Middle East Financial Services Technology Consulting – Choosing the Right Technology Advisor

Key factors in selecting technology advisors for financial services organisations

Tags: HCL Technologies
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By  Madhu Kurian Published  July 25, 2011

The Middle East banking sector is getting back on its feet after the recession and is all set to explore hitherto unchartered territories. As business ambitions and regulatory requirements grow, so does the need for higher investment in the right technology and people.

 The need for speed in technology initiatives and project implementation is driving unprecedented demands in technology consulting* in the Middle East.

That Middle East financial services is a fertile land for technology consulting is evident from the large number of consulting firms opening offices or partnering with local consulting companies in the region. It has become increasingly difficult for a bank's management to choose a best fit partner for their strategic IT projects.

This article attempts to provide a basic guidance on selecting the best fit consulting partner. For the purpose of keeping the focus on consulting industry, the third party services offered by pure play outsourcing partner are no included in the scope. Only the upstream advisory services come in the purview of the article.

Middle East Banking Technology Market

CEOs in Middle East Banks are under unprecedented pressure both from internal and external angles. While there are shareholder's and owner's expectations on business growth, the ever increasing regulatory scrutiny and new requirements form external pressure points.

Banks looking to aggressively expand in post recession era

Middle East banking sector has gone through rough weather and is now recovering from the downside. The sector is witnessing a rapid growth of around 20% year-on-year since 2009. Banks are also increasingly looking to fast growing Asian economies to fulfill their growth targets. Also on the CEOs' agenda is the need to gain edge over competitors through quick introduction of innovative products and to maintain leadership positions in Islamic Banking offerings. All of this translates into a need for higher investment in business, technology and people.

Increased Regulatory Requirements

The jury is out on whether the regulatory measures announced by Central Banks across the globe will cripple the industry growth. Regardless of the outcome, banks are required to maintain healthy CARs, identify ways to cut fat and take clear steps in reassuring investors and customers. Banks with global aspirations should also be looking to comply with international standards such as Basel III .The CIOs are closely watching these developments. If they have not already got a call, it will not be long before the CEO call comes in asking to identify technology requirements to meet the new regulations.

To meet regulatory requirements and meet them fast, CEOs need to fall back on technology.

Higher Technology Spend and Limited In House Resources

The two drivers mentioned above are in no way unique to Middle East. Economies in US, Europe and Asia are also facing challenges. But it's the way the Middle East banks respond to the changes that make them unique. While US and European counterparts are seeking every possible way to cut costs and limit investments especially in technology, banks in the Middle East are investing. Keynesian as it may sound; the real reason behind the trend is the growth opportunity the Middle East banks have identified amidst adversity. Having lots of reserve money also helped to push higher technology budgets.

Higher technology spend strategy requires that banks:

  •  - Make right and quick IT investment decisions (Strategic decision)
  •  - Implement fast (Project Implementation and management)
  •  - Quickly adopt to the new system and processes (Project Implementation and management)

At a strategic level, decisions such as how much to spend for technology, which platforms to run applications on, which product to choose from or what and when to outsource, require a holistic study of International, Regional and Local environments. It also requires great understanding of past, present and future technologies.

From an execution point of view, implementation brings its own set of challenges such as requirement for top class project management, user involvement, adoption of new technology or process etc.

More often than not, the in house technology team (typically 3-4% of the total organization strength) does not have the skill, head count or bandwidth to manage strategic initiatives from concept to implementation to support stage. Due to sheer pressure, the IT teams usually operate in ‘Run the Bank' mode with activities such as fixing bugs or enhancing current software. It is a natural necessity that banks take outside professional help to augment strategic decision making and project management capabilities.

It is this necessity brought about by inevitable demand for technology initiatives that has resulted in the surge of consulting assignments in the region.

Which advisor to choose?

Any consulting firm worth its salt has not ignored the high growth Middle East markets in the recent past. The services offered by a typical technology consulting firm include IT Strategy Formulation, Application Portfolio Optimization, and Project Management, Selection of Product and Vendor, Process Consulting and IT governance consulting among others. As one could see, services listed above are very critical to the IT organization and in every sense have direct impact on the business.

The presence of a large number of options has increased the customer's bargaining power and in the process the firms are finding themselves open to low margin - high volumes strategy.

Increase in the number of consulting firms would mean the choice of right advisor becomes more difficult than ever before for the CIO customer. Selecting the right consulting firm is thus of utmost importance since it means not only investing time and money, but also it could be a differentiator between success and failure of an IT initiative.

Although there is no substitute to firsthand experience while initiating a project and selecting the right partner a check list compiled from the experiences of multiple banks would immensely help the process.

The Selection Process

Project Initiation: Initiation is the most important part of any project and a set of simple checks will ensure any initiative is well started. Since project scope and requirements are defined at the initiation phase, it has also implications in selecting the right consulting, IT implementation and management partners and vendors.

  • - Clear and Detailed project charter is drafted
  • - Senior Management buy in is received
  •         • Senior management (Including CEO and CIO) is briefed about the project

        • Senior management agrees to the project requirement and the proposed budget
        • Assurance is received from senior management on continued involvement

- Requirement and Scope are clear and defined

  •         • Detailed business & technology requirement gathering is done and all stake holders are in sync
  •         • The requirements can be detailed out and also clearly communicated in an acceptable format
  •         • A clear & simple RFP is created (to be sent to the shortlisted set of firms)
  •         • Sign off on RFP is received from all stakeholders
  •         • RFP is either published or sent to the long listed firms

- Bank Team is formed

        • Roles and Responsibilities are identified and communicated

The Selection Process

The selection process generally consists of a long listing and short listing process.

- Long List of potential consulting firms is created from

  •         • Information on public domain
  •         • Previous experience/ reference

- Short Listing: Short listing of firms can be a tricky part involving objective and subjective parameters. A comprehensive selection process must consider the below parameters to arrive at right fit partner

Evaluation Category

Parameter

 Functional
 Requirement Fit - RFP Compliance
 Requirement Understanding
 Project Scope proposed
 Identification of Risks – Quality and Quantity
 Issues predicted – Quality and Quantity

 Experience/ Skill Level
 Technical Solutions evaluated/worked with
 Projects of similar nature executed in the Middle East region
 Knowledge on Middle East banking processes
 Reference enquiry/ visits results/ testimonies

 Technical
 Expertise in standard methodologies
 Usage of any standard tool
 Expertise in international standards
 Approach proposed
 Quality of sample deliverables
 Change/ Benefit proposed

 Organizational
 Unique Value Proposition
 Quality of management team
 Skill profile of the identified team
 Thought leadership in the concerned area
 Contribution to industry
 Company revenues/ history
 Level of commitment/ Presence in local market
 Downstream capabilities

 Commercial
 Total Cost proposed
 Payment Terms
 Effort estimated
 Timeline compliance
 Cost – Benefit/ ROI calculation

 

Appropriate scoring points could be given to each of the above parameters and weighting can be given at the category level. Once consolidated the Top 2 or 3 consulting firms maybe invited for commercial negotiations depending on the Bank's procurement policy.

The Middle East will remain a high growth market for the consulting industry for years to come. It is critical for banks to choose the best fit partner who will provide the right advice at the right time. A set of simple checklists such as above, and common sense, will help to ensure maximum bang on the money spend on receiving advice and recommendations.

Madhu Kurian is senior manager for HCL Technologies, Business and IT Transformation Services.



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