Jan 06 2021

6 Ways Banks Can Reduce IT Costs Without Cutting Services

Times are tight, but banks and credit unions need top-drawer IT services more than ever.

The start of the pandemic pushed financial services firms large and small to embrace remote work and empower online banking. As noted by Forbes, while these efforts were largely successful at increasing customers’ tech savviness and creating new ways for staff to complete key tasks at home, efforts at a return to near-normalcy were cut short as the virus surged again in the fall.

The result? Small and midsize banks and credit unions that lack the capital resources of their larger corporate cousins are now struggling to manage costs; two smaller banks shut their doors permanently in October and more than 50 financial firms nationwide are in danger of meeting the same fate.

For smaller banks, this creates a paradox: On-demand technology assets are critical to remaining relevant, but costs can add up. Put simply, banks need a way to reduce IT costs — without cutting services. Here’s how they can do both.

1. Carefully Evaluate Current IT Environments

Existing IT environments may offer opportunities for cost savings that won’t impact service delivery. From unused data center space to sprawling cloud services or inefficient network operations, it’s worth conducting a complete assessment of current IT frameworks to determine exactly where money is being spent — and how it could be allocated more efficiently.

Rather than adding this task to an overworked IT team’s list, it’s often worth partnering with an experienced third-party assessor that has the skills and knowledge to conduct complete evaluations and offer actionable suggestions.

2. Double-Check the Details of Service-Level Agreements

Service-level agreements govern third-party services such as telecommunications, cloud provision and software licensing. But over the past nine months, many of these agreements have been neglected as banks prioritize services over savings.

As a result, it’s worth checking the details: Are these agreements still in force? Are banks and credit unions paying for services or solutions that aren’t useful in current conditions? Confirming these details lets businesses drill down and identify the services they need while eliminating costs for solutions they no longer require.

3. Consolidate IT Vendors to Cut Spending

Vendor sprawl has become a real concern as the IT market has diversified. Many banks now leverage different providers for security, cloud computing, telecommunications, data storage and disaster recovery services. While this ostensibly offers the benefit of service specificity, it also increases the training time necessary in order for staff to use each solution. Meanwhile, more vendors mean more risk; every solution provider layered onto financial IT frameworks creates another potential vulnerability that could be exploited by malicious actors.

Consolidating IT vendors reduces both staff learning curves and total risks while simultaneously opening the door for volume-based pricing discounts and longer-term technology relationships. While concerns around potential data lock-in and compliance remain relevant, vendor consolidation offers a substantial savings opportunity.

MORE FROM BIZTECH: Learn about the 5 financial services tech trends to watch for in 2021.

4. Assess Cloud Options to Slash Costs

Banks are moving to the cloud, but which cloud framework is the right fit? While public clouds excel at resource availability with lower overall costs, private options improve control — with higher costs to match. Hybrid solutions combine the best of both worlds.

Identifying ideal deployments means considering workloads: For resource-intensive processes or applications, public clouds are the priority. For storage of high-value client or corporate data, private clouds are preferred.

5. Augment Staff and Services

Managed service providers have come a long way from help desks and break-fix IT. Next-generation MSPs now offer banks the ability to incorporate data-driven solutions such as artificial intelligence into key business processes to help better understand current market conditions and anticipate new service demands.

Staff augmentation, meanwhile, makes it possible for banks and credit unions to supplement existing teams with skilled IT experts at a fraction of the cost of full-time employees.

6. Implement Metered IT Consumption

To help reduce costs without compromising services, banks are also well-served by metered IT consumption solutions. This approach leverages a pay-as-you-go model that allows businesses to align spending with usage: Instead of overpaying for capacity that isn’t required and then adjusting SLAs to match, metered options typically require baseline operational agreements that are then metered to match exact usage over time. Regular assessments help dial in service provision while ensuring banks always have the resources they need to meet client and stakeholder expectations.

With operational conditions anything but certain, smaller banks and credit unions must be prepared to pivot on demand without sacrificing services. This requires a balanced approach to cutting costs that focuses on evaluating current environments and contracts to find opportunities including vendor consolidation, ideal cloud operations, managed staff and services, and metered resource consumption.

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