Why Do Banks Change Systems?
What are some of the reasons given by financial institution management for leaving their current system?
Lack of confidence in system
Poor, unresponsive vendor support
Mistrust in vendor
Financial instability of company
Planned obsolescence (discontinuing/sunsetting a system)
Vendor arrogance
Proprietary system that will not allow third-party interfaces
Unreasonable prices for third-party interfaces
Vendor was acquired
Vendor is losing more customers than it is gaining on an annual basis
Financial institution requirements not being met by system
Vendor not keeping pace with technological innovations
Significant increase in maintenance fees
Vendor pricing is penalizing the financial institution for growth
If you can identify with five or more of the above reasons, it may be time to plan the following project, which should begin at least one year prior to your contract expiration date.
System Selection Tips and Techniques
The scope of a typical system selection can be summarized as follows:
Define project
What system is needed for what function?
Is there a budget for the project?
What are some of the goals related to a system selection?
Improve delivery systems
Enhance customer service
Grow efficiently
Maintain personalized service and community focus
Achieve better systems integration
Enhance financial institution profitability
Turn data into useful information
Increase technology utilization
Interview consultants (if using outside assistance)
Select the financial institution's system selection team
Ensure adequate representation from various departments
Communicate the goals to the project to the team
Define financial institution requirements for system
What does the financial institution want in a system?
What interfaces are required?
What is the current technology environment?
Gather financial institution statistics (e.g., account volumes, current configuration)
What does the financial institution's technology environment look like now?
What are the financial institution's current account and item volumes?
What are the financial institution's five-year growth projections?
Review vendor choices
Which vendors are available?
Who are the industry leaders?
What are other financial institutions using? (Learn from other's successes and failures)
Attend trade shows and conferences
Select the field of vendors to be evaluated
Which vendors seem to be the best fit for the financial institution?
Which vendors have the best reputation?
Develop RFP (Request for Proposal)
RFPs range from the brief and succinct to the complex and voluminous (seek outside assistance when feasible)
The main purpose of the RFP is to communicate your requirements to the vendor in an organized manner
The RFP will also help each vendor propose based on the same information
Compile vendor profiles
Obtain information regarding each vendor
President?
Headquarters?
Business structure of company?
Parent company?
Number of personnel?
Sales rep contact information?
How long in business?
How many financial institution clients?
How many total installations of the system being proposed?
How many installations in the past year?
Name of system?
Hardware platform?
Operating system?
Programming languages?
Source code provided?
Contact information for last five installations
Send RFPs to finalists
Review proposals received from vendors
Vendor proposals can be very complex with much proprietary language. Be prepared to translate into plain English, a difficult task.
Did the vendor comply with the RFP?
Require line item pricing so you can clearly compare vendor pricing. Some vendors will attempt to disguise pricing by aggregating several system components into one price.
Selected criteria used in the evaluation of vendor proposals can include, but is not always limited to:
Ability to meet system requirements
Management's comfort level with the vendor (e.g., company, people, systems, support)
Vendor presentations
User references/Site visits
Vendor's financial stability
Commitment to financial institutions of this size and market
Cost and value (two different issues)
Commitment to future product development
Ability to execute a smooth conversion
Complete investment analysis/vendor comparison
Understand that this is rarely an "apples to apples" comparison as most systems vary greatly
Consider the fact that some systems contain more standard features than others (e.g., Is accounts payable standard or an option?)
Ensure that the comparison has integrity and is fair
Avoid unrealistic cost saving projections
Narrow the field of vendors
Don't waste the time of vendors who do not have a chance to win the business
Focus your efforts on the viable systems and vendors
Schedule and facilitate vendor presentations
Contact vendor representatives
Secure a venue for presentations
Set the agenda for the presentations
Allocate the same amount of time for each vendor
Complete vendor evaluation forms
Evaluate each vendor after each presentation to "freeze" the presentation in time and document your thoughts
Have each member of the system selection team complete an evaluation
Plan site visits / reference checks
Call references
Schedule site visits
Compile questions for site visit
Conduct site visits
See "20 Questions for Vendor References" in a future installment
Develop system selection compilation
Document the system selection from A-Z
Should anyone question the decision later, simply produce the documentation which will tell the story and support your decision
Make a final decision
Begin Contract negotiation
See "20 Rules of Vendor Negotiation" in a future installment
Have contract reviewed by legal counsel
Submit contract modifications (if necessary)
Discuss contract modifications with vendor
Sign contract
Begin conversion planning
Allow adequate time for conversion planning
Prepare your staff for the work ahead
Communicate the plan!
All of the above steps are not necessarily executed sequentially. This is just one of many structured approaches. Your approach will depend on your financial institution's culture and the system being reviewed.
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