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    Banking & Financial Ser vicesNew regulations and oversight are forcing change

    on this sector. With IT budgets bigger than other

    industries, these companies also have higher levels

    of outsourcing. But its not just IT work going

    offshorebusiness activities of financial services

    firms are going global, too, and IT must find ways

    to support those efforts.

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    Report ID: 1460910-B

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    B a n k i n g & F i n a n c i a l S e r v i c e s

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    3 Research Synopsis

    4 Analysis: Big Budgets, Big Challenges

    7 Q&A: Vanguards Paul Heller and Tim Buckley

    11 Appendix

    5 Figure 1: Banking & Financial Services Spending Overview

    5 Figure 2: InformationWeek 500 Spending Overview

    11 Figure 3: Innovation Plans

    12 Figure 4: New Web Technologies

    13 Figure 5: Global IT Strategies

    14 Figure 6: Technology Initiatives That Improved Company Productivity

    15 Figure 7: IT-Driven Patents and Copyrights

    16 Figure 8: IT Adding Value Back to the Business

    17 Figure 9: Reporting Structure for CIO

    18 Figure 10: CIO Areas of Responsibility Outside of IT

    19 Figure 11: CIO Involvement with New Product Development

    20 Figure 12: IT Budget Allocation

    21 Figure 13: IT Spending Expectations

    2 September 2010 2010 InformationWeek, Reproduction Prohibited

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    B a n k i n g & F i n a n c i a l S e r v i c e s

    Survey Name: 2010 InformationWeek 500Survey Date: December 2009 through April 2010Region: United StatesNumber of Respondents: 38

    Methodology:To be ranked in the InformationWeek 500, companies with revenue of

    $250 million or more must complete a rigorous application on their tech-nology strategies. The process includes quantitative and qualitativeassessments of business tech innovation. Completed applications arereviewed by a panel ofInformationWeek editors, who determine the rank-ing. The data is aggregated for all 500 companies and by industry; indi-vidual company data isnt disclosed without permission.

    This report focuses on the IT strategies and practices of the Banking andFinancial Services companies that made the 2010 InformationWeek 500 list.

    For more information, please visit the InformationWeek 500 Resource

    Center at informationweek.com/iw500. Send questions pertaining to theprocess to iw500@techweb.com.

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    ABOUT US | InformationWeek Analyticsexperienced analysts arm business technology

    decision-makers with real-world perspective based on a combination of qualitative and quantitative

    research, business and technology assessment and planning tools, and technology adoption best

    practices gleaned from experience.If youd like to contact us, write to managing director Art Wittmann at awittmann@techweb.com,

    executive editor Lorna Garey at lgarey@techweb.com and research managing editor Heather Vallis

    at hvallis@techweb.com. Find all of our reports at www.analytics.informationweek.com.

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    Analysis: Big Budgets, Big ChallengesIts been a wild ride for banks and financial services firms in the wake of the financial melt-

    down. New banking regulations and overseers, rigorous stress testing and stringent capital ade-

    quacy requirements have led banks to re-examine their operating practices, business models

    and customer offeringsand all of these changes contribute to the challenge for bank CIOs.

    One priority for CIOs is to enable their firms to adjust business models and operations in

    response to the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act.

    Banks have got to figure out a different way to make money than fee income, says Jim

    Eckenrode, research executive for banking at TowerGroup, a research and advisory firm in

    financial services. You have to work a lot harder, while giving the customer confidence that

    your processes are consistent, fair and easily understood.

    As an industry driven by data, CIOs in banking and financial services enjoy the biggest IT

    budgets in the InformationWeek 500, in both absolute terms and as percent of revenue.

    Financial CIOs reported an average company IT budget of $448 million compared to an all-

    industry average company IT budget of $243 million, and the financial IT budget represents

    8.2% of company revenue compared to 2.9% across all industries.

    With these big budgets, financial services firms engage in higher levels of outsourcing than

    companies in other industries. Fully 70% of financial services CIOs report doing IT outsourc-ing outside of the U.S. (vs. 58% for all industries), while 46% send business processes offshore

    (vs. 32% for all industries). People are looking at outsourcing with renewed vigor, not only to

    continue to address cost issues, but also to roll out new functionality more quickly, especially

    in a compliance situation, Eckenrode says.

    Yet its not just IT work thats going overseasbusiness activities of financial services firms and

    their customers also are going global, with 24% of financial services CIOs (versus 14% for all

    CIOs) actively pursuing new global activities. Indeed, trade finance and treasury services have

    been among the few bright spots in the financial services industry during the past two years.

    Because of the continued weakness in the U.S. and Europe, many corporates and even smallbusinesses are looking to expand trade into growth areas in Asia and Latin America,

    Eckenrode says. As smaller businesses look globally, their banks need to think about how

    theyre going to provide trade services and foreign exchange for their clients.

    The increased need to support global business has spurred investment at banks of all sizes.

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    The largest banks that have traditionally provided trade services dont necessarily have the

    scale to deal with higher customer volumes, Eckenrode says. Then, at the level of the midtier

    and smaller, they need to think about how to provide those servicestypically by outsourcing

    to correspondent banks or third parties.

    For 60% of bank and financial services CIOs, this years IT spending in financial services is expected

    to exceed last years spending, which is in line with expectations in other industries. However, IT

    spending in financial services has a stronger customer focus than the survey total: 53% of financial

    services CIOs plan to introduce new IT-led products and services (vs. 40% for all industries), and

    45% are building improved Web operations and customer experiences (vs. 34% for all industries).

    The mutual fund giant Vanguard is an example of a company doing both. In terms of new serv-

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    Banking Spending OverviewRevenue and IT budget

    Average company revenueAverage IT dollars spent

    Average IT budget as a percentage of revenue

    Note: Dollars in millionsBase: 38 banking and financial companiesData: InformationWeek Analytics survey of 2010 InformationWeek500 executives

    $10,874$488

    8.2%

    Note: Dollars in millions

    Data: InformationWeek Analytics survey of 2010 InformationWeek 500 executives

    Average company revenueAverage IT dollars spentAverage IT budget as a percentage of revenue

    Revenue and IT Budget

    InformationWeek 500 Spending Overview

    $9,978$2432.9%

    Figure 1

    Figure 2

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    ices, in the last year it began doing its own clearingsomething that took a $20-million to

    $25-million investment, a project that Vanguard decided to keep funding despite the financial

    meltdown and recession. We think long-term, says Vanguard CEO Bill McNabb.

    In terms of improving the customer experience, Vanguard has made several improvements.

    One is to revise the Web interface for opening new accounts. Previously, less than 40% of peo-

    ple who started that process finished. After revising the interfaceallowing people to jump to

    different places in the process depending on their needs, for examplearound 50% of people

    who start now finish. Another improvement was to go mobile, launching an iPhone app. Its

    very small numbers using the mob