Capital Markets: Reinventing the CIO
Chief information officers in capital markets are under pressure to cut costs, secure systems and support mobile devices. Yet their greatest opportunities will come from developing systems that add value to the customer relationship.
In capital markets, there are really only two ways for buy- and sell-side investment firms to differentiate themselves: by lowering their costs and providing solutions at the best price, or by improving the customer experience. Their chief information officers (CIOs) can help with both. But only by improving the customer experience can CIOs and their organizations truly stand out.
Standing out has never been more important or difficult than today. In today's capital markets, product differentiation is short lived, as competitors have demonstrated an uncanny ability to copy ideas almost instantaneously. New government regulations, the most stringent since the 1930s, are transforming capital markets, making innovation more onerous and risky. Even the most powerful changes in the market, such as the rapid adoption of mobile devices — and the accompanying bring-your-own-device (BYOD) phenomenon — are major factors constraining innovation.
Reinventing the CIO Role
The CIO role is changing rapidly. Increasingly, CIOs in capital markets are expected to lead the kinds of rapid, dramatic changes that their fellow C-level executives need implemented. They are under pressure from increasingly tech-savvy business managers to create new IT capabilities that add value — by connecting with customers through new channels such as mobile and social media — and to provide a new level of customized service through big data analytics.
And, at the same time, CIOs are still expected to maintain their traditional role of "keeping the lights on" — that is, implementing, operating and securing their firm's legacy IT systems — managing the IT staff, and justifying an IT budget that is constantly under pressure.
As CSC's CIO Barometer 2013 survey finds, CIOs in capital markets still consider it a top priority to ensure the security of their IT systems. After security, modernizing applications represents the second highest priority for CIOs in financial services, the survey found.
For all of these reasons, CIOs need to rethink how they balance their time, resources and priorities. On the one hand, CIOs have never been more challenged than they now are; on the other hand, they have never had a better opportunity to become more strategic, to have an impact on the company’s vision and the ability to realize it. As a result, CIOs must be more connected with their C-level counterparts throughout the organization.
They need to completely understand and contribute to the company’s strategy. And, more so than ever before, they will be central players in bringing these innovations to life through new services and channels.
We find that successful CIOs don’t try to do it all at once. Instead, they decide whether they are going to improve operations or develop new, customer-centric systems. One or the other is fine; trying to do both at the same time, our clients show us, is too much in an era where they must focus on truly essential needs.
For example, the CIO at a major European financial services provider decided to focus first on costs. The company’s leaders, facing serious competitive pressures, decided that IT was not one of their strategic functions. As a result, the CIO outsourced nearly all IT operations, transforming the company’s fixed costs into variable costs and lowering the break-even point.
By contrast, the CIO at a major life insurance provider decided to improve customer relations first. The company found that it was actually providing too much information online, making it easy for customers to compare and switch carriers. The solution? The CIO implemented a big data system that “understands” which task a customer is attempting to complete and which product(s) would deliver the value expected by the customer, and then provide only the information needed for that particular task. It's a matter of not pushing all products to all customers all the time, but instead promoting the right products to the right clients at the right times.
To build on successes like these, CIOs in capital markets should focus on IT’s value proposition. More specifically, that means building new IT-powered products and services, enhancing the efficiency of their IT operations, and improving the all-important customer relationship. Often, these tasks require skills above and beyond those of current CIOs.
CIOs today can reinvent themselves and their organization. They must upgrade skills to better understand strategy and how to affect it. CIOs in today’s capital markets industry have new and exciting opportunities to lead and succeed.
Loïc Rochas is partner, Global Financial Services Consulting – Capital Markets, at CSC, a provider of technology-enabled solutions with some 81,000 employees in more than 70 countries. He is based in Paris.