innovating legacies: banks, financial services and ...€¦ · 2 contents 3 digital leadership for...

The TCS 2020 Chief Information Officer Study

Digital Leadership for Business Transformation

Innovating Legacies: Banks, Financial Services and Insurance Companies

Industry Report from the TCS CIO Study

TCS Business 4.0TM Institute

2

Contents 3 Digital Leadership for Business Transformation 4 Key Highlights for the Banking,

Financial Services & Insurance Industries 5 Digital Leaders vs. Digital Followers 7 Experience & Expectations Among Top Leadership 11 Digitization Progress To Date and Ahead 13 Digital Business Success 14 The CIO’s Role in Digital Transformation 16 Where Innovation Happens18 How We Conducted This Study

Innovating Legacies: Banks, Financial Services and Insurance Companies 3

Digital Leadership for Business Transformation

The TCS 2020 Chief Information Officer (CIO) Study seeks answers to central questions facing information and technology executives across industries in North America and Europe: How are these leaders helping their enterprises navigate a complex and fast-evolving digital landscape? Where are their companies focusing their digital

initiatives? What traction have they gained this decade from those efforts?

In this report, data from the surveys of CIOs in the banking, financial services and insurance (BFSI) industries (243 companies) is compared against the overall survey data (1,010 companies) on such issues as success in transforming business models and offerings to meet digital opportunities and challenges; how digitally adept senior BFSI management and boards of directors are; and what kind of data BFSI CIOs think will help drive future revenue growth, compared to the views of CIOs in other industries. Where differences in the data were notable, separate results for banking/financial services (B/FS) and insurance are reported.

Other reports in this series examine these and other issues across industries and within other industries.

W Key Findings: How CIOs Are Helping Their Companies Navigate the Digital Ecosystem

W Roles & Responsibilities in Digital BusinessW Data Priorities & PracticesW Threats & Opportunities: Industry vs. EcosystemW Master Report: Study Results, Trends & Best Practices

Additional reports will look specifically at the consumer packaged goods, retail, and media, entertainment and information services industries, as well as the viewpoints of CIOs at North American and European firms.

All reports currently available from the TCS 2020 CIO Study can be found at: sites.tcs.com/bts/tcs-cio-study


Key Highlights

Banking, Financial Services and InsuranceW Banking and financial services firms are only slightly ahead of other

kinds of companies when it comes to self-reported success in digital business—despite being farther ahead than other industries in almost every area of digitizing their operations.

W Perhaps given the role of IT in daily banking and financial operations, CIOs in this industry were more likely to be tasked with managing the current IT environment than CIOs in other industries.

W The insurance industry has been outpaced by most other industries in the race for digital business success. Insurance CIOs are far more likely to report lowered expectations for future digitization efforts—and yet they report lower levels of digitization to date in many areas than do CIOs of most other industries.

W By contrast, the minority of companies in the banking, financial services and insurance industries who do report digital success (26% of banks/financial services firms surveyed and 18% of the insurance companies) exhibit leadership in a number of areas, ahead even of such leader companies in other industries.

W Among the greatest distinctions between these Digital Leaders and the rest is where they develop new digital businesses, products, and service offerings: in the IT department. Less successful companies say they’ve moved such work out to separate business units or even into other business functions.


How Digital Leaders Are Different: Context in the CIO Study Across 11 industries in North America and Europe, we analyzed the survey answers of 1,010 CIOs and other IT executives to understand the differences between firms that are leading and trailing in the digital transformation of their businesses.

Leaders vs Followers

Among banking, financial services and insurance firms

Using these criteria, we found more Digital Leaders among banking and financial services (B/FS) firms and more Digital Followers among insurance companies.

No industry (or industry within a region) among those we surveyed had only Digital Leaders or only Digital Followers. Taken as a whole, BFSI companies accounted for 24% of the Digital Leaders in the study and 30% of the Digital Followers.

34%66%

41%59%

53%47%

61%39%

Digital Leaders -220 Digital Followers -219

Digital Leaders vs Digital Followers

We’ve been not very successful increasing digital revenueWe’ve been not at all successful increasing digital revenue

Digitization is limited to a few business units so farWe’re still in pilot phase for digital transformation

New digital businesses, offerings, business and operating models Enterprise-wide digitization, strong leadership, major initiatives

We’ve been highly successful increasing digital revenueWe’ve been hugely successful increasing digital revenue

Nearly a quarter of the 1,010 CIOs we surveyed worked for banks, financial services firms or insurance companies


Most of the B/FS success comes from Europe, where there were 1.4X more leader companies than followers; it was a 1:1 ratio among BFS companies in North America.

While the North American insurance industry has somewhat more Digital Follower companies than leaders, the European insurance industry would appear to be the biggest drag on the industry’s success in digital business.

In comparison to other industries, banks and financial services firms rank slightly above the middle in terms of their success to date with digital business, as self-reported by their CIOs. The insurance industry, however, has some catching up to do.

Digital Followers vs Digital Leaders

Banking/Financial Services

Insurance

9

14

13

2

18

26

18

20

Leaders as a % of Followers

High-tech (hardware and software) 1600%

Telecommunications services 329%

Healthcare and life sciences 175%

Automotive 163%

Banking and financial services 115%

Retail (online, physical store, and/or catalogs) 109%

Travel, transportation and hospitality 56%

Insurance (life, property and casualty, health, etc.) 55%

Consumer packaged goods (food and non-food) 51%

Media, entertainment and information services/data providers 44%

Industrial manufacturing 23%

North America Europe

Digital Leaders vs Digital Followers


Board members Top management

More Digital Experience on Bank Boards and Among Top ExecutivesCIOs at banking and financial services firms say they have a higher percentage of digitally experienced board directors and management team members than other companies do.

The insurance industry seems to have somewhat less digital experience among its boards and top management. However, Digital Leader insurance companies report such experience roughly on par with the average banking and financial services firm, and ahead of the average company in other industries.

How many board members/top management have deep digital experience

63%

76%

45%

58%

72%

46%

B/FS

B/FS Leaders

Insurance

Insurance Leaders

Other industries

59%

48%63%

48%

Experience & Expectations


CIOs at Leading BFSI Firms See Strong Executive Support for Digital Visions; Others Less So Asked whether they think other key stakeholders in their organization agree with their vision of digital-related growth opportunities, banking, financial services and insurance CIOs showed a slightly lower degree of alignment, overall, than CIOs in other industries.

For example, BFSI CIOs said they were aligned with the CEO, line-of-business heads, and functional C-suite leaders 4 to 5 points behind what their colleagues in other industries said.

Only with the members of the board did BFSI CIOs have slightly more agreement than did other industries’ boards and CIOs.

But such alignment is much higher among BFSI’s Digital Leader companies, particularly with the board and LOBs, where agreement with the CIO’s vision was 94%, surpassing the consensus with those corporate stakeholders that all 220 Digital Leader companies reported.

How much consensus CIOs feel they’ve reached on digital opportunities with key stakeholders

All Leaders BFSI Leaders BFSI Other industries

86%

74%94%

72%86%

68%85%

72%92%

72%94%

77%86%

70%83%

74%

Board

CEO

LOB heads

Function heads



Narrowly More than narrowly Expansively Very expansively

BFSI Boards and Executives Envision Expansive Digital FuturesWhen asked how their board directors and top management view future digital business opportunities, CIOs in BFSI say they have broad views on what is possible.

Almost two-thirds (63%) said the board and top management think expansively or very expansively about the business opportunities in a digital world. This is significantly higher than the 48% of boards and executives in other industries.

Within the BFSI sample, 69% of CIOs at banks and financial services firms said their boards and management think expansively or very expansively, compared to 57% at insurers. Even among Digital Follower banks or insurance companies, at least half of CIOs said their corporate leadership was thinking expansively about digital business—more than in other industries in general.

How expansively does your board and top management think about digital opportunities?

BFSI companies

Other companies

37%

52%

63%

48%

19%

22%

18%

15%

29%

19%

18%

10%

16%

11%

23%

35%

35%

48%

41%

40%

B/FS Leaders

B/FS Followers

Insurance Leaders

Insurance Followers


More than narrowly/narrowly Expansively/very expansively


BFSI Firms Less Optimistic About Digitization Opportunities Than OthersWhile more than half of BFSI CIOs said their boards and top management held expansive views about their firms’ digital futures, a sizeable percentage of these IT leaders (42%) said their companies see “limited opportunities to further digitize our business.” For insurance industry CIOs, the percentage holding this view was even higher.

Many CIOs described modest progress in digitizing their businesses—at least that’s how they would characterize their executive colleagues’ views. Notably, about a third of BFSI Digital Leader companies feel they are still in the nascent stages of their transformation journey—despite reporting success already in digitizing much of their business and already earning revenue from digital products and services.

Among BFSI Digital Follower companies, however, the mood is much darker. Over two-thirds think there are limited opportunities for further digitization of their business—and 70% think so among the insurance industry followers—even though these companies report less success to date in digital business than other companies in their industry, so might be expected to see even more opportunities for digitizing their businesses.

Top management believes: “There are limited opportunities to further digitize our business”

B/FS

Insurance

Other industries

39%44%

34%

Management’s view of digital opportunities

We have covered a lot of ground, but there is still more to doWe have not even started our journey; we are just at nascent stagesThere are limited opportunities to further digitize our business

28%

58%

42%

8%

30%

34%

3%

67%30%

BFSI Leaders

All BFSI

BFSI Followers



Insurers Have Much More Digitization Work Ahead of ThemPerhaps owing to the already digital nature of much of their business, banking and financial services CIOs said their companies’ businesses were more digitized than did CIOs in other industries. They have higher levels of digitization in just about every area of the business.

At the same time, insurers lag other industries in digitization of their businesses. In fact, they had the lowest scores of any industry for digitization of IT security—a risk CIOs seem to acknowledge by noting that information security and ITSM processes have the most progress to make at insurance companies between now and 2030 (from 38% digitization to date to an expected 79% by 2030). By contrast, bank and financial service CIOs say that nearly two-thirds of IT security work is already digitized in their environments.

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Digitization Progress

2030Today


Otherwise, CIOs at banks, financial services firms and insurance companies will be focusing on digitizing procurement and vendor management in the next few years where, for them, the gap is largest. (For other industries, the gap between the current state and the 2030 goal is largest for human resources, which is 4th on the list for BFSI.)

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Procurement Needs CIOs’ Attention

Digitization Progress


Digital Business Offerings Accounted for Half of BFSI 2018 RevenueWhile CIOs at banking, financial services and insurance companies may be modest about their progress in digitizing their business, many have made real gains.

CIOs in these industries said more of their revenue already came from digital business offerings in 2010 than did CIOs at companies in most other industries. Half of BFSI 2018 revenues were from digital products and services, higher than the 45% among all other industries. For Digital Leaders in the insurance industry, the increase was more than 20 points from 2010 revenue to 2018 revenue.

Only Digital Followers—across all companies surveyed, including the BFSI industries—had less than a 10-point increase in the percentage of revenue accounted for by digital products and services.

% in 2010 % in 2018

What % of company revenue did digital business account for?

40%

51%

36%

35%

43%

36%

34%

45%

31%

53%

64%

43%

46%

65%

43%

45%

63%

38%

B/FS

Insurance

Other industries

B/FS Leaders

Insurance Leaders

All Leaders

B/FS Followers

Insurance Followers

All Followers

1.5X

Digital Business Success


Underutilized, Outsized or Just Right? CIOs in many BFSI companies appear to be slightly less central to digital transformation discussions than CIOs in other industries. They were less likely to play driving roles on strategy, budget, people management, governance, and developing new alliances and partnerships than CIOs in other industries.

At the same time, BFSI CIOs—and this was true in both the banking and insurance industries—were more likely to say they had been the primary driver of digital transformation efforts at their firms, which exceeds the leadership of CIOs in any other industry.


What role has the CIO played in driving digital transformation?

CIOs saying they’ve been the primary driver of digital transformation to date

72%

65%

15%

79%

53%

75%

55%

19%

60%

60%

Ideation & Strategy

Budget

People

Governance

Alliance and partnerships

Project management

56%

20%

54%

63%

22%

54%

B/FSOther industries

B/FS LeadersB/FS Followers

The CIO’s Role


Banking CIOs More Likely to Manage Current IT EnvironmentMore than their counterparts in other industries, banking CIOs are more likely to be managing the current, legacy technology of their companies. Given the industry’s reliance on its IT systems for its day-to-day—and even microsecond-to-microsecond—operations, it’s no wonder.

At the same time, CIOs in BFSI are also less likely than those in other industries to lead any other one particular area, from IoT development and research on emerging technologies to end-user tech support.

Notably, Digital Leader firms in both banking and insurance have CIOs focused more on data security and analytics than does the BFSI industry as a whole. And leader insurance company CIOs are more likely to be focused on end-user tech support (45%) than at any other industry’s leader companies except for industrial manufacturing (at 67%).

(Overall, BFSI CIOs say they average a near 50/50 balance of their time spent on legacy IT versus digital business model innovation, same as CIOs in other industries.)

By industry By leaders By followers

B/FSInsuranceAll industries

B/FS LeadersInsurance LeadersAll Leaders

B/FS FollowersInsurance FollowersAll Followers

69%55%

60%36%

50%51%

54%48%

57%38%38%

47%19%20%

26%34%

26%

27%

22%

37%

34%

85%65%

68%30%

40%51%

41%30%

47%26%

20%34%

15%8%

24%19%

11%

13%

8%

25%

22%

74%55%55%

39%55%

51%71%

59%72%

48%68%

65%13%

45%26%

48%

42%

50%

64%

56%

58%

Existing/legacy IT

New systems for existing processes

Embedded/IoT technologies

Researching emerging tech

End-user tech support

Data analytics

Data security

The CIO’s Role


The IT Function at BFSI Leader Companies: Where Innovation HappensWhere digital innovation happens in a company is the issue that separates BFSI CIOs from their counterparts in other industries most starkly.

In BFSI companies overall, new digital businesses and digital products and service offerings are less likely to be developed in the IT function than in either a separate business unit reporting to a corporate or a divisional head or in a business function such as marketing or sales.

In sharp contrast, such innovation is more likely to occur in the IT department at a BFSI Digital Leader firm. (It’s even more likely to be there than in the IT departments of leader companies in many other industries: 70% at BFSI leader companies vs. 63% at all leaders.) Among all 1,010 study participants, the IT function hosts such innovation efforts in 42% of companies—compared to 46% doing so in a separate unit.


Where is new digital business developed?

36%

54%

40%

44%

43%

35%

In the IT function

In a separate unit

In business functions

Elsewhere 8%20%

Where Innovation Happens


Banking & financial services

Where is new digital business developed?

Insurance

In the IT function

In a separate unit


Elsewhere

In the IT function

In a separate unit


Elsewhere

B/FS B/FS Leaders B/FS Followers

Insurance Insurance Leaders Insurance Followers

41%

31%

23%

23%

4%

12%

41%

40%

0%

10%

29%

32%

0%

14%

19%74%

51%

70%39%

64%18%

57%

73%40%

Where Innovation Happens


How We Conducted This StudyThe TCS 2020 CIO Study asked senior IT executives in 11 industries about their work, their company’s digital success, and where they’re focused strategically for the future.

Of the 1,010 companies surveyed, 24% (243) were banking, financial services, and insurance companies.

The revenues of the BFSI companies in our study ranged from half a billion to more than $50 billion dollars.

The IT budgets under the CIOs in these companies ranged from less than $25 million to more than $1 billion.

Revenue

IT budgets



Insurance

Insurance

$500 million to less than $1 billion

$1 billion to less than $5 billion




$50 billion or greater

Less than $25 million

$25 million to less than $50 million





$750 million to less than $1 billion

$1 billion or more

25%

14%

16%

10%

30%

23%

37%

7%6%

17%

17%

21%

16%

30%

14%

9%

10% 13%

16%

8%

12%

9%

7%

8%

2%

12%

2%

8%

19Innovating Legacies: Banks, Financial Services and Insurance Companies

About the TCS Business 4.0TM InstituteThe TCS Business 4.0 Institute is a research-driven center with a mission to deliver practical, forward-thinking technology and business insights that inform the strategy of TCS prospects and clients. Our data-driven research provides best practices and recommendations that lead the way for transformational journeys.

To learn more about TCS Business and Technology Services, visit: info.tcs.com/bts-home

About Tata Consultancy Services (TCS)Tata Consultancy Services is an IT services, consulting and business solutions organization that partners with many of the world’s largest businesses in their transformation journeys. TCS offers a consulting-led, Cognitive powered, integrated portfolio of IT, Business & Technology Services, and engineering. This is delivered through its unique Location Independent Agile delivery model, recognized as a benchmark of excellence in software development. A part of the Tata group, India’s largest multinational business group, TCS has a global footprint and is listed on the BSE (formerly Bombay Stock Exchange) and the NSE (National Stock Exchange) in India.

For more information, visit us at www.tcs.com.

Copyright © 2019 Tata Consultancy Services Limited. All content/information present here is the exclusive property of Tata Consultancy Services Limited (TCS). The content/information contained here is correct at the time of publishing. No material from here may be copied, modified, reproduced, republished, uploaded, transmitted, posted or distributed in any form without prior written permission from TCS. Unauthorized use of the content/information appearing here may violate copyright, trademark and other applicable laws, and could result in criminal or civil penalties.

Authors

Akhilesh TiwariGlobal Head of Enterprise Application Services

Dinanath KholkarGlobal Head of Analytics & Insights

Nidhi SrivastavaGlobal Head of Business and IT Consulting Practices

Santha SubramoniGlobal Head of Intelligent Process Automation

@TCSDigitalTech | @TCSDigitalBiz | @TCSCognitiveBiz

http://info.tcs.com/bts-home

innovating legacies: banks, financial services and ...€¦ · 2 contents 3 digital leadership for...

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