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Tech Time: Best Practices for Selecting a New Core Provider

abstract digital illustration of core technology with floating numbers and shapes representing data and APIs around a centrals swirl
Charlie Kelly Photo
Partner
Remedy Consulting

4 minutes

Timelines, deal breakers (and makers) and project leadership are crucial to a successful selection process.

When your consulting practice is built on helping credit unions improve their technology, one of the best things you can do is to learn from your own mistakes, particularly if that makes things better in the future.  We’ve learned a few things in managing technology assessments and contract negotiations over the years that really help smooth the process when dealing with vendors.

If your credit union is considering issuing a request for proposals for a new core system or another major technology vendor, consider some of these ideas.

1. Timeline, timeline, timeline. 

Starting the core selection process too late really puts your team at a disadvantage, and the process of going through an RFP, choosing a vendor, negotiating a contract and getting on the implementation schedule generally takes a lot longer than most management teams think it will.

For a core system selection, the rule of thumb we use at Remedy is to start the project 36 months before the contract ends with the current core provider.  If you are simply planning to renew a contract with your current provider, start the process no less than 24 months ahead of the current contract end date.

I could walk you through the math or the reasoning behind the 24/36 rule, but for now I’ll just let you know that the downside of engaging too late is a rushed schedule, less negotiating power and possibly some sticky contractual issues with your current provider that could cost quite a bit to detangle. Err on the side of being a bit early and you won’t regret it.

2. Define why you need to change right at the start of the project.

Before you even start a core selection project, consider that a high percentage of credit unions that go through a formal RFP process to change core vendors stay with the same provider. They go through an entire process—RFP, system demonstrations, proposal review, etc.—and then don’t make the change.

Why is that?  Simply because change is difficult, particularly a decision like changing your core provider.

When it is decision time, it’s tough to be a member of the senior leadership team that makes a decision to change with this many consequences. So, with that said, consider setting some criteria or a ranking system before you start the project. If X happens, we agree to change.

Examples might be a more efficient workflow with your teller line, a more effective mobile application, better integration with other products and/or all of the above. Whatever it is, try to get the team to decide ahead of time what it would take to change versus what the current vendor would have to do to win the business. That will make the decision much easier when the vendor(s) review is complete.

3. Assign a project manager to drive the process internally.

Whether you use a consultant to drive the process or do it yourself, assign a project manager that is not your CFO or COO to manage a combination of your internal team and the vendors that will be part of the process.

Here are a few things that this person could get organized for you:

  • Set major goals and assign tasks. What date will RFP be sent out?  When are responses due? When will the demonstrations be completed by?  When will the financial comparison (TCO) of the vendors be complete?
  • Who will be on the RFP team, and how often will they meet?
  • How do we rank the vendors?

4. Consider a consultant.

A consultant telling you to use a consultant could be seen in the same light as your plastic surgeon recommending a body enhancement—of course, they will!

However, in this case, I’d say that there are places a consultant could be genuinely helpful.  You may not need someone from the outside to run the project for you, but when it comes to the contract stage, rates and contract language may not be fully transparent. Said another way, the contract is written by the vendor, not your team, so having a third party review it may save you some real money and headaches throughout the term of the contract.

The other place a consultant may be useful is to review the overall product offering. As an example, just recently we had a client approach us to do a last-minute review of a mobile offering. They wanted us to review specific parts of the contract for terms and conditions only and had effectively told the vendor that they won the business before we got engaged.

We spent a few minutes looking over their offering and had to let them know that this vendor did not communicate with their current core software—there was no interface built to do what they wanted to do.

We are not sure how this was overlooked, but it was enough of a technical snafu that the credit union opted not to sign with the vendor and had to start the selection process over. So, sometimes a consultant can be useful in product analysis as well. It could save you some real headaches later to have a third party reviewing all aspects of your technology stack.

That’s all for now. Good luck!

Charlie Kelly is a partner at Remedy Consulting, New Berlin, Wisconsin, and the host of BankTalk Podcast. Remedy Consulting helps community financial institutions thrive through best-in-class consulting services specializing in technology contract negotiation, technology pricing and system assessments, contract terms and conditions improvements, and FI strategic planning. As a trusted advisor to community financial institutions, the Remedy Team has executed over 700 system selection and vendor negotiations since 2016. Our clients receive a cost reduction on their core vendor contracts and increased efficiency with Remedy’s price repository. To learn more about Remedy Consulting, visit www.remedyconsult.net.

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