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Becca Lipman
Becca Lipman
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Banks to Increase IT Spend on Big Data Challenges, Finds Aite Report

Big data has presented the greatest challenges and dissatisfaction for banks, yet it is the most likely to see upward spending in the next two years.

According to a recent Aite Group report on global large bank IT strategy and spending, there will be significant increase in spending in the next 24 months on the technologies banks are currently most dissatisfied with, such as big-data analysis tools and data warehouse management.

Aite asked banks questions about the technologies they are embracing, such as cloud and big data, how they evaluate their goals, capabilities, and projected spend on those technologies.

"Aite Group finds ambivalence in banks' levels of satisfaction with and ambitions for their technological capabilities," according to the press release. "Across all of the 53 capabilities for which the respondents were surveyed, just 68% of banks are satisfied with these capabilities overall, while 32% are not satisfied. For these capabilities, only 47% wish to 'be stellar,' while 53% seek to merely 'be good enough.' "

The category "Big data analysis tools" received the highest level of dissatisfaction, and the technology in which banks were most likely to increase spend. There were similar results for data management and data warehousing. Only 39% of banks expressed satisfaction with their multichannel integration capabilities

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Banks are interested in getting their data organized, aggregated, and made accessible with analytics but the silos are getting in their way, explains David O'Connell, senior analyst in Wholesale Banking at Aite Group and author of the report. He adds that due to increased spending projections it's safe to assume they are going to be less dissatisfied with big data over time, but they have some work to do to over come the underlying challenges with data quality and integration.

Satisfaction with Core Systems
One of the findings that left O'Connell a little surprised and concerned was the relatively high level of satisfaction (and low spend) that banks have for their core banking systems. At many banks these are multi-decades old, very expensive and hard to operate and maintain. Many of these systems are Cobalt based and often the staff that knows how to maintain them are retiring.

O'Connell says Aite knows from their ongoing coverage of core banking systems that banks are often not elated by the speed by which they can introduce new products and rely on their core to support the introduction of new products. Instead, in lieu of overhauling their cores and risking disruption to their business, he believes banks have become very good at doing many small changes at the periphery.

"Banks have become so accustomed to this model that they've become more satisfied with their core than they should be." The practice of changes on the periphery is not a cost optimal way to rely on the core to do things like launching products, and "I think banks need to start expecting more. They should have faster new product launches and faster changes to their core."

Other findings
It is perhaps unsurprising that the report found only 11% of banks are "aggressively" embracing cloud computing, and 20% intend to avoid it altogether. "Bankers are conservative folks, they are naturally technology and risk adverse," he says. "Risk management is at the core of a banker's psyche. It goes against banking culture to have that data outside their own firewall." In general, it's going to take a while for banks to embrace private cloud, and certainly tougher to embrace public cloud, and when they do, it was be for extremely safe capabilities like CRM.

The report also found data security technology to have a high level of satisfaction and high probability of upward direction of spend. High satisfaction and spend can only really coexists with a certain amount of fear, explains O'Connell. These institutions have seen DDoS and other attacks grow exponentially over the past few years -- eye opening experiences that have left banks very concerned about what might come next.

Areas where banks reported a low level of satisfaction and low projections of spend include physical branches where there are small opportunities to make adaptations that will bring great returns. "Branches aren't going away, they are becoming more expensive it is harder to earn ROI on them," O'Connell said.

Becca Lipman is Senior Editor for Wall Street & Technology. She writes in-depth news articles with a focus on big data and compliance in the capital markets. She regularly meets with information technology leaders and innovators and writes about cloud computing, datacenters, ... View Full Bio
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KBurger
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KBurger,
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9/19/2014 | 9:23:55 AM
Shared responsibilities
Bankers say they are dissatisfied with big data-related tools. No doubt there are some systems & offerings that have not delivered on the hype. But I really wonder to what extent the disappointments stem from inadequate systems and to what extent they are due to banks' failure to implement effective data governance, invest in the needed staff capabilities around analytics and data science, apply meaningful metrics and otherwise implement the organizational and cultural changes that are essential to realizing the benefits of big data and analytics? It's easy to say the tools haven't delivered. But the tools themselves don't create the benefits -- it's how they are applied, what banks actually are able to do with the data. I don't challenge the finding but I think there's context that needs to be considered.
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