Simplicity Bank Outsources Its Core

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When David Hanighen arrived in October 2011 as the newly hired CIO at Simplicity Bank, it was immediately obvious to him what the Covina, Calif.-based institution had to do to wring the most efficiencies out of its operations to better achieve its community banking goals: Outsource the core.

"The job processing done here was a fraction of the total amount of job processing that was done in the in-house environment where I came from," Hanighen says. "The job schedule was about a page and a half, whereas it was about 40 or 50 pages where I was before. So it became pretty clear that it really didn't make a lot of sense to have operations processing in-house."

Simplicity has run the credit union-focused Episys core banking system from Jack Henry & Associates' Symitar for years. But Hanighen needed to redeploy his tiny IT staff toward product development as the bank shifted its focus toward full-service community banking.

The former credit union for California employees of Kaiser Permanente Medical Care Program had converted to a mutual savings bank called Kaiser Federal Bank in 1999, which in October 2010 went fully public via a $63.8 million stock offering. This November, the holding company changed the bank's name to eliminate any confusion with its past: Namely, the fact that it used to only serve Kaiser employees.

Simplicity serves and seeks any customers throughout the I-210 Corridor just south of California's San Gabriel Mountains, which stretches roughly from Los Angeles to Rancho Cucamonga. Hanighen says the bank has begun a shift from a formerly "wide and weak" branch footprint to a more centrally focused one. The institution also expects to position more ATMs outside of only Kaiser facilities. New lines, like business banking, and product rollouts like mobile remote deposit capture are also expected, to both boost customer service and further differentiate the bank from its Kaiser-focused, credit union past.

"We have a very small IT staff here, so we don't have a lot of expertise in the hardware and the operating system software that Symitar uses," Hanighen explains. "Without Symitar's expertise and resources, we were not going to be able to upgrade our hardware or our operating system nearly as easily.

"We also wanted to put a focus on development rather than operations," he adds. "The two resources I have right now devote about half of their time to operations. By letting Symitar do that work for us, we'll be able to get almost a full resource back for development, because we're going to be expanding our presence in the community and we'll have some new products we're going to want to roll out. So it was really a core competency question: Do we really need to be in the operations processing line? Or is there somebody else who could do that better for us, more efficiently?"

Simplicity signed a contract in March with Symitar to shift to the vendor's Ease service bureau program, with full migration planned for a weekend in October 2013. Migration was pushed back from this month so that Symitar could finish work on upgrades to its Ease offering. The changes will allow Simplicity to keep using its biometric log-ins, and to continue to assign dynamic IP addresses in-house.

The $923 million-asset bank had long used fingerprint-based log-ins in its Episys environment for all employees. But no other Ease clients used biometrics, so its service bureau didn't accommodate them. Ease also required use of static IP addresses.

"But the desire to move to the dynamic IP was one that even their existing Ease clients wanted," Hanighen says. "Many of them had to roll back to static IP in order to get on the Ease program. So I think us pointing out that we weren't going to make the migration unless dynamic IPs were enabled helped make the change. So that'll be taken care of in the first quarter. And they're addressing the biometric issue I think because it's good for their program to be able to state that they support both biometric devices as well as user ID and password logins."

Hanighen expects outsourcing will save the bank $200,000 to $250,000 a year, nearly half of which, he says, should come from avoiding hardware updates. There'll be no need for duplicate host hardware at Simplicity's secondary data center. Hanighen expects to keep his headcount at current levels, despite new IT initiatives.

"It also gets us out of the need to rely so heavily on consulting from Symitar," he adds. "We were spending, and we are currently spending, quite a bit of money with Symitar to have them come in. Because they have the hardware and software expertise that we just don't, and won't, have."

 

 

CASEFILE

BANK: Simplicity Bank

PROBLEM: How to develop new products without boosting head count?

SOLUTION: Outsource the core; repurpose operations staff.

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