COVID-19 Banking Impact: CIO agenda and imperatives

As we digest the developments of the last few weeks, the reactions have been myriad.  Phrases like ‘Black Swan event’ on one end, Doomsday/Armageddon perspectives (albeit without the aliens and the zombies) on the other; some debate on U-shaped, or V-shaped or W-shaped recessions; others ponder over a deeper connection to the Gaia hypothesis. But one thing is difficult to disagree—that the COVID-19 pandemic and impact is unprecedented and unlike anything we have seen in our lives and, in many ways, it does spell the end of the world as we know it. Industries, business enterprises, technology, work-life balance, social behavior (individual, community, family) and many other things will not be the same as they were before.

Some industries like travel and hospitality are going through an existential crisis, while others like retail and manufacturing have been badly hit by the spikes and troughs of disrupted demand and supply chains. Banking is perhaps less visually impacted (for now), as irrespective of self-isolation or social distancing, it is a necessity and a fundamental utility akin to gas and electricity. But there is a lot coming down the road for sure.

I have spoken to many banks and CIOs in the last few weeks and discussed and shared thoughts. The immediate focus has been on business continuity measures, on getting remote work from home (WFH) processes up and running and ensuring the technology and infrastructure is in place and getting contact centers and helpdesk to support the business. But now as it stabilizes, and it becomes evident that this is the ‘new normal’ (a phrase you hear everywhere), there is a clear thinking emerging on some potential steps and imperatives for the bank CIO. 

Stress and impact on the self-service/digital channels of engagement

Over the last two decades, internet banking and mobile banking were built as independent channels to the branch, call-center etc. and the utopian goal over the last few years has been to achieve an omni-channel outcome where customers could engage across channels seamlessly. Yet the technology stack has been built incrementally with band-aid solutions and some of the current mobile/internet channels are cumbersome and already legacy systems. Today, due to COVID-19, the entire stress and impact is on self-service via the digital online/ mobile channel, and there has never been a better time or a business-case to look at transforming this.  There is cheap and proven technology around to choose from. Mobile-first, cloud-native and secure; out-of-the-box functionality that can easily integrate with your existing core-systems, and canned workflows and processes that can easily be tailored. And low-risk implementation models that are plug and play and bolt-on, delivered in days and weeks rather than months.

Don’t put your change budget and discretionary spending on hold; modify it

Most enterprises are programmed to follow set patterns of risk management. The first response to a disaster is to put discretionary spending on hold. “Let’s focus on BAU,” is a comforting idea amidst the chaos. But the lessons of 2008 should not go waste. In 2008, savvy banks invested in modifying their technology estate, IT legacy systems and their limitations, while the markets were still in turmoil. They got fit before the downturn loosened its grip. And when economies returned to normal, these banks zoomed ahead leaving their competition far behind.

Core-systems transformation/ modernization and approaches – either ‘rip and replace’ or ‘hollowing out the core’ – have in the last decade matured significantly. They don’t necessarily need to balloon into spends running into millions (which then get railroaded by inter-company political agendas) and fail spectacularly and become a career-limiting outcome for the people involved.

Trim down the change budget by all means but talk to your IT partners and see how it can be put to better use and explore how some proven technology and approaches can simplify and transform your existing IT limitations. This could be the best time to do this.

Agile IT Delivery – make it global and distributed

When Agile development became institutional in the last few years, and Agile manifestos, and stand up meetings sprang up everywhere, the purists recommended co-location as mandatory and suddenly development and testing teams all in the same floor/building became de rigueur. This was somehow seen as a conceptual clash with the global delivery (onshore, nearshore, offshore) model and local IT contracting and costs mushroomed exponentially. Some of the braver CIOs saw this as unsustainable and took the step of working with their IT services partners and pioneered Distributed Agile development models. These have now matured very well with robust tools, technologies, processes and ways of working with remote teams.  And when COVID-19 struck, unsurprisingly, these distributed agile teams were the first that adjusted to the new normal. Today when everyone is working remotely, whether a developer logs in from his home in Boston, Birmingham or Bangalore, it doesn’t make a difference. But it does make a difference to the bottom-line when the unit cost of delivery is different in each of these. 

And then with automation and other efficiencies, there has probably never been a better time to go all-in and consider Distributed IT delivery models that reduce your unit cost of delivery.

Move (even more) to an opex, pay-per-use model

In the last few years, SAAS applications and platforms have paved the way for increased familiarity with the consumption-based spend pattern for IT. On the other hand, large clunky lock-stock-and-barrel outsourcing contracts with black-box operating models are distinctly unfashionable. But there is a clear middle ground here for parts of the IT spend and estate to be carved out intelligently and moved into an opex model with your IT services provider, with guaranteed performance metrics, productivity improvements and clear transparent dashboards that give you all the control you want and the services and scope can be tweaked as required.

By implication, IT vendors will step up their game with new models. While some of the larger vendors may struggle to move fast enough to change their cookie-cutter outsourcing frameworks, or not be as hungry because of the dropping contract values, or perhaps be loath to cannibalize existing contracts, chances are that flexible, nimble and agile mid-tier providers will knit together these offerings much faster than their more mature competitors. 

The winners…

In my view, this is not the time to wait and watch; it is a time for decisive action. Banks and their CIOs (and their IT partners) have a window in which to turn this setback around and those that react fast and adapt will end up as the winners. To borrow a phrase from Malcolm Gladwell, those who see this as a phase of ‘desirable difficulty’ will be the ones that thrive.