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/ BANK TECH / and relationship management technology are typically deployed.

Bankers’ next steps

Microsoft’s acquisition of LinkedIn should catch the attention of every bank CEO, CFO, and CLO because of the growing connection between social networking and customer relationship management discussion agenda was CRM. Conversely, at a recent roundtable of industry CMOs, collaboration with information technology was at the top of the agenda. Recent Cornerstone Advisors research on system add/replace rates shows that planned changes in marketing and sales systems like CRM and origination are two times higher than those in core and payments systems. And even in online or mobile banking replacements, the user experience connection among transactions, relationship management, and content management is a growing driver of change. Increasingly, it’s about how does a bank convert better online and mobile experiences to new expanded relationships. Without a doubt, the industry is in the process of engineering its human energydriven revenue generation processes to be more systematic and scalable. And social technology sits in the middle of those processes and can have a real impact. Leaders will shape that impact as the capabilities unfold.

Enterprise accountability? The Microsof t/LinkedIn acquisition points to another growing phenomenon in banking: Enterprisewide technology 44

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initiatives are now as common as departmental initiatives. As noted, LinkedIn is leveraged by users all across the bank. It’s not a line of business app like a mortgage origination system driven by Lending or a payroll or performance management system driven by Human Resources. It’s driven by nearly everyone. But it’s also not centrally managed at a bank like a core system. And, increasingly, these enterprisewide systems are used in the cloud, even in the very largest banks. Te c h nolo g y c o or d i n a t ion a c r o s s lines of business is a grow ing, complicated phenomenon that requires a new vendor/partner management process, covering risk, cost, and benef it assessments, and resulting in higher organizational accountability. Bankers tend to think about vendor accountability in terms of compliance, but our experience has been that most vendor performance failures at banks are due as much to internal coordination issues as to vendor wrongdoing. In addition, per formance fail ures are especially common in technologies deployed across the enterprise without central oversight. And, operationally, that is exactly how both social

December 2016/January 2017

Banks often do have central oversight on paper. But it’s mainly from a risk perspective. What the Microsoft-LinkedIn merger points out is the other two pillars of vendor management—cost and benefit—are actually more important than the risk pillar. From a risk management perspective, if banks increasingly leverage Microsoft and LinkedIn capabilities (cloud-based email, CRM, recruiting), they still may not be considering Microsoft a critical vendor. Some CRM systems are viewed by many banks to be of lower criticality. Origination systems are typically viewed as more critical, but only some origination systems also include CRM capabilities. T he mor e i mp or t a nt pa r t of t he e quat ion i s m a na gement over sig ht and coordination from cost and benef it assessments. It’s not just vendor management, but vendor performance m a na gement—a c c ou nt abi l it y. A s a bank generates more of its revenue from engineered processes (like relationship management and social), it’s more important to the bank’s viability that the technology driving those processes has a successful cost/benefit outcome. Does the bank have an effective means for the CFO to oversee and gauge bankwide cost management of technologies and push spending redirects to fund key growth initiatives? Does the bank have a coordinated way for lines of business to gauge the successes or challenges in the benefit from these deployments? The now-completed Microsoft-LinkedIn combination is one of many industry developments that point to how addressing these questions will increasingly be important for banks going forward as part of a total risk-cost-benefit approach to vendor performance management. This is true especially as banks are more and more reliant upon technology providers not just to automate and manage costs, but to engineer revenue creation.

Sam Kilmer is senior director at Cornerstone Advisors. He can be reached at skilmer@crnrstone.com, on Twitter @SamKilmer, and—yes—on LinkedIn. Aspects of this story were first covered on GonzoBanker.com.


December 2016 January 2017 Banking Exchange