Banks That Are ‘Too Big to Fail’ Are Also Too Big to Succeed, Gartner says.

Bank CIOs and COOs must innovate in IT and operations […]

April 15, 2013

Bank CIOs and COOs must innovate in IT and operations to negate a problem Gartner has identified as the “law of diminishing IT returns.

Big banks are considered too big to fail, but their size and operational complexity create performance drags that make them too big to succeed.

In that context, exponential increases in demand for IT are a problem for all banks, particularly because IT budgets have failed to keep pace with demand (the 2013 Gartner survey of financial services CIOs has once again shown only a minute increase in IT budgets — an average of 0.4%). Big banks’ internal economies of scale — which makes them better able to absorb fixed overheads due to a larger customer base and stronger buying power — should give them an advantage over smaller banks.

However, Gartner’s data continues to show that these supposed economies of scale are actually being overwhelmed at big banks (typically those with annual revenue greater than $10 billion) by accelerating demand and complexity. The poor performance of big banks cannot be adequately explained as a reflection of poor economic conditions and overall constraints on enterprise budgets. Gartner believes a more comprehensive and overarching force is at work — one that we have identified as the “law of diminishing IT returns.”


■ The increasing size and complexity of big banks is outstripping the ability of their CIOs to provide effective IT and operational support.

■ Increasing digitalization has created an exponential growth in demand that exceeds the bank CIO’s ability to supply IT cost-effectively.

■ IT spending outside the bank CIO’s control renders traditional management models obsolete.


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