When it comes time to evaluate an FI’s core systems, organizations sometimes enter the process with a high level of frustration around their current solution or vendor. This inherent frustration can lead to a desire to make big changes. However, because changing out a core system significantly impacts an FI’s productivity, it is wise to take a calculated approach, said Mike Neale, technology consultant at Profit Resources, Inc.
Potential bias can negatively impact comparisons of the existing solutions and new alternative solutions. Incumbent bias may arise for three reasons:
- Frequently, depending on the level of ownership of technology, the depth of knowledge of new features of the existing incumbent solution erodes over time. Often core applications have changed over time to meet new requirements, but longtime users may be unaware of the changes.
- Sales presentations are specifically designed to deliver the “wow factor” of the new solution.
- Team members with strong personalities who have previous experience with competitive technology can significantly influence opinions toward a bias for alternatives.
“The value of taking a calculated approach to system selection helps to remove any emotional bias,” Neale said. “It’s important to identify the business requirements and determine whether the vendor meets those needs before putting out an RFP. If there are gaps, they should be documented and assessed methodically.”
Neale suggests taking a process-driven review of organizational strategies, business objectives and needs when establishing true business requirements for evaluating solution options. Before the FI embarks on a full analysis of alternative solutions, the incumbent vendor should be measured against the business requirements. Identified gaps should be discussed with the incumbent provider to determine if feature sets or ancillary solutions exist.
If significant gaps exist in the incumbent’s suite of solutions, an RFP should be issued with alternative solutions measured against the business requirements, improving the quality of the whole evaluation process.
“The goal is to maximize shareholder value by using a methodical process that will establish how well the key business objectives will be met,” Neale said. “This will help the FI avoid unanticipated impacts to the business.”
Profit Resources specializes in identifying profitability improvement areas for financial institutions through revenue growth, cost control, streamlining processes, and effective use of technology. Contact us to learn more about our personalized approach to propel growth and improve profitability.