Eurozone break-up will lead to tech disruption, says Gartner analyst

By Derek du Preez
28 Nov 2011 View Comments

Banks and financial services will have to deploy a certain amount of "creative disruption" within their IT portfolio if the eurozone does break up as is predicted by some economic commentators.

With the economic climate in Europe looking increasingly fragile, Peter Redshaw, analyst at Gartner, told Computing that IT leaders working for banks need to prepare for the worst.

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If a break-up were to occur, banks would have to allocate a portion of IT spend towards restructuring of systems, updates to software and converting data to accommodate new currencies.

However, there would be little left over because, as Redshaw explained, banks spend 80 per cent of their IT budget on keeping the business running, and most of the remaining 20 per cent on regulatory compliance and risk management.

This would leave very little money available to accommodate for the changes required to break away from the euro, and so banks would have to undergo a certain amount of "creative disruption", meaning they would have to assess IT assets and wrap up services to free up funding.

"European market volatility means that financial services will have to take a hard look at their business models and see whether or not they can maintain certain lines of business," said Redshaw.

"Banks would have to evaluate their IT portfolio and infrastructure, and services that aren't adding value will be discontinued," he added.

Redshaw believes that systems and projects that have been implemented to improve the customer experience are likely to face the cut.

"One impact of a break-up would be a retreat in the short term from customer-centric projects," he said.

"Banks have been keen to do deploy systems that offer more personalised services, but these may well be something that is postponed," he added.

"They are far more likely to invest in software to help them make lending decisions, rather than something that is just a fancier front end for the customer."

Redshaw also believes that large overhaul projects could suffer.

"Core replacement programmes, which have continued right through the recession, will have to be reviewed again if the zone were to break up," he said.

"Banks will be reluctant to cancel those projects because they have sunk hundreds of millions of euros into them.

"But some of them will have to ask, "Is this something we can really afford to do?"

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