productivity and strategy in portuguese banks: a ... · productivity and strategy in portuguese...

Productivity and Strategy in Portuguese Banks: a Qualitative and Quantitative Approach for IT Investment Analysis

Manuel João Pereira and Luís Valadares TavaresFlorence, May 29-June 2001

Manuel João PereiraCatholic University of Lisbon

Luís Valadares TavaresTechnical Institute of Lisbon

Florence, May 29-June 1 2001SeUGI 19

Productivity and strategy in Portuguese banks: aqualitative and quantitative approach for IT

investment analysis



Presentation Outline

• Motivations

• Methodology

• Analysis

• Findings and Scenarios

• Conclusions



Motivations

Understand the business impact of IS/IT in financialservices

Trace previous studies of IS/IT impact on financialorganisations and analyse the conclusions

Analyse the IT situation of the financial sector in Portugalusing SAS® Analyst

Do a prospective exercise of IT impact in financial servicesusing scenarios for the next 10-20 years



Methodology

• Mixed using two complementary approaches(qualitative and quantitative), data analysis, focusgroups and surveys (data from 1994 to 1998)

• Financial analysis from Portuguese BankingAssociation and Bank reports

• Design and explore two surveys:• Clients• Employees

• Validate the results with a “Panel of Experts” anddraw conclusions



IT and the Financial Sector:main forces nowadays (Pereira, 1995)

Deregulation

Technology

NegócioBancárioBanking

BusinessCompetitionHuman

Resources



IT and the Financial Sector:nowadays

• 5,1% of GNP in 1998 (INE, 1999)

• Gradual increase of client satisfaction from 1994(3.95) until 1998 (4.04)

• % Employees with a graduation: 14.2% (1994) vs.23.4% (1998)

• Number of Employees: 60648 (1994) vs. 58301 (1998)

• Comissions/Services are getting more important:15,8% (94) vs. 28,6% (98)



IT and the Financial Sector:PC per employee and Sector in Portugal

Source: IDC Portugal 1999 (in thousands)

S ec tor E m ploy ees P C's P C's /E m ploy eeG oods Indus try 1.126 199.8 0.2F inanc ial S ec tor 86 111 1.3Utillit ies /Telec om m ./Tranport . 201 129.5 0.6Food, Hotel, Tradic ional Com m erc e 971 122.1 0.1O ther S ervic es 362 103.6 0.3O thers 1.156 74 0.1P ublic A dm ., Defenc e, S oc ial S ec . 288 84 0.3




• Number of POS´s: 29138 (1994) vs 60964 (1998)

• Hardware, Software, IT Serv. (Mill. Contos-Pereira, 2000)

57.2

21.417.617.416.9

11.2

28.125.5

39.7

56.7

30.1

48.845.741.9

31.3

0

10

20

30

40

50

60

70

1994 1995 1996 1997 1998

Software

Hardware

Serviços Externos deSTI




– Investments in Telecomunications decreased from 95 to 96 butafterwards there was an increase of 32,9%.

– Investment in Training: strong decrease of 31,1%. Quality of HRon the long run?

– Investment in Marketing - strong increase of 39,3%

– The number of employees per branch was 17 in 1994 and is 13in 1998.



IT and the Financial Sector:quantitative findings

– Main improvements caused by efficency and productivityimprovements less than by “sales improvement”

– Client Satisfaction and Investments in IT not correlated

– Negative Correlations:» CSTI/CA vs. CP/CA» CSTI/CA vs. %EMPADM

– Positive Correlations:» CSTI/CA vs. %ESP

(CSTI- Costs of IT; CA-Administrative CostsEMPADM- Administrative Employees; ESP- Experts)



IT and the Financial Sector:Client Survey- qualitative findings

- 192 client surveys, Grade 1 to 5

- Top Five:- Dressing of employees - 3.82

- Personal needs satisfied - 3.77

- Reliability of data - 3.76

- After-sales service - 3.72

- Comissions of products and services - 3.70

- Experience of employees - 3.70



IT and the Financial Sector:Client Survey- qualitative findings

– Bottom Five:

- Waiting in a queue - 3.01

- Turnaround of Employees - 3.06

- Flexibility for new solutions - 3.15

- Functionality/Availability of services - 3.19

- Front-Desk Service - 3.20



IT and the Financial Sector:Employee Survey- qualitative findings

– 236 employees surveys

– Top: - Users friendly interface 3.71

- Introduction of new applications is high - 3.74

- Marketing Information - 3.49

- More Important questions:- Quicker access 40.58%- Use of tradicional branches 38.93%- Products launched by competiton 33.92%



Scenario AnalysisFuture Perception of Employees-

qualitative findings

• Top Four:- User friendly interface (4.41)

- Time lag for introduction of new products (4.39)

- Business in Electronic Channels (4.32)

- Integration of aplications (4.29)

•



Scenario AnalysisFuture Perception of Clients -

qualitative findings

• Top Five Worst (variance analysis):- Comissions of products and services (29.69%)

- Waiting in a queue (28.06%)

- Personalisation of service (17.05%)

- Confusion and noise (13.74%)

- Speed of service (13.28%)



Scenario AnalysisFuture Perception of Expert Panel

- The new role in banking business will be integration

- Globalisation will be one of the most difficult challenges

- “Intelligence” will be critical

- Focus on “buying and selling” risk

- Branches?

- Client Preference of channels



Scenario AnalysisIT Investment Cycle (Moshela, 1997)

Network Centric(Enfoque nas Redes)

•Internet•Intranet•Hardware / SoftWare Global

Systems Centric(Enfoque nos sistemas)•Dados são a base•Time Sharing•Mini-Computador

Content Centric(Enfoque no Conteúdo)

•Virtualização•Software•Sistemas Embebidos

PC Centric(Enfoque no PC )

•Microcomputador•Cliente / Servidor

Millions of Users(not in scale)



Scenario AnalysisConsolidation (Source: EC 1999)

Target AreaCountry Internal B DK F D GR IRL I L NL P E UK Total Japan USA Others Total

UE 580 14 2 26 19 - 8 12 5 7 3 7 28 131 1 19 36 56Belgium 10 - - 5 2 - - 1 1 2 - 2 - 13 - - 1 1Danmark 21 - - 1 - - 1 - - - - - - 2 - - - -France 77 4 - - 4 - 1 6 2 2 - - 11 30 - 4 5 9Germany 22 - 1 3 - - - 1 - - - 1 3 9 1 - 3 4Greece 2 - - 1 - - - - - - - - 1 2 - - 1 1Ireland 7 - - - - - - - - - - - 1 1 - - 1 1Italy 22 - - 3 4 - - - - 1 - 1 4 13 - - 2 2Luxemburg - 3 1 - - - - - - - - - 1 5 - - 3 3Holland 7 3 - 2 - - - - - - - - 2 7 - - 1 1Portugal 6 - - - - - - - - - - 2 - 2 - - - -Spain 26 - - 5 1 - - 2 1 - 3 - 5 17 - - 1 1Great-Britain 380 4 - 6 8 - 6 2 1 2 - 1 - 30 - 15 18 33

Non UE 583 - 1 24 7 - 7 4 1 16 - 16 72 148 19 21 80 120Japan 12 - - - - - - - - - - - - - - 1 - 1USA 353 - - 2 1 - 6 2 - 5 - 2 39 57 13 - 28 41Others 218 - 1 22 6 - 1 2 1 11 - 14 33 91 6 20 52 78Total 1,163 14 3 50 26 - 15 16 6 23 3 23 100 279 20 40 116 176

UE Buyer Other Buyers



Scenario AnalysisFragmentation

Outsource theirtraditional value to

more efficient sellerswith scale economies

“Product Designer”

“Gateways” or client consultant

“Service supplier to the industry”

Retail Bank1995- 2000:Banks areintegrated

Retail Bank 2015 a 2020



Conclusions

• Integrate the communication in the Value Chain• “Push” the Client to Migrate to other Channel• Increase the traditional “boundaries” of operation• Improve the use of fixed structures• Redesign the relation with clients• Cooperation with traditional “non bank” competitors

– Role of new e-Marketplaces



AcknowledgementsExpert Panel

Sr. João Leite, Grupo BPSM

Dr. José Miguel Pessanha, BCP

Dr. Rui Mendes, Caixa Geral de Depósitos

Engª Isabel Ferreira, Montepio Geral

Engº José Alegria, BANIF

Engº Filipe Santos, SIBS

Dr. Amadeu Paiva, UNICRE

Dr. Paulo Rodrigues da Silva, BPI

Engº Paulino Magalhães Corrêa, Banco de Portugal

Dr. Domingos Oliveira, CAP-GEMINI

Sr. Álvaro Oliveira de Faria, SAS Institute Portugal

Engº Jorge Ferreira Pinto, Bolsa de Valores de Lisboa

Engº Carlos Madeira, Gemini Consulting

Dr. Pedro Orvalho, Associação Portuguesa de Bancos

Engº Sérvulo Rodrigues, BES

Prof. Doutor Pedro Brandão Rodrigues, BMI

Engº Aristides Meneses, INSAT

Dr. Vasco Sousa Ribeiro, Inst. Gestão do Crédito Público/Min. Finanças

Dr. Fernando Nunes, Price Waterhouse Coopers



Manuel João PereiraLuís Valadares Tavares

[email protected]@dislogo.ucp.pt

Acknowledgements:

SAS® Institute Portugal

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