Today we conducted our Euro Crisis Webinar. 416 participants were surveyed about:

• Whether their enterprise had plans in place to deal with a worsened euro crisis
• Whether the euro crisis has impacted their IT budget
• Whether the euro crisis would influence investments in innovation

Results of the polling revealed that 50% of respondents covering all industries have no contingency plans in place to manage a worsened euro crisis. We urge clients to better prepare themselves via accessing existing research available on http://www.gartner.com/ and setting alerts for upcoming research using the search term “euro crisis”.

Existing published research includes:

Peter Redshaw Jan 18^th: Euro Crisis and the Threat to Outsourcing

Andrea DiMaio Jan 18^th:Examine Six Risk Dimensions of IT Preparedness for the Euro Crisis

Alistair Newton Jan 16^th: Expect the Euro Crisis to Adversely Affect Payment Systems and Industry Supply Chains

Keith Harrison Jan 13^th: Euro Crisis: Issues and Recommendations for Electric Utility IT Functions

Mim Burt Jan 11^th: How Retail CIOs Should Respond to the Unfolding Euro Crisis

Mark Raskino Dec 29^th: Euro Crisis: Key Questions CEOs and CIOs Should Ask Each Other

Stessa Cohen Dec 27^th: Euro Crisis Offers Banks Opportunity to Revise Social Media Strategies to Engage Customers and Innovate

Dave Aron Dec 23^rd: Ensure Your IT Strategy Is Ready for a Euro Crisis

Andrea Di Maio Dec 22^nd: What the Euro Crisis Means for Government IT

David Furlonger Dec 20^th: The Euro Crisis: Four Scenarios and How CIOs Can Prepare for Them

David Schehr Dec 20^th: The Euro Crisis Will Mean More and Different Customers for Wealth Managers

David Furlonger Dec 6^th: CIOs Should Address the Impacts of the Euro Crisis on Their Enterprises Now

David Furlonger Oct 1^st 2010: The European Crisis and Market Impact: Situation Remains Dire

David Furlonger Apr 17^th 2009: The Financial Market Crisis: Storm Clouds Over the Euro

We also asked webinar participants about their IT investment plans:

• 52% of respondents believe IT budgets will remain unchanged
• 15% expect an increase
• 9% expect a decrease of <5%
• 25% expect a decrease of >5% in their IT budgets

Clients should watch for forthcoming research from analyst Kurt Potter: Actions to Fight Cost Optimization Fatigue during the Euro Crisis, for additional guidance on how to work through reduced IT budget scenarios

Lastly, we also asked webinar participants about their views on how the euro crisis will impact investments in research and development and discretionary spending on innovation:

• 17% revealed that discretionary spending would increase
• 69% suggested there would be no change
• 14% voted that discretionary spending investments would be cut to zero

Those clients who expect no change in their innovation spending patterns or who anticipate a cut can gain further insight into the importance of maintain an innovation focus during crisis by reviewing an upcoming note from David Furlonger: Euro Crisis Innovation Remains Critical to Survival and Growth

We thank everyone for their participation today and welcome client enquiry and continued interaction on this important subject. An archive of today’s material can be found on the Gartner Webinar website.

An interesting article appeared on Reuters yesterday: Financial repression is here and may be helpful.

It discusses and supports the potential for greater control over the financial markets by governments, including a continuation of the current schemes that print more money for central banks to lend to banks who then buy more “risk free” government debt. Throw in a little inflation and the long-term debt load depreciates. Merkel is calling for more money for Greece and I note that the US debt ceiling has been nearly reached – again. (Where did that last U$1tn get spent anyway..?) The suggested alternative to financial repression via regulation is considered far worse. But is it?

Admittedly austerity packages don’t help either and are creating popular unrest at levels considered worrying enough for several commentators to point to previous historical conditions that led to bloodshed.  Nevertheless, structural reform doesn’t even seem to be on the agenda, and certainly lacks political will.

In fact, the most recent Economist leader hinted rather as political posturing and included the repressive/protectionist impact of:

• The imposition of the Tobin tax on financial transactions (suppressing proprietary trading),
• Forcing houses that do clearing & settlement of derivatives that are denominated in euros to be located in eurozone,
• Forcing OTC derivatives to move to exchange-traded instruments

While maintaining market order, curbing greed and improving terrible risk management is important, protectionism and unnecessry regulation will only introduce artificial subsidies. Financial institutions will surely be wise to this as the costs of managing red tape increase eating further into profit margins. The euro crisis and political/regulatory meddling will therefore likely encourage Asian markets to be more aggressive with strategies to evolve their own platforms and tempt firms to move east.

Regardless of Europe 2020, a 2010 European Commission report highlighted more than 330 trade restrictions that included cross border challenges such as tariff increases, licensing requirements etc, as well as internal restrictions such as certification schemes, buy-national policies etc. A worsening euro situation leading to a meltdown or default scenario will only make matters worse: The Euro Crisis: Four Scenarios and How CIOs Can Prepare for Them, and likely bring about yet more “repression.”

Perhaps the most immediate form of any financial repression will involve protectionist initiatives designed to “protect” local jobs. This has two implications for CIOs:

• General enterprise HR sourcing and labour/talent mobility
• Ability to outsource

This will require CIOs to perform a risk analysis/containment and draw up contingency plans for all outsourcing contracts. Such planning will enable CIOs to adapt outsourcing strategies as needed. In the current crisis, these plans need regular review. The key question here is to ask: what contractual contingency has been taken in the event of a significant change to the business model of the firm due to meltdown or euro break-up?

CIOs should carefully consider their longer-term HR plans in terms of location of critical talent, training mechanisms, long-lining business support and the specific contractual requirements for IT staff and their jobs. Flexibility is key, as is increasing the institutional knowledge of non-eu locations, working practices and culture.

In terms of the ability to outsource, corporations and government departments have been under pressure in the press and from unions to reconsider outsourcing while simultaneously looking to make local redundancies in an effort to cut costs: Backlash leads Birmingham City Council to reconsider offshoring IT-jobs and Department for Work and Pensions staff begin industrial action. CIOs need to have in place communication and media management plans to address any public backlash from operational changes.

CIOs should also note that repression may not be overt. They need to prepare for additional administrative requirements, the impact of subsidies on ROI and potentially more foreign exchange rate manipulation that will impact the costs of products and services.  Note the last quarter’s Swiss moves in this regard: Swiss Franc Protectionism. Such protectionism will likely not occur as “one-off’s” at the moment annual budgets are set. This means CIOs will require financial flexibility from CFOs as part of ongoing project commitments.

Loading companies with more red tape will in the end just be counterproductive for all of Europe, especially at this moment of econommic malaise. However, CIOs must prepare for more protectionism, whether overt or hidden under the banner of market stabilization.

Remember to read our latest research:

CIOs Should Address the Impacts of the Euro Crisis on Their Enterprises Now

The Euro Crisis: Four Scenarios and How CIOs Can Prepare for Them

Ensure Your IT Strategy Is Ready for a Euro Crisis

Euro Crisis: Key Questions CEOs and CIOs Should Ask Each Other

What the Euro Crisis Means for Government IT

Euro Crisis Offers Banks Opportunity to Revise Social Media Strategies to Engage Customers and Innovate

The Euro Crisis Will Mean More and Different Customers for Wealth Managers

And remember to diarise our January 19^th webinar on this topic: Euro Crisis Webinar

Although active military won’t get paid if the government goes offline on Friday, their pay is being accrued and is guaranteed by the US government.  So Navy Federal is not really taking a big risk by depositing the regular pay into their customer’s accounts, but they are building mega loyalty in the process.

It’s not always technology that makes the difference – smart play.

 Remember that?

 Two years ago,  I, along with other Banking research colleagues, wrote several posts about the importance of transparent, readily available customer communications and why it was necessary during the financial crisis. And why it might be important for banks to address problems upfront.

 Now, Chase’s online banking functionality has been offline since Monday evening through much of Wednesday (13-15 September 2010) for a number of days.  On 16 September, an explanation appeared sometime on Wednesday evening or Thursday.

 I think I’ve been through this before.

Let me be clear: Fixing the problems are uppermost on the minds of Chase IT and product staff right now. I am sure — I know — that they were and are extremely busy and working several 16 or 20 hour or longer days.  But the lack of communication left a void.  And a missed opportunity. 

The financial crisis offered banks an opportunity to reevaluate their customer communications and figure out to incorporate new means — eg social media — into their repetoire. Some did. Some did not.

Instead of hearing about the outage directly from Chase, customers probably read about it on twitter.  And from maybe more traditional, reliable  news sources, suc h as online newspapers (disclosure: this article does quote me ), and news aggregation sites.  Over a couple of days, consumer panic, fear, anger grew, which may lead to more serious fallout from the outage (from the NY Times):

A system outage of this length communicates to me that they really don’t have a handle on their systems,” said Vic Caterina, a Chase customer in Chicago who does all of his banking online. “My relationship with Chase is now under reconsideration.”

Direct communication with customers might have reduced customer frustration that grew to anger and threats and thoughts about switching banks.

So, what’s the answer? A twitter account or Facebook page ? Social media is going to solve Chase’s (and other bankss) problems?

Yes: If your customers are there.  But remember, consumers go a lot of places. They are at Youtube.com and Linkedin. Are those potential places to communicate?

Communicate via all available methods.  Don’t expect your customers to come to you.  

But if they do, inform them. Not by press release, but straightforward, honest as you can communication.  Make it easy and simple for customers to know where to find you.

Plan for customer questions and concerns at all channels and destinations, whether at the branch, drive-up window, ATM, telephone banking, contact center.

Remember the power of the social network. Use social media to spread the word. Customers can help by spreading the word to their friends and contacts in their social networks.  Doing so will also help the bank manage the overflow of customer demands on branches and contact centers, for example.

Too many social media outlets to manage? Might be time to consider tools to manage that.  Of course, Gartner has you covered with the Hype Cycle for Social Software 2010

I hope the IT problem have fixed the tech problems.  I do. I also hope others at the bank see the customer communication opportunity and seize it.

There seem to be two different components to this story.

First is demand —  the issue of vendor supplied technology costs and an attempt by these three organizations to directly impact buying power by grouping their requirements and forcing major vendors to change their service provisions and costing models.

Second is supply — the potential for a group of banks to cooperate in the provision of cloud computing (e.g. infrastructure as a service) to, we assume, other industry participants.

With respect to the first issue, the focus on cost optimization has not dissipated even if the financial services industry is somewhat more stable than it was a year ago. The attempt by these three banks to force pricing changes is evident that CIOs have not lost sight of the need to extract greater value from the services they offer to the business. Productivity improvements are a major component of those initiatives as highlighted in the 2010 Gartner CIO Agenda [Banking CIO Agenda: Getting to Grips With Transformation]. Whether three banks can speak with one voice and so have more power than one remains to be seen. And, whether any reaction from the vendors is strategic in terms of them fundamentally shifting their delivery model and pricing paradigm, or more tactical in terms of just short-term price improvements is also open to question. Our hypothesis is the latter is more likely to occur than the former because of the negative impact that a strategic shift will have on annuity revenues.

The second issue is arguably a lot more interesting, however it isn’t completely novel in the industry – more of an incremental development on previous activities. For example, several Tier One banks have provided infrastructure capacity for equity trading by brokers for many years and others also have a variety of long-standing and similar, white-labelled services for brokerages. Custodian banks and exchanges also provide shared infrastructure and co-location for trading platforms. Independent of the banks there are shared environments that combine networks, data and applications such as BT-Radianz, SunGard STN, Bloomberg and Reuters and SWIFT that have existed for some time.

Clients need to exercise some caution before assuming this development is suddenly going to transform their technology sourcing strategy. Cloud computing is still over-hyped and often used as a term to erroneously describe the evidence of something new when this may not be the case. For example, every bank that offers a payment acquiring service can – at a stretch – be described as involved in cloud. This isn’t new – payment services (whether credit card for retail, or SWIFT based for more B2B applications) have been around for years – almost since the inception of the Internet. Similarly, some of the shared service models in place in the Nordics for the mainstream banks, or Germany and Spain for the savings banks have operating models that might tenuously satisfy requirements for a “cloud”. The cloud may be an enabler, but clients have to look at the main business purpose and the desired results of these efforts before jumping to conclusions.

The study focuses on three areas related to enterprise architecture:

1)      EA Framework Usage – a profile of how the popular EA frameworks and methodologies are used in how they have been adapted and modified into “hybrid” approaches

2)      EA Value Measurement – a profile of how the value of enterprise architecture is measured in a large cross-section of organizations and industries

3)      Demographic of People that Lead EA Functions – a profile of the people in leadership roles in enterprise architecture

 Please forward this link to the lead architect in your firm: http://www.surveymonkey.com/s/EASURVEYLEADERS, and ask him or her to complete the survey. This is a great opportunity to participate in a collaborative effort to better understand trends and best practices in enterprise architecture – both overall and hopefully specific to our industry as well!

One of the outcomes of this research will be some segmentation of the available solutions based on focus – front office vs middle and back office; particular use cases; geographies served, etc – and on the primary business of the vendors (general master data management, front office vs middle and back office suite providers, specialized investment services reference data management solution providers).

I’ve compiled quite a list of vendors to whom I am reaching out. My questions to you:

• Are there particular vendors you would like us to invite to participate?
• Different vendor segmentations or use cases you would like us to explore?

Send me an email or post a response here!

Google announced a sophisticated attack that originated in China.  They suspect hackers were trying access Google e-mail accounts of Chinese human rights activists.  These attacks combined with free speech issues are leading Google to consider exiting China (see here and here).

This move will impact banks and technology vendors viewing China as a growth opportunity.  Chinese officials are likely to be outraged.  A deeper protectionist stance may emerge as a result, which has been growing in force lately anyway (with new government procurement rules, for example – see here).

Financial institutions and technology vendors must therefore re-evaluate and re-calibrate human rights issues into their market strategy for China (and other countries with human rights issues) – from both a risk management and market opportunity perspective.  If attackers are interested in the e-mails of human rights activists, imagine how interested they are in their bank accounts and financial transactions.

The Ministry of Information Industry formed a group called the Creative China Industrial Alliance.  Its explicit mandate is to push the slogan of “created in China.” The Creative China Industrial Alliance provides marketing for conference management, Web design, and project management. The Chinese government’s decision to kick Starbucks out of Beijing’s Forbidden City may be considered the beginning of the “created in China” movement.

While the “created in China” concept is still an emerging idea, design firms are now beginning to flourish. For example, s.point of China recently designed a children’s PC for Intel. Designers observed the way children used their computers to understand their habits. They also learned what parents like and dislike. The result was a children’s PC designed to meet all of these needs.

Financial services firms have much more in common with China than first meets the eye. They have been associated with quantity as opposed to quality, very much like China. China has issues related to brand image (for example, unfavorable press on such issues as tainted milk and toxic toys) that need to be addressed. Financial services firms face similar issues with toxic debts that have dragged down the global economy.

Financial services firms must begin the hard work of repairing their tainted image with consumer and corporate clients. The created-in-China approach shows what concerted efforts in marketing can do.