Traditionally IT has been seen as a cost centre. Over time, as the significance of technology has been reassessed, it has become accepted as an investment. Whenever the business attempts to modernise, explore new markets, meet regulation, become more efficient, it seems that this investment must be renewed. A number of companies have managed to recoup their investment by using their infrastructure as a business service for others, or extend their bespoke software to generate revenue. But this is often a distraction from core business. The end result is that as IT along with technology evolves rapidly, systems need to be replaced or upgraded. It is no wonder that IT budgets, while under scrutiny, are growing. The very size of such budgets requires high-level decision making, and so IT spending has high visibility at board level. An aspect of IT governance is its focus on business needs and IT serving those needs through balanced budgeting.
In Spring 2007, the research organisation Datamonitor noted that IT budgets have increased by an average of 11% in the trading, brokerage, fund management, investments and securities, and hedge fund sectors during 2007. The prediction is for a big spending year in 2008 for financial service organisations looking to boost their IT infrastructures. The advances in IT in general and infrastructures in particluar have transformed the way financial services do business, such as home banking, ATMs, trading systems, call-centres and so on. For many customers ITbased solutions are a given - they expect near instant access to their money and investments and immediately available facilities for transfering funds and trading. Customer satisfaction is the dominant theme.
The integrated nature of the financial sector market is such that products are often hydrids of components from different sources. When cross-selling financial products a company might be promoting a package that has input from many underwritten sources. A call-centre employee might be selling a product supplied by another company on behalf of a third company; the product itself might consist of components from multiple sources. Increased competition has led to seemingly contradictiory trends such as consolidation. This is also cited as a key factor to the focus on customer relationships. An important additional trend is impending regulatory changes to the sector. For example, the Markets in Financial Instruments Directive (MiFID) in Europe requires financial institutions to review their IT infrastructures. MiFID is a driver for close scrutiny of what is achievable with existing infrastrcutures; IT is being assumed as the means of delivering a more open, transparent trading system. The future for trading in the sector for everyone involved is electronic. Integration, within a firm, between firms, across markets and globally, relies overwhelmingly on the successful implementaiton of IT solutions. All the challenges of budgeting, effective choice and measured assessment of potential come together in a comlex arena. Integrating IT solutions is a major cost and resource activity.
Getting it right is difficult; making sure it works well for the business is even harder. Without a framework that monitors and measures this effectiveness it is likely to fail. Performance is a key indicator, a guide to how well things are going for all aspects of business. The difficulty in managing performance is measuring it. How do we define good and bad performance and in what terms? A process may be performing well against its stated aim - to manage and deliver so many transactions per hour - but its usefulness to the business is inappropriate. In other words, when it was created, the measures were not related to business needs, merely to a quantitative view of its activity. Assessing the links of IT activities to business needs is what IT governance is about, and linking an IT process or activity to business is the critical ingredient often missing from performance management. Poor performance can be considered in a number of ways: the way the program is coded may be inefficient and perhaps ineffective, the system design may contain unanticipated bottlenecks. When initially introduced the product may well have been suitable for the task at hand but incapable of scaling when the business expanded or it is too inflexible, unable to adjust to a change in business direction.
A common issue is the inability to integrate well - an aspect of the insularity of developing applications separately from real business environments, solutions that ‘fix' a problem but do not fulfil a role in a bigger solution. How are these issues identified at an early stage of the software development or procurement cycles? Functional testing has a place in ensuring a working product, but matching products to the realities of turbulent business life is not easy. Once resolved, how do we ensure that the IT processes that underpin business success remain effective? The path towards this ideal is defined by concepts such as more frequent testing to the point of continuous monitoring. Especially in financial services, the expectation of users is such that very high levels of performance are assumed. When introduced, IT solutions are expected to cope with loading and often untested use. They are assumed to cope with this all with integrity and reliability. Contemporary firms deal with very large volumes of data cumulated from internal sources and the markets in which they operate. They work through this data instantaneously and are expected to deliver accurate information for critical decision making. Shortfalls in performance are immediately noticeable.
The drive towards being ever more competitive requires these solutions to be flexible and capable of adapting to the constant switching of market of direction. Responsiveness is now an important aspect of performance. Trading environments are particularly demanding. They need speed, lots of bandwidth, heavy loads of data all delivered reliably and processed accurately. In a world in which performance is now taken for granted, bundling traditional performance measuring activities as a strategy for delivering effective systems is no longer enough. To bridge the gap between IT activity and business focus we need a more encompassing approach. This is all the more pressing when we factor the need to manage the escalating risks of working in heavily regulated markets. IT governance establishes itself as a means of determining value from IT systems. At board level it provides assurance about execution. Many vendors have introduced ‘dashboard' tools to help executives maintain a high-level but quantitative view of business performance. That is, these tools provide quantitative data to allow executives build a picture of the key performance indicators of their business - critical Business Intelligence (BI) elements presented as a ‘snapshot' of how they are doing.
They are not a substitute for full analyses, but a representation of the main trends. Dashboards, such as these, have had variable acceptance among customers. They have the virtue of often being graphical in the way they represent complex data. But in their very simplification of the data that had led IT departments to be wary of them they do not provide a full picture. They are often ‘fixed' and not easily changed to reflect the real interests of the business. They might even reinforce the disconnect between IT activity and business needs. The need to integrate complex information into levels of representation appropriate to levels with the business has been a function of BI.
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