Every credit union takes a different approach to its technology buying. However, just as with anything else, there are extremes at each end of the spectrum.
At one end are the credit unions that are happy to choose the path of least resistance. When they find themselves in need of some sort of add-on product or service, they simply buy whatever their core data processing vendor is selling. It might be a product developed by the core vendor, or a product from a company with which the core vendor has a financial relationship.
In any event, this is a safe choice. Credit unions that take this approach to technology buying can rest assured that the product they chose will at least meet minimum needs, and also will be relatively easy to deploy. It's not difficult to see the appeal of such an approach.
The problem is that in today's competitive arena, "good enough" often isn't. Given the same needs, if the bank the next block over deploys a better overall solution than your credit union does, that bank may very well turn that technology acquisition into a competitive advantage. In short, the core vendor solution may not be the best solution, and it may not even be the most cost-effective solution.
At the other end of the spectrum are the credit unions that invest a considerable amount of time and money identifying, acquiring, and most important, maintaining that Holy Grail known as the best-of-breed solution. Thanks to their own due-diligence, these credit unions are assured of finding just the right solution to meet their needs-or at least the one that comes closest. Of course, this approach to technology buying is not without its own down side.
As already noted, taking the best-of-breed high road can be very expensive. It can also be very complex. Because such a credit union has pieced together its own Frankenstein's monster, it now becomes the chief guarantor that everything will work properly. The core vendor can't be expected to play the role of Van Helsing and slay the monster when it runs amok. Such a technology strategy can also be lonely. There are likely no other credit unions running in the same environment with which to share tips and horror stories. The sharing of ideas has always been a cornerstone of credit union technology.
Somewhere in the middle ground between blind reliance on the core processor and the rigors of best of breed, there's a growing interest in the concept of "pre-integrated best of breed." (If you're one of those who feel the need to convert everything to an acronym and then pronounce it, I suppose you can call this PI-BOB.) Credit unions interested in pre-integrated best of breed want the best of both worlds-and quite frankly, I think they deserve it.
These CUs want the comfort of working with solutions that are endorsed by their core processing vendors. They want to know that they're buying a product that's already been proven to work with the technology they have in place. They want the assurance that deployment will require a minimum amount of effort and frustration.
However, just as important as the niceties of a vendor-endorsed solution, these progressive credit unions want choice. They're calling on their data processing providers to offer multiple solutions that address the same need. This only makes sense.
For example, there are a number of very good document management solutions on the market today. The best document management solution for Credit Union A may not be the best document management solution for Credit Union B. Yet, if these two credit unions both use the same data processor, they may both feel forced into using the same document management solution. There's no reason for it.
Some core processors may squawk at the idea of having to manage more third-party relationships. However, third-party relationships are all about dollars and cents. And the fact of the matter is that if a core processor offers only one solution for a particular need, a certain percentage of its customers will go elsewhere looking for a better solution. By offering a wider range of solutions, core processors can ensure that they capture the largest possible revenue from the technology choices made by their customers.
Pre-integrated best of breed is really the next step in the evolution of credit union technology. In the early days, virtually all core data processing systems were closed. If a credit union needed to add something, that something had to come from the core processor.
In the past few years, most data processors have committed to opening up their systems to third-party products (although admittedly some of this commitment has been half-hearted at best). The problem is that by simply saying, "Okay, our system is open," the core processors have placed an inordinate amount of technology burden on the CUs.
The goal of pre-integrated best of breed is, at least in part, to relieve the credit unions of some of this burden. Core processors who adopt this strategy can say to their customers, "Yes, our system is open, and here are some options that we feel are worthy of your consideration as you take advantage of this openness. We know these solutions work in our environment."
This is the strategy that progressive credit unions want. This is the strategy that progressive credit unions need. And this is the strategy that core processors interested in the long-term evolution of credit union technology will adopt.
John San Filippo is the founder and president of The Financial Technology Alliance. The online home of the Alliance is the Financial Technology Marketplace, located at www.financialtechmarket.com.
