When creating annual IT budgets, credit unions often get trapped in a complicated maze.
Increasing demand for mobile services, rapidly changing technology and tighter security regulations regarding innovations such as social media make it tough to pinpoint the best ways to spend tech dollars.
Do you go with the cool new mobile banking technology? Or save those funds for cyber security to prepare for the possibility of tighter scrutiny from the Federal Financial Institutions Examinations Council?
During the IT budget planning process, expensive mistakes could include cutting corners on security, splurging on ineffective new tech tools and not aligning future technology investments with existing business strategy.
“One of the biggest challenges is identifying what technology will be the most beneficial,” said Teresa Trostel, director of IT at the $230 million Red Rocks Credit Union in Highlands Ranch, Colo. “Sometimes we have a change mid-year on strategic direction and we need to move in a new technology direction, but often what we now need isn’t in budget.”
Pinpointing the right IT priorities requires advance planning, she said.
“For example, as we’re looking at budget-related items, we want a remote workforce and we need to build disaster recovery,” Trostel added. “Whether we go in-house or cloud – we have to decide how quickly we want to recover. Then, based on that time frame, we put pricing around it. Then we have to decide if we can afford to implement it. Or if we need to step back and readjust.”
To create effective IT budgets and reap the best return on investment, experts say, credit unions must plan ahead, think strategically and partner with reliable vendors.
“The first step is to gain a thorough understanding of the credit union’s strategic business plan, and then you must ensure that your IT strategy is updated each year and in sync with overall strategic business plan,” said Brad Smith, co-founder and CEO/president of Austin, Tex.-based Abound Resources.
In a recent webinar on “Developing a Technology Strategic Plan that Hits the Target,” Smith offered these tips:
- Perform a gap analysis against existing technology to identify short-term and long-term priorities required to align IT systems to support the institution’s business strategy.
- Evaluate current business processes and determine ways to improve efficiency with existing infrastructure before implementing new technology.
- Get CEO and business line execs engaged in the IT budgeting process.
- Address the cost-effectiveness of new technology such as cloud-based storage.
- Learn about the FFIEC’s 2013 IT audit findings and how to address them in your plan.
Creating a strategic IT plan is especially important as an increasing number of members opt for online and mobile services.
“Credit unions used to have a few years to ponder what was happening in the market, but now we’re finding a need for real time lessons and constant evaluation,” said Jason Nelson, vice president of development at Red Rocks, which operates only two branches, and serves its 17,000 members primarily online and on the phone.
“Research done a year ago or 18 months ago has already shifted by the time it comes to bring a new strategic initiative or service online,” he continued. “No longer can a credit union identify one clear plan at the end of the year and expect it to remain substantially unchanged. You can’t close your eyes once you make an IT decision. You must constantly evaluate and revise.”