analytics

Outsourcing business processes

Emerging markets (Web and mobile)

Social systems

Better financial accounting

M-commerce

Open innovation

Sustainability management

Usage-based revenue models

Dynamic BPM

E-discovery

Location intelligence

Smart grids

Treacability and visibility

Real-time asset monitoring

Percentage of Respondents

Long-term strategic value (a source of sustainable competitive advantage) Strategic value (material to business growth) Tactical value to business operations No significant value to your business Not applicable

18• Thelackofstrategicvalueseeninsocialsystems.Again,this

maybeduetoacommunicationproblemaswellaspoorlydefinedbusinessmodelsandperformancecriteriafortheuseofsocialcomputing.

CIO ActionsEventoday,itisstillcommontofindCIOswhoareinorganizationswherebusinessstrategyisunshared,unclearornonexistent.AssumingthattheITfunctionisdeliveringthebasicswell,whatshouldaproactiveCIOproposeforfurtherbusinessenablement?Figure11suggeststhatbyfocusingonCRM(particularlytheexternalcustomerexperience),businessprocesschangeandbettermanagementinformationandanalytics,suchaCIOwouldbelikelytoaddvaluethatmostCEOsrecognizeandappreciate.

More-innovativeandentrepreneurialCIOsintechnology-aggressivefinancialinstitutionsshouldnotetheclusterofitemsatthebottomofthelist.Itsuggeststhattoday’sCEOsdonotyetunderstandorappreciatebenefitsoftraceabilityandvisibility(forexample,ofdata),e-discovery(forexample,fromacompliancestandpoint),openinnovation,andperhaps–moresurprisingly–m-commerce.Situationsofmajorityignorancearepreciselywheretrueleadershuntforcompetitiveadvantage.

ThoseCIOswhoarespendingalotoftimeandattentiononcloudcomputingshouldnotetheapparent“nosignificantbusinessvalue”response.ItmaybetimetoprobemoredeeplyintowhatcreativebusinessvalueyourCEOmightgetfromcloud–beyondjust“cheaperIT.”

METHODOLOGYThedatawascollectedfromNovember2010toDecember2010.Qualifiedorganizationswerethosewithannualrevenueof$500millionormore.Therevenueoftherespondentswasasfollows:morethan$50billion(24.2%),$25billionto$50billion(24.2%),$10billion$25billion(19.8%),$5billionto$10billion(12.1%),$1billionto$5billion(16.5%),and$500millionto$1billion(3.3%).Intermsofinstitutionsize,80.2%werefromorganizationswithgreaterthan10,000employees.

Respondentswereataleveloftheorganizationfromwhichtheywereabletoprovideinformationaboutthecriticalbusinessissuesfacingseniorexecutivesinthefinancialservicesindustry.Qualifiedrespondentswereindividualswhoareactiveandwhohaveanyofthefollowingjobcategories:boarddirector,chairperson,president,owner,soleproprietor,CEO/managingdirector,CFO/financingdirector,COO,orotherC-levelexecutiveorequivalent(61.5%CEOs,14.3%CFOs,19.8%COOsand4.4%otherC-levelexecutives).NotethatCIOsandCTOswereexcluded.Gartneroperatesanothermajorsurveytoanalyzetheirviews.Thisresearchisfocusedonwhatnontechnologybusinessleadersthink.

ThesurveywasconductedusinganonlinequestionnairedevelopedbyGartneranalystswhospecializeinexecutiveresearch,andwasreviewedandtestedbyGartner’sResearchDataandAnalyticsteam.Inall,91qualifiedrespondentsfromthebanking(42.9%),investment(31.9%)andinsurance(25.3%)industriesparticipatedinthisresearch(fromatotalindustrysampleof319).Respondents’geographiclocationswere:Americas(27),U.K.(20),EMEA(13)andAsia/Pacific(31).Theresultsofthisresearchrepresenttheviewsofthesurveyparticipants.AlthoughGartnerhasdrawnthesampleinanattempttomimicthecharacteristicsofthetargetpopulation,theexactrelationshipbetweenthesampleandthebroadermarketisunknown,becauseitcannotbefinitelydetermined.