Email this article	Comment on this Article	Print this article

Do not lose sight of what it is that gives most companies the competitive edge

But the question on everyone's lips at the moment is whether new technologies are being used to transform the sector in line with international trends, or whether the great and the good alike are just in a holding pattern.

Needless to say, this is a tough question to answer, as the front end of any innovation only becomes visible years after work has commenced on the back end, so the use of emerging technologies is sometimes difficult to track. 

That said, careful analysis of products and services being offered in the sector reveals an interesting picture.

With the pressure on to ensure the best ROI possible under current market conditions, the sector's IT focus tends to be on maintaining operational excellence rather than anything else; on "keeping the lights on" rather than on innovating.

Other than that, existing capacity is being used to build new or additional capabilities, such as improved online security, but there is a great deal of "white space" in the area of innovation and the use of emerging technologies.

Globally, about 20% to 25% of spending on IT is on new capabilities, while at home this figure is closer to 15%.

Similarly, the percentage of revenue spent on IT internationally is around 5 to 7%, way higher than what is being spent here at home on average, other than a number of frontier financial institutions.

If nothing else does, these figures should raise a red flag in the financial services sector which, although it doesn't have the markets that the US, UK and EU might have, still has to preserve competitiveness on an international level.

The focus at present, which flows from both financial influences and the nature of the market, is on optimising operations and minimising cost.

Emerging technologies, where they are being brought in, are being used to align IT to the business - to ensure that the systems can deliver on the business's value proposition and marketing promise.

In line with this is an increasing trend towards outsourcing non-core functions and, on the flip-side of that coin, the creative use of assets.

This means, for instance, that call centre and data management functions are typically being outsourced, while spare capacity is being leased out through strategic partnerships with vendors.

Sourcing agreements between tech partners are also becoming more common in an attempt to keep a lid on the spiralling costs of hardware and networking.

In terms of ROI, the trend is now to analyse IT as a total cost to company rather than just as an infrastructural expense. This gives CFOs insight into the real cost of some technologies, and they are then able to opt for the outsourcing route if this is appropriate.

Of course, this may all sound very prudent, but there is a hidden danger in this approach. Information technology develops so swiftly that those who do not keep up soon get left behind.

The gap that develops between the leaders and the pack soon becomes a gaping chasm, and it is often almost impossible to recover lost ground. So, while it is vital to work smarter in the current economic climate, it is also important not to lose invaluable ground.

Innovations focused on optimising personnel, hardware and software should definitely be par for the course, but care should be taken to preserve and build competitive advantage as well.

Watch ROI, certainly, and make sure that there is a benefit from economies of scale, but do not lose sight of what it is that gives most companies the competitive edge - emerging technologies.

Luizet Ruzow is Head of Financial Services at FeverTreeConsulting