• Cognizant 20-20 Insights

CIO Priorities: Striking the Right Balance Between Growth and Efficiency As a slowdown looms, Indian financial firms’ CIOs are turning to technology to rein in costs without hampering growth initiatives.

Executive Summary Insights from the Survey India has grown at a rapid pace over the past Our discussions reveal that firms are focusing decade, and the financial services industry has on driving operational efficiency to rein in costs, grown in line with the market. New products while continuing to keep an eye on market and services were introduced, based on market trends and growth avenues to explore when the requirements. As time to market was the most economic tide turns (See Figure 1). important consideration during this phase, efficiency ended up being compromised. Efficiency Reorganizing to Exploit Synergies Now, with signs of a slowdown emerging, orga- A majority of the firms surveyed have added new nizations can focus on analyzing the alignment lines of business or new products and services between technology and operations and undertake to their offerings over the past decade. Such initiatives to improve overall efficiency. Also, with expansion has, in many cases, resulted in business a negative IT budget outlook, firms are looking divisions operating in silos, often leading to a lack at ways to reduce the total cost of ownership by of integration across the enterprise. Consequent- streamlining systems and/or processes. ly, firms are undertaking rationalization initiatives Cognizant Business Consulting (CBC) conducted to increase enterprise-wide integration. discussions with leading buy-side firms and Operations optimization: The aim is to reduce diversified financial firms during May-June 2012 • the cost of operations while improving scalabil- regarding their short-/medium-term priorities ity and flexibility to be able to respond quickly in the current market scenario. A set of themes to market changes. It involves: emerged around the often conflicting focus areas of “growth” and “efficiency.” Firms seek value >> Optimizing middle- and back-office work- for their operations spend while continuing to flow to remove process redundancies. prepare themselves for future opportunities. >> Building a shared services model to ratio- Technology is considered key to achieving the nalize the organization structure. right balance between these two objectives.

cognizant 20-20 insights | august 2012 Key Imperatives for Buy-side Firms

Growth Efficiency How to effectively drive growth in How to drive efficiency in business by adapting to changing operations to reduce the total customer needs, regulations and cost of ownership? technologies? Key Imperatives • Enhancing customer alignment. • Increasing focus on regulation • Reorganizing to exploit synergies. and risk management. • Restructuring capital expenses. • Investments in “SMAC.”

Figure 1

>> Adopting a service-oriented architecture reducing business risk by keeping the core for better enterprise-wide integration. team in-house but using vendors to provide >> Automating key processes to reduce manu- flexible capacity as and when required. al workflows. Growth • Infrastructure rationalization: The focus is on Enhancing Customer Alignment increasing firm-wide infrastructure integration In order to improve customer engagement levels, and sharing best practices. It involves: firms are increasing their client-centric focus and investing in technology that helps them provide Optimizing IT assets across lines >> multi-asset, multichannel capabilities. of business. >> Leveraging the existing enterprise infra- • 360-degree views: All the firms surveyed structure wherever possible. consider a comprehensive 360-degree view of each client relationship as essential to deliver Reducing maintenance costs by taking a >> more personalized service and improve cross- holistic view of the infrastructure setup. selling/up-selling revenues. In addition, many Restructuring Capital Expenses firms are also investing in an external view The challenging conditions in the Indian market that allows a client to view their relationship are expected to continue for longer than initially and transaction history with the firm across estimated. Companies are therefore taking a con- all services to help strengthen the client’s servative approach and reducing up-front capital engagement with the firm. A critical piece in expenses. Key initiatives include measures to this initiative is ensuring data reliability. Firms convert capital expenditures to operating expen- are therefore investing in projects related to ditures. enterprise data management. • Customer service: Firms view customer • Infrastructure costs: Given the falling cost of service as a key differentiator in securing a technology, most firms are entering into short- larger share of wallet. As the industry services er-term contracts for infrastructure services customers across a number of channels and renegotiating terms more often to get the (internet, IVR, mobile, in-person), firms are best value from their infrastructure spend. directing their efforts towards ensuring a • COTS products pricing: Firms are seeking consistent level of service across channels. innovative pricing models from their COTS Increasing Focus on Regulation vendors to reduce the up-front investment. Fees and Risk Management based on assets under management (AuM) or Our survey indicates that compliance through per-transaction pricing are increasingly being technology enablement is becoming ever more discussed with the vendors to align product critical, especially given the growing number of license fees with business performance. financial products and the rapidly increasing • Outsourcing: Firms are using the core-flex regulatory requirements. model for their IT staffing requirements,

cognizant 20-20 insights 2 Risk management is another area where >> Increased automation in the compliance organizations are employing additional measures division. to ensure calculated exposure to market uncer- >> Streamlining operational processes to tainties. reduce cost. • Compliance: The cost of meeting regulatory >> Re-architecting applications to support requirements in India is increasing. One of increasing data requirements. the survey participants indicated that their • Risk management: Firms are taking a data storage requirements have increased proactive approach to risk management as any by over 300% in the past three years. This lapse has a significant impact on the brand. All trend is expected to continue over the next the firms surveyed have an in-house suite of few years. The cost of compliance is impacting applications for enterprise risk assessment and the firms’ margins and may become a threat management. These applications are continu- to the viability of the businesses. Hence, all the ously enhanced to better manage risk while firms surveyed are focusing on reducing the maintaining smooth business functioning. The cost of compliance to prepare for growth. The key risk management attributes include: measures taken include:

Quick Take

Below are excerpts from the responses of participants in our survey:

Head of business solutions & IT, diversified financial services firm: “We are seeking innovative pricing from products and services vendors. Pricing models that allow us to customize our mix of capital and operating expenses are the need of the hour.”

Chief information officer at a large capital markets firm with brokerage, asset and wealth management offerings: “Given the constant downward pressure on margins owing to market conditions and escalating regulatory costs, we have stepped up our efforts to improve operational efficiency to ensure profitability.”

Managing director, global private bank: “There is an element of novelty associated with mobile applications. However, the associated payment and technology ecosystems are still evolving. We expect them to gain wider acceptance in the near future.”

Partner, financial advisory firm: “Although investors are aware of the risks associated with investing in financial markets, they are disappointed every time they experience a downside. Proactive risk management is essential to build a reliable brand in the marketplace.”

Chief operations officer, large asset management company: “We firmly believe that customer-centric products and excellent customer service drive customer satisfaction and loyalty to brand.”

cognizant 20-20 insights 3 >> Enterprise risk views for different lines of customers. However, most of the firms do not businesses. see a clear business case for investing heavily >> Risk reporting aggregated at various levels in building such applications. There is ongoing (e.g., client, region, etc.). debate in the industry regarding the value of investing in standalone mobile applications Continuous updating of risk thresholds. >> vis-à-vis developing device-agnostic Web sites. Investments in SMAC (Social, Mobility, • Analytics: A majority of the firms surveyed are Analytics and Cloud) investing in third-party analytics solutions and The survey participants believe that while are subsequently customizing them in-house emerging technology trends have significant to meet their specific requirements. As firms potential for making an impact on how businesses undertake projects to improve customer operate, that potential has not been fully realized focus and infrastructure integration across yet. However, as the technology and regulatory the enterprise, they are exploring opportuni- ecosystem evolve and pave the way for imple- ties to leverage existing customer data to gain mentation and innovative usage of these tech- insights and improve cross-selling revenues. nologies, they will go from being “nice to have” to Cloud: Most survey participants use a private becoming a necessity in the industry. • cloud (or virtual environment). However, they • Social media: While most firms have a were wary about putting customer data on presence on popular social media platforms a public cloud given security and regulatory such as Facebook and Twitter, they have not concerns. There is nonetheless a strong fully ventured into this space and are adopting business case for the use of a public cloud, the a wait-and-watch approach. In addition, there is advantages being reduced capacity wastage uncertainty around regulatory policies on the and minimized capital expenses. However, these use of these technologies and significant risks benefits can be realized fully only when the of loss of data privacy and confidentiality. A privacy and regulatory concerns are addressed. number of the firms surveyed have made social Till then, firms plan to use public clouds only for media applications available internally for use processes with no privacy requirements. by employees (financial advisors, field repre- Conclusion sentatives, etc.) to facilitate better interaction. Our discussions with the survey participants However, they believe these applications are indicate that, going forward, both growth and not being used to their full potential yet. efficiency in technology must be managed to • Mobile: The survey participants considered drive sustainability in business operations. Any the availability of an online interface on mobile imbalance can have a long-term impact resulting platforms, such as smart phones and tablets, in the company being under-prepared to tap to be a must-have. There is some demand into industry growth. Technology is expected to from customers for mobile applications and contribute ever more significantly to the overall most firms have provided or are planning to performance of the organization, making it a provide a basic mobile application to engage strategic differentiator.

About the Authors Dheeraj Toshniwal is a Manager with Cognizant Business Consulting and leads the Wealth Management Consulting Practice for APAC. He has experience leading business and IT transforma- tion engagements with global banking and wealth management firms. Dheeraj can be reached at [email protected]. Siddhi Chanchani is a Senior Consultant in the Banking and Financial Services Practice at Cognizant Business Consulting. She can be reached at [email protected].

cognizant 20-20 insights 4 Acknowledgments The authors would like to thank the senior executives from leading financial firms who participated in the survey. The authors also thank Aamod Gokhale (Director of Consulting, Cognizant Business Consulting) and Saurabh Bhandari (MDI, Gurgaon Batch 2011-2013) for their contribution to the research design and execution.

About Cognizant Cognizant (NASDAQ: CTSH) is a leading provider of information technology, consulting, and business process out- sourcing services, dedicated to helping the world’s leading companies build stronger businesses. Headquartered in Teaneck, New Jersey (U.S.), Cognizant combines a passion for client satisfaction, technology innovation, deep industry and business process expertise, and a global, collaborative workforce that embodies the future of work. With over 50 delivery centers worldwide and approximately 145,200 employees as of June 30, 2012, Cognizant is a member of the NASDAQ-100, the S&P 500, the Forbes Global 2000, and the Fortune 500 and is ranked among the top performing and fastest growing companies in the world. Visit us online at www.cognizant.com or follow us on Twitter: Cognizant.

World Headquarters European Headquarters India Operations Headquarters 500 Frank W. Burr Blvd. 1 Kingdom Street #5/535, Old Mahabalipuram Road Teaneck, NJ 07666 USA Paddington Central Okkiyam Pettai, Thoraipakkam Phone: +1 201 801 0233 London W2 6BD Chennai, 600 096 India Fax: +1 201 801 0243 Phone: +44 (0) 20 7297 7600 Phone: +91 (0) 44 4209 6000 Toll Free: +1 888 937 3277 Fax: +44 (0) 20 7121 0102 Fax: +91 (0) 44 4209 6060 Email: [email protected] Email: [email protected] Email: [email protected]

­­© Copyright 2012, Cognizant. All rights reserved. No part of this document may be reproduced, stored in a retrieval system, transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the express written permission from Cognizant. The information contained herein is subject to change without notice. All other trademarks mentioned herein are the property of their respective owners.