| When I hear the phrases "Data Processing" and "Best | | | | system. |
| Practices", each has such a different connotation than | | | | Now your are ready to select core application |
| it had ten years ago. Back then, the community | | | | systems for comparison. Try to limit your potential |
| banking industry wanted reasonably priced and fast | | | | vendors. Too many options could prevent you from |
| (comparatively speaking) customer record | | | | making a decision. I have seen situations where a |
| accountability and transaction processing. The most | | | | management team compiles a significant amount of |
| significant issue was cost and whether or not such | | | | information about particular application systems and |
| services were better controlled by implementing an | | | | gets lost in the numbers. To make the situations |
| in-house computer operation or to outsource to a | | | | worse, the systems were all sales demonstrated on |
| data center. Costs, security and staffing issues | | | | site, and each one was found to be comparable in its |
| typically drove this decision making process. In | | | | "ease of use, menu driven screens and management |
| today's environment, the management focus has | | | | reporting options. Decision gridlock occurs, and with |
| shifted from processing accountability, which is now | | | | each passing day the fear of selecting the wrong |
| assumed, to one regarding the need for profitability | | | | application system grows. |
| measurement, sales and marketing databases. | | | | Phase II - Vendor RFP Process |
| Because of increased competition for additional | | | | Your initial contact with a potential vendor should not |
| market share, and the strategic objective of meeting | | | | be to line up an on-site software demonstration. |
| existing customer needs, organizations today must | | | | Instead, express your interest in their product and |
| rely more than ever on core application databases to | | | | request an introduction meeting where a request for |
| give them reliable information about their products, | | | | proposal ("RFP") document will be distributed for |
| customers and service offices. The starting point to | | | | completion. |
| achieving such a strategic objective rests with the | | | | 1.) Always start with the resume of the vendor. |
| product and core application service providers and | | | | Evaluate the vendor's background. Look for evidence |
| their systems that are selected. | | | | to support industry specialization, financial stability, |
| With the significant advances made regarding delivery | | | | and service reputation. |
| systems such as real time transaction processing | | | | 2.) Consider whether the vendor's products are being |
| tellers, telephone banking, debit and credit card POS, | | | | kept current with new technology trends. PC driven |
| ATMs, Internet banking, and remote deposit capture, | | | | client / server technology has become the standard |
| a core data processing and archiving system must be | | | | the smaller (less than a $ billion in assets) financial |
| able to either accommodate a variety of third party | | | | institutions. |
| vendor applications or come from a service vendor | | | | 3.) The RFP will include a list of customer references . |
| that offers a suite of quality integrated applications. I | | | | Select comparable size or larger customers to your |
| am going to present the method I have used with | | | | company for site visits and telephone interviewing. |
| great success in performing a current core application | | | | The vendor will supply you with their best user sites, |
| vendor product and service review, comparison and | | | | which is really to your advantage. I have found that |
| selection process. | | | | these sites are open and candid in answering |
| Every four years, or approximately eighteen months | | | | questions regarding the conversion process, software |
| prior to the service contract expiration, management | | | | features and functionality, user groups, vendor |
| should review the ability of their current data system | | | | service quality, software enhancements, and any |
| and service provider to meet their business needs. If | | | | other questions or concerns you may have. |
| a decision is made to investigate the feasibility of | | | | 4.) After a well planned site visit, and a compliment |
| converting from the current core application system | | | | of user bank conference call interviews, the next |
| and vendor to another, a formalized information | | | | step is to identify your vendor and core application |
| gathering process should occur. | | | | system finalists. |
| The following risk management process is beneficial in | | | | 5.) Ideally, the two or three finalists should be |
| building a comprehensive and effective approach to | | | | requested to setup on a computer lab to allow your |
| support management's due diligence and decision | | | | personnel to try out their software applications with |
| made. | | | | vendor help onsite at your location. |
| Phase I - Fact Gathering | | | | 6.) Review and compare each finalist vendor's site |
| 1.) Each key area of the company must be | | | | visit and reference contact results, and their other |
| represented on the project team. This will help in | | | | RFP information, such as software features and |
| getting internal end user as well as customer needs | | | | functionality, third party partnerships and software |
| identified, keep all personnel in the loop, and minimize | | | | compatibility. A diligent detailed analysis is necessary. |
| the risk of key issue omission. For example finance, | | | | Your goal is to be able to evaluate vendor proposals |
| compliance, deposit and technology operations, | | | | on an "apples to apples" basis. |
| branch network, loan production, personal banking, | | | | 7.) A five year financial / investment analysis should |
| trust, marketing and executive areas should be | | | | then be completed. The projections cover initial |
| represented on a system evaluation project team. | | | | conversion, ongoing operation costs, and investment |
| 2.) Identify your current system computer hardware, | | | | options such as lease or purchase. Make sure the |
| ancillary processes such as item and document | | | | vendors are quoting costs and capital investment |
| imaging, optical storage, system and application | | | | requirements on the key items such as appropriate |
| software, personal computers, LANs, | | | | computer hardware, communication media, application |
| telecommunications, business resumption impact and | | | | software, and maintenance options. |
| ongoing maintenance coverages. | | | | Phase III -Additional Best Practice Procedures |
| 3.) Identify staff "internal customer" needs. Allow | | | | Other basic project issues that must be addressed |
| your personnel to openly indicate issues, both positive | | | | as a part of any decision process include a risk |
| and negative, with the current systems and service | | | | management assessment, by critical risk factor, |
| provider. Issues such as vendor support, customer | | | | updating of policies and procedures, business |
| and product data availability, information report | | | | resumption needs, and staff education and training |
| flexibility, regulatory compliance needs, security, | | | | needs. In addition, physical site availability, physical and |
| manual vs. automated processes, and staff training | | | | logical security needs, operational internal controls, |
| must be identified. | | | | and staffing qualifications and size round out the |
| 4.) Circulate a user PC and core system satisfaction | | | | remainder of the issues that must be addressed. |
| survey among key operating, customer service and | | | | Phase IV - Action Plans And Project Implementation |
| administration personnel. Perform follow-up interviews | | | | Schedule |
| with selected individuals as necessary to confirm and | | | | Action plans and an implementation time line must be |
| expand on user needs and concerns identified. | | | | developed. Project sponsors (Those identified at the |
| 5.) Compile statistical information regarding current | | | | beginning of this project) will work initially with the |
| system processing and storage capacity levels. | | | | vendor and the company's Technology Service |
| Examples of statistical information needed would be; | | | | department in documenting the chronological order of |
| average transaction volumes by account type, total | | | | action steps. |
| customer accounts and concentrations of multiple | | | | This should help getting a more formalized apporach |
| account arrangements, and check clearings. This | | | | to supporting management's understanding of |
| information is critical in determining a pricing structure | | | | business risk associated in the computer core |
| for a possible service bureau contract, or in acquiring | | | | systems selection process or even what many |
| the appropriate computer hardware for an in-house | | | | believe is just a basic service renewal decision. |