Western Independent Banker - March/April 2008 - (Page 30)

By John Jones Rethinking ROI Planning to Make the Most of Technology Investments TODAY A STRATEGIC view of core technologies is critical to building bank value and success. Therefore, when evaluating return on investment from a technology vendor, it can be helpful to broaden the scope of things to consider. The Technology Structure Technology is useless if it doesn’t bring competitive advantage and value. It must be more than economical or flashy. It must be built to strategically support efficiencies and services, integrate the entire bank and put the bank in control. For example, an open structure and a single, relational source of data storage bring greater value by providing unhindered access to every account and relationship detail using one system. Banks should also be able to independently control the technology and make it adaptive, according to their immediate needs. This impacts ROI by enhancing staff efficiency, service capability, and strategic responsiveness. The Total Cost When the total cost – short- and longterm – is unclear, it can put a bank’s ROI at risk. Evaluating the total cost of ownership includes both quantitative and qualitative attributes. Quantitative costs include known hardware and soft ware investments. Qualitative costs include increased support center calls due to errors or restricted access, inability to support new services, costs for upgrades or new branches. Those costs then need to be measured against quantitative savings (e.g., lower staff, equipment, maintenance, programming costs) and qualitative benefits that permanently accrue as a savings to the bank. This includes scalability to support growth, full access to data, enhanced efficiencies across channels, reductions in staff and competitive capabilities, such as the ability to create unique products “on the fly” for a specific customer or as a quick response to current business trends. Hidden Costs Sometimes banks fail to consider potential hidden costs. For example, consider hardware requirements in other areas of the bank like the back office or the teller line, and determine if the vendor requires hardware upgrades or fees for future software upgrades. Ask the vendor to provide a baseline minimum for its software up front and to be clear about upgrade requirements. Banks should also question vendors about costs that may not be in their proposal and contracts. For example, charges for the right of entry to certain data or for system inquiries can lead to unexpected per-use fees or custom programming. Its best if every field of data is immediately, freely available. Ask for clear itemizations of all costs (including one-time, monthly and per-use fees), and quotes for custom services. If the vendor has provided everything up front, initial billings should closely match their proposal. Relationship Return Questions about the banker/vendor relationship can also address overall value. What is the training method? Training impacts budgeting, efficiency and service. Does the vendor use a “train the trainer” or an in-bank, hands-on classroom approach? How much training is included? Are additional options available and affordable? How much voice does the bank have in product development? Examine the extent and ways in which vendors enable regular input and involvement from customers (e.g., user groups, surveys, site visits, beta testing). Does the vendor then act on that input in a timely and meaningful manner? This can impact how well the technology suits a bank’s ongoing competitive needs. Open dialogue also addresses emerging technologies and makes bank IT staff a part of strategic planning, rather than just a resource or engine by which planning is carried out. What is the company structure? Are vendor circumstances such as stock market performance, mergers and acquisitions applicable? These could trigger an assimilation of systems, impromptu conversions, vendor layoffs, reduced support, discontinued products and services or a delay in improvements. How might add-on products impact the total cost? Are the options restrictive? Does the system integrate with a variety of existing technologies without excessive costs or penalty? Are only premier products from an acquired division or vendor offered? What would it cost not to utilize a vendor’s proposed option? What is the level of accountability? Vendors in sync with banking desires provide Service Level Agreements (SLAs) with some teeth, including reasonable thresholds and non-performance discounts. Is the vendor’s support staff available by phone at convenient hours? What is the average response time? Does executive management make itself available to the bank? In the end, bankers can be better served by rethinking what goes into a technology ROI analysis to ensure their selection addresses all that is at stake and that it meets their strategic initiatives. John Jones is president & CEO of Hutchinson, Kansas-based DCI, a provider of full-service bank technology and processing solutions to the financial industry. He can be reached at jjones@datacenterinc.com. “Technology is useless if it doesn’t bring competitive advantage and value. It must be more than economical or flashy. It must be built to strategically support efficiencies and services, integrate the entire bank and put the bank in control.” 30 www.wib.org Western Independent Banker http://www.wib.org

Table of Contents Feed for the Digital Edition of Western Independent Banker - March/April 2008

Western Independent Banker - March/April 2008 Contents A Message from the President & CEO The Forest Through the Trees Differentiating Your Bank Through the Five Senses 51st Annual Conference for Bank Presidents, Senior Officers and Directors Building Franchise Value Deposit Gathering Steps to Determine ROI on a Successful Brand Want to Improve Customer Loyalty? Managing the Change Your Bank Needs to Grow Ten No-Fail Strategies to Create Profit-Rich Growth Niche Banking Rethinking ROI Using The Reserve’s On-Balance-Sheet Sweep to Their Advantage WIB Calendar Welcome New Members Index to Advertisers Advertiser.com

Western Independent Banker - March/April 2008

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