This survey of 37 retail and wholesale institutions found that the best performers spent up to 40% less than their peers while excelling in their IT management and the ways the bank uses IT to support the needs of their business.
IT spending varied widely - 10%-30% of operating costs or 4%-18% of operating income - but, worryingly, higher levels of spend didn't increase business effectiveness or efficiency. Typically, the best performers have more centralised and consolidated application portfolios, and manage their IT infrastructure tightly - with fewer and cheaper data centres.
They tend to outsource less - a reflection of their stronger in-house skills - and have flexible contracts with vendors that allow for more renegotiation. Importantly, they make applications flexible and centralise important customer data, so avoiding the need to re-enter customer details each time a new account is opened.
Smart IT spending: insights from European banks
Kanika Bahadur, Driek Desmet and Edwin van Bommel
McKinsey Quarterly, January 2006
Review by Steve Lodge.