AWS for Industries

How Financial Services Institutions Measure Business Value from Digital Initiatives by Using Net Technology Investment Value

Oliver Wyman AWSFinancial services institutions (FSIs) have increasingly defined and differentiated themselves not just by the products and services they provide to customers, but by the technology that underpins their establishments. The unexpected shift in global market conditions resulting from the COVID-19 pandemic has accelerated the need for successful digital transformation initiatives that deliver concrete positive business outcomes. Business leaders are now confronted with the question: “What is the holistic value I get out of my technology spend?” The answer highlights where technology investments deliver the best value, in terms of key business outcomes such as improved productivity. One thing is certain: Where technology was once difficult to justify, it is now essential for survival.

Technology innovations—such as how digital-first banks can support changing customer needs including mobile-first banking, contactless payments, remote Know Your Customer (KYC), and account validation—have enabled business growth and improved customer experiences despite challenges. Running on the cloud has enabled FSIs to stay agile and maintain employee productivity by enabling a modern, remote workforce.

This new focus requires a reprioritization of business goals along with capital and resource reallocation in order to:

  1. Find the right balance between the long-term investment roadmap, to modernize legacy infrastructure, and short-term pressures around profitability, market capitalization, and investment capacity.
  2. Create opportunities to innovate rapidly and support business and technology teams to bring impactful features to market, and to keep pace with both incumbent and new industry competitors.

In addition, there has often been a disconnect between expectations and results when it comes to the implementation of enterprise technology projects. Success in one area, such as enhanced customer experience, may be accompanied by a lack of discernible progress in another, such as the continuation of silos and fragmented data sharing.

Although the industry has spent over $1 trillion on technology investments over the last four years, there’s often no solid correlation tying such initiatives to significant bottom-line and enterprise growth. This can lead to frustration and disappointment by C-suite executives vested in seeing quantifiable, systemic change from such tech-transformation projects, and a wariness of supporting similar, future projects. Deriving the most value from technology investments will play an essential role for businesses if they want to maintain a competitive edge.

Net Technology Investment Value

AWS and Oliver Wyman, an AWS Partner, have combined their joint expertise to develop a robust methodology that FSIs can use to define, evaluate, prioritize, and communicate their technology investments to their respective CEOs and executive leadership teams: Net Technology Investment Value (NTIV).

The NTIV methodology is a comprehensive approach for measuring the business value of technology investments, factoring in profitability, productivity, operational efficiency gains, and customer value. It generates an assessment of both a company’s current technology and proposed digital changes to support their adaptation and growth in an evolving industry— while remaining keenly focused on return on investment (ROI).

NTIV focuses and unlocks value from two areas:

  • Invest Score: Has management sufficiently invested in business-impacting technology, or is most of the technology budget locked to preserve legacy systems that cannot operate in a modern-day, remote world? The Invest Score focuses on the addressable technology budgets that can be invested into business-driven technology and digitalization projects, and it purposely excludes “lock-in investments,” such as regulatory-related costs.
  • Impact Score: How far is the business in terms of its technology maturity, and has management translated investments into measurable value for its stakeholders? The Impact Score focuses on suitable KPIs to determine the digital maturity and value add of technology-related investments for an organization.

The Invest and Impact Scores combine a business-focused assessment that maps and continually traces technology investments with their impact. This helps executives and portfolio managers to develop a business case, map it to cloud economics, and prioritize future technology investments.

NTIV offers a refreshed approach to investment strategy for technology that provides CEOs and executive leadership teams with the transparency they need to make more informed decisions, while simultaneously delivering and communicating the value of those technology investments for all stakeholders.

Why a Methodology Is Needed?

The pandemic led FSIs to make digital changes that were imperative for the sake of survival. Even with all of the disruptive change in the market, FSIs still only allocate 30% of their tech budget for growth. The NTIV methodology quantifies the value of investments, so businesses can continue to retain and grow users.

In a post-COVID-19 world, capital reallocation, risk management, digital-transformation, and digital user engagement will remain a focal point in organizations—in order to retain, attract, and better serve customers.

In addition, FSIs will continue to place emphasis on digital regulatory requirements, requiring the need for massive data capture, collaboration with government regulators, and reporting.

The NTIV Methodology will help those driving technological changes within FSIs to have an even-handed approach in making the business case for proposed advances—with a combination of both circumspection and speed. It will also help FSIs prepare for unplanned moments and be able to effectively pivot.

How the NTIV Methodology Works

The NTIV methodology provides executives with the tools to enable their organizations to maximize the business value obtained out of their technology investments: It generates an investment score for proposed technology projects and an impact score based on key performance indicators (KPIs) that determine the value of technology-related investments charted across financial, operational, technology, and customer experience aspects of the business.

The investment score and impact score are later combined to obtain the final NTIV value:

final NTIV value

FSI Technology Archetypes

Before we start the NTIV process, FSIs should identify which of three archetypes best defines their organization: Are they a holistic modernizer; selective strategist; or an enabler pioneer? What is their appetite for change when it comes to a technology-investment strategy? They must understand their organization’s vision, business priorities, and post-COVID-19 objectives. They must also discuss risk appetite, business resiliency, and cybersecurity challenges derived from enhanced digital economy. They also need to understand key regulations and to assess how tech modernization can mitigate organizational, reputational, and system/platform risks. The archetype should be leveraged when deciding how to improve business value.

Here’s a deeper portrait of the three archetypes:

  • Holistic modernizer: Institutions following this strategy invest in key technology areas to boost revenue and reduce cost. They dedicate a significant proportion of their revenue to technology investments and are aggressive about decommissioning legacy systems.
  • Selective strategist: These financial services companies align their technology investment strategy with their top-priority business goals. They focus on specific technology investments to drive key strategic areas, instead of making across-the-board improvements.
  • Enabler pioneer: These FSIs focus on accelerating star-enabler technologies, such as APIs, microservices, machine learning (ML), and artificial intelligence (AI).

Once a customer has selected its desired organization type, there are three primary NTIV phases that collectively guide FSI stakeholders through technology transformation challenges and help them set optimal priorities for organizational and technology modernization. Throughout these NTIV phases, FSI customers are guided through the transformational technology challenges they are confronting. Consultants then work with stakeholders to help them set optimal priorities for organizational and technological modernization:

Phase I / Assess: Starting Point

This opening phase of the NTIV methodology starts with an assessment, where each FSI’s goals and priorities for technology projects are clearly defined. These goals establish the core business drivers: competition-differentiating or standardizing features, performance; security, and sustainability metrics of future state platforms—along with technology benefits, like cost savings, productivity gain, and operational resilience.

During this phase, risks and risk appetite are examined, along with pertinent regulatory mandates that need to be considered. Identifying these variables, metrics, and regulatory requirements upfront help companies manage all kinds of risks: business resiliency, cybersecurity, organizational, and reputational. It can also leverage AWS Cloud Economics tools to capture and compare scenarios on business agility, operational resilience, staff productivity, total cost of ownership (TCO), and ROI.

Phase II / Acceleration

Technology investments are measured against economics, business impacts, and internal KPIs. These areas that can provide quick wins are identified and prioritized to build momentum. The value for the FSI is benchmarked, focused on identifying:

  1. Scalable repeatability as a way to drive value and create and help deploy virtual innovation labs that allow rapid prototyping, at scale in a secure and collaborative manner.
  2. Areas for optimization to create repeatable cloud frameworks to elastically instantiate entire platforms on demand.
  3. Quantifiable benefits of cloud migration.

Using benchmarking data empowers an organization to estimate value based on the experiences of peer organizations. This approach can also help FSIs identify best practices, address shortcomings, communicate performance expectations, and measure progress. During this second phase, the NTIV guides creation of a technology roadmap with business outcomes, and a dashboard to monitor progress, governance, and internal reporting.

By leveraging the AWS Cloud Economics benchmarking study from the Omnicom Group, FSIs can gain insight into the business value of a cloud migration. The study measures value in four key areas: cost savings, staff productivity, operational resilience, and business agility.

Key benefits reported by study respondents, after adopting AWS, include:

  • 27.4% reduction in cost per user
  • 67.7% increase in terabytes (TBs) managed per administrator
  • 56.7% decrease in application downtime
  • 37.1% reduction in the time to market for new products and services

Phase III / Finish Line: Get the “Value”

Here, the methodology defines a detailed transformational plan, with long-term measurement criteria. This plan acts as a blueprint to be used during implementation, and it is designed to increase the demonstrable value of technology investments based on the chosen archetype.

AWS and Oliver Wyman have determined four main areas where FSIs can focus their technology investments, so they maximize business value. These strategies include:

  • Transforming digital channels for improved customer experiences
  • Deploying modern applications that enable innovation and greater efficiencies
  • Migrating backend workloads and infrastructure to the cloud
  • Achieving regulatory compliance faster with cloud services

It is the prepared, cloud-ready firms that can sow the most from all four areas. FSI’s can chose from one of these focus areas, or a combination of several.

Why Now?

Oliver Wyman and Celent conducted an assessment on anticipated post COVID-19 investment behavior for FSI technology investments, broken into three areas:

  • Accelerated investment: Emerging trends or requirements from the pandemic, where institutions will rapidly begin exploring these technologies—some previously not on their radar.
  • Strategic investment: FSIs have been investing and thinking about these needs prior to the pandemic. Investment will continue or strengthen.
  • Delayed investment: FSIs will continue to monitor these proposals, but may not embrace and activate them until a full recovery in market conditions.

The NTIV methodology can help FSI decision-makers find a strategic balance with responsiveness and recalibration for immediate, mission-critical operations, while knowing which longer-term initiatives to dial back and which to keep on track.

It guides organizational and technological aspects of digital transformation, prioritization, and ways to monitor and track results. It gives rhyme, reason, and intentionality to technology assessments, strategy, and investments. It also shows how migrating legacy systems to the cloud helps tech investments transition from capital expenditures to drivers of operational agility—with a proven track record of higher return on expenditure (ROE) than for legacy systems.

With the AWS and Oliver Wyman NTIV methodology, FSIs now have a better way to evaluate their technology investments, so executives and boards can prioritize spending and develop the metrics to continually track progress towards their transformation goals. The NTIV process and dashboard allows decision makers to define, prioritize, track, measure, and communicate thevalue of those investments to help them make the crucial decisions that will be necessary for the endurance, evolution, and longevity of their institutions.

For more information on the NTIV, download the AWS and Oliver Wyman co-authored whitepaper: RETHINK. REBOOT. RECOUP. Technology investment strategies for financial services. For more information, please contact Addy Dubhashi, EMEA Consulting Partner Lead, AWS, or Jeremy Warrick, Senior Solutions Architect, AWS.

Advait 'Addy' Dubhashi

Advait 'Addy' Dubhashi

Addy is the partner practice lead for Financial Services (FS) at Amazon Web Services (AWS) in the EMEA region. In this role, he works with specialist consulting partners to build cloud adoption frameworks and FS solutions leveraging AWS services; these solutions in turn help customers across Capital Markets, Banking and Payments accelerate transformation and drive innovation. Prior to AWS, Addy has spent over 12 years in building partner ecosystems for Financial Institutions, Regulators and Central Banks. Addy is interested in ‘catalytic’ partnerships that will accelerate customers to Innovate and adopt the cloud.

Gökhan Öztürk

Gökhan Öztürk

Gökhan Öztürk is a Partner in Oliver Wyman's Digital and Financial Services practices. He advises institutions on how to get the maximum value out of their technology investments, setting vision and ambition, and bringing business and technology functions together to deliver technology modernization programs.

Jeremy Warrick

Jeremy Warrick

Jeremy is a Senior Solutions Architect at AWS working with Business Consulting and Advisory Partners. In his role, he helps customers translate business-led initiatives into successful technical delivery processes. With a background in software engineering, Jeremy is always looking for better ways to solve customer problems.

Ramiro De La Rosa

Ramiro De La Rosa

Ramiro De La Rosa is the Director of Strategic Partnerships for Oliver Wyman Digital globally. He focuses on how the firm goes to market with strategic partners, designing value-add propositions that combine the knowledge, experience, and strategic thinking capabilities of all parties.