Can managed services and vCIO leadership help financial institutions meet their top technology challenges? Here’s how to decide.

Financial institutions are in the middle of a technological revolution. AI, cloud-based systems and fintech are reshaping the market to the extent that any institution that doesn’t prioritize digital transformation is almost guaranteed to lose customers and market share.

To stay competitive, more institutions are turning to technology outsourcing like managed services and a vCIO (also called a fractional CIO or outsourced CIO) to increase their capabilities without breaking their budgets. Could this approach make sense for your institution as well?

Keep reading to learn more about what outsourced technology can offer, plus how to assess whether it could be a fit.

Why do financial institutions need more effective technology and stronger tech leadership?

The fast-changing technology environment is pushing financial institutions to adapt their traditional business models. As in other industries, AI and migrating to the cloud are genuinely evolving how institutions operate, pushing a greater emphasis on data, analytics and automation.

But the biggest factor to consider is shifting consumer expectations. The days when most consumers want to handle banking transactions in person are gone. Instead, the institutions that win will be the ones that deliver a smooth, easy, mostly online customer experience. If your customers can’t access their funds and complete transactions through an app, 24/7, you’ll likely be out of business within the decade.

Competing in this new reality requires both a modern tech strategy and the infrastructure to execute it. While some institutions do this fully in-house, many are choosing to incorporate at least some degree of outsourcing, like managed services and outsourced technology leadership like a vCIO.

How do managed services benefit financial institutions?

Managed services are outsourced IT infrastructure and support. This can include servers, maintenance, upgrades, network monitoring, cybersecurity, help desk and regulatory awareness, all of which are provided by a third-party managed services provider (MSP).

Employing managed services allows financial institutions to gain access to reliable, scalable IT infrastructure and skilled support without having to build that capacity in-house. This allows your institution to focus on your core business without diverting resources and attention to IT functions that are outside of your institutional expertise.

Managed services are typically:

• Cost-effective: Taking a managed services approach tends to be much more cost-effective than building in-house infrastructure.
• Reliable: Managed services are also usually much more reliable, as managed services providers offer scale, redundancy and the maintenance capabilities needed to keep your servers and systems running under almost any circumstances.
• Compliant: Crucially for financial institutions, managed services providers that service the financial sector also understand technology-related regulatory requirements and can help ensure that your technology is in compliance.

When should you choose managed IT services over in-house?

Deciding between managed services and investing in in-house IT capabilities is typically a financial decision. Assess your institution’s specific needs and consider both options to find out what makes the most financial sense.

Also consider that to deliver ROI, your tech infrastructure needs to be deployed as part of a cohesive strategy that supports your long-term growth and retention goals. That’s where a vCIO comes in.

How does a vCIO benefit financial institutions?

A vCIO or fractional CIO serves as a part-time strategic technology leader. Like an in-house CIO, a fractional CIO is responsible for developing and implementing a technology strategy to help achieve an organization’s long-term goals.

As financial institutions look to meet changing customer expectations and improve operational performance, many are turning to CIOs to lead the technology side of that effort. But not every institution needs (or can afford) a full-time CIO, which has made vCIOs increasingly popular.

A vCIO or fractional CIO provides:

• Strategic technology leadership: Look to a vCIO to guide your digital transformation and implement AI from both an operational and customer experience perspective by serving as a strategic, C-suite-level executive rather than a siloed IT leader.
• Cost-effective expertise: A vCIO costs dramatically less than a full-time hire. You only pay for the level of support you need, which can be dialed up or down as conditions and requirements change.
• Mentorship and training: vCIOs frequently mentor in-house IT managers or directors, providing a growth path for your existing internal team, as well as training and guidance for your IT team as a whole.
• Depth of knowledge: vCIOs typically work for technology consulting firms and managed services providers, which means you don’t just get their expertise, but their colleagues’ as well, which can be especially useful as your institution seeks to adapt to change.
• Risk management experience: A vCIO also understands technology risk management — including the growing problem of vendor risk management — beyond the level typically expected of an IT director or manager.

Decision framework: Should your financial institution hire a vCIO or a full-time CIO?

Would your institution benefit more from a vCIO or from hiring a CIO full-time? Here’s a practical framework to help you decide:

Factor	vCIO	Full-time CIO
Institution size	Community or mid-sized institution	Larger institution
Organizational maturity	Need significant technology or AI upgrades that could disrupt established routines.	Digitally mature, with fewer major changes needed
Strategic technology goals	One to three-year timeline	Three to five-year timeline
Access to talent	Access to only a regional or limited talent pool	Access to a national talent pool
Role flexibility	Flexibility is highly prioritized	Flexibility is less important
Budget	Limited	Mid-six figures
Perspective	Brings experience working with dozens of other institutions	Works only for your institution
Support needed	Less than 25 hours per week	Full-time or close to full-time

Notice that change is a key factor here. If your institution is gearing up for digital transformation and is expecting to undergo significant upheaval as a result, you may find a vCIO or fractional CIO especially useful.

A vCIO can lead this process of technological change — which can cause a certain amount of organizational turmoil — and then step aside for a full-time CIO once your institution is more digitally mature.

Action steps: Here’s how to get managed services or a vCIO for your financial institution

Here’s how financial institution leaders can kickstart the process of getting managed services, a vCIO or fractional CIO, or both:

1. Talk with a technology consulting advisory firm

A technology advisory firm can help assess your technology needs and consider whether managed services, fractional support or additional in-house capacity represent your best route forward. When deciding among potential advisors, prioritize firms that understand the unique operational and regulatory needs of financial institutions.

If your technology advisor offers vCIO services, ask that your potential vCIO be the one to conduct your assessment.

2. Develop a technology roadmap

With your technology advisor, develop a technology roadmap. This is effectively a three to five-year plan aimed at helping your institution align its technology capabilities with its overall strategic goals in a cost-effective manner.

3. Use outsourced support to enact your roadmap

Implement your roadmap, including using managed services and/or a vCIO. Your technology advisor can typically provide both of these services or you can seek out a separate managed services provider or fractional CIO.

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