Kristin R. MoyerDavid Furlonger here. We have been discussing the restructuring of the industry for some time – in fact in 2006 we predicted the demise of at least two of the top bulge houses due to unsustainable business models and excessive leverage. The question is what kind of restructured picture will emerge. Our financial services scenario from the same year talked about a future whereby an “ecosystem will evolve into a structure that is based on decentralized, loosely coupled and nonhierarchical interactions among parties and counterparties.”
This is less far fetched today than it may have seemed in 2006. The merger, acquisition and divestiture of businesses will gather apace as the cost of capital and available liquidity highlights underperforming assets. Such desegregation could be hastened by what the Economist calls the “Loan Rangers” – the private equity firms who have a substantial war chest and an eagle eye for bargains.
So, what does this have to do with IT? Well to start with a critical success factor for CIOs over the next few years is going to be their ability to rapidly condolidate functions - for example, integrate or disengage systems from disparate entities. Long linked, tightly coupled IT environments will be viewed by the Lone Rangers as poorly performing assets and direct impediments to their buy-out strategies. CIOs would be well advised to focus on creating as much flexibility as possible.
Previously the Lone Rangers may have made investments/operated at arms length. However if, for example in the U.S., the Fed is forced to change the Bank Holding Company Act to accommodate private equity investments, such accommodation may require much more hands-on operational involvement from actors whose main interest is not necessarily directed towards IT. The business value of IT now takes on a whole new meaning.
Category: Uncategorized Tags: banking and investment services, business value of IT, financial services restructuring, IT
1 response so far ↓
1 Alistair Newton October 2, 2008 at 5:23 am
I wonder whether, as we see greater governmen intervention both in ownership of and support for financial services firms, whether these governments will also join the ranks of the “Lone Raners”. As with the private equity players, governments need an exit strategy to keep disgrntled taxpayers at bay. With this pincer movement on banks, an approach to IT architecture that will support future divestment of some or all parts of a bank’s business, could indeed become a defacto requirement for many banks.