Retail financial services companies in the UK are experiencing many difficulties in achieving transformation as highlighted in the previous chapter. This chapter focuses on the technology problems they face at the stage they have reached. Reference is made to the findings of the Foresight Programme, a major government-sponsored study designed to ascertain the effect of IT on society, industry and commerce and to identify key technology trends. The likely effects of these trends on the retail financial services sector are discussed, and brief case studies are included to highlight important issues. Information is derived from the 1993 survey (IT2), which covered the whole retail financial services sector in the UK, and the 1995 survey (ITS), which covered UK retail banking.
The history of computing has been characterised by an especially rapid pace of technological change, particularly with regard to the cost performance of the hardware. For example the price of computing power has steadily decreased by around a factor of ten every ten years.
Whilst technological advances in hardware have resulted in reduced costs and have made many new applications possible, the very pace of change and its unevenness offset some of these gains and hinder progress. Whilst core technologies such as CPU size and speed have grown explosively, others such as peripheral devices and software development tools have grown only slowly. Consequently the changes in cost/performance ratios of computer hardware departments has not been matched by a corresponding increase in the cost-effectiveness in the development of software.
The need to upgrade systems continually to keep pace with change has added to costs since upgraded hardware needs upgraded software and upgraded skills. Since new systems are run in parallel with old systems until fully tested and all staff retrained, running costs must include the cost of the new system, the cost of maintaining the old system, and the cost of establishing