Exec Creates Unique Way To Measure System Costs

Register now

Steve Hennigan has nailed down the five-year core system costs for San Antonio FCU's (SACU) new in-house platform.

In fact, the senior vice president of IT at SACU devised a predictive cost model that Cornerstone Advisors heralded as the "most creative core system financial analysis" of 2004.

"I just used some basic statistical methods and a spreadsheet to calculate various outcomes and then plotted them on a normal distribution curve," Hennigan said. "The story is boring."

Others disagree. "Steve is very bright and clearly understood what he was doing as part of his financial analysis of the project," said Carl Faulkner, principal at the Scottsdale, Arizona-based Cornerstone Advisors, which worked with SACU to narrow down the search for a new system.

"He used a Monte Carlo simulation to determine the most likely cost of the change, given the data that we had provided," explained Faulkner. "His simulation gave him the probabilities of ranges of cost outcomes.

"Steve's approach was unique because no one has ever done a Monte Carlo simulation with our vendor model data," Faulkner continued.

Dale Marroquin, first vice president of IT at SACU, said Hennigan "took the analysis to the tenth degree. Steve is a very analytical individual, and he just looked at the numbers differently."

The $1.7-billion CU took "everything" from the Cornerstone model data-including cost of living, staffing, consulting and depreciation of hardware, system modules, software and interfaces-and plugged it into a Microsoft Excel decision analysis spreadsheet before ranking vendors and choosing a new core system, according to Marroquin.

Most importantly, the cost analysis accounted for key drivers in the search, including system functionality, Marroquin said. "Functionality was by far the No. 1 driver in our selection process," he said. "We rated functionality across each vendor we were looking at."

Functionality accounted for 40% of the decision scorecard, followed by cost at 30% and then by system architecture, vendor strength, and risk, said Marroquin.

SACU "tore apart" the concept of functionality, breaking it down to modules such as new account origination, mortgage loan processing and electronic services, he continued.

Other credit unions could "absolutely" adopt SACU's predictive modeling approach, Marroquin added, using cost data to emphasize functionality in the decision-making process.

However, warned Cornerstone's Faulkner, "in most cases, the additional information is not valuable if you don't understand the statistics behind the numbers."

Seven vendors later, after the thorough Monte Carlo simulation and a long-awaited drum roll, SACU decided on a vendor. Just like half of the other credit unions that converted core systems last year, SACU decided to switch to the Symitar Episys platform.

The migration to the Episys in-house environment by Dec. 31 will allow SACU to tailor the system to its needs, he said. "We're leaving a service bureau environment where we were promised custom development and it never happened," Marroquin explained.

So far, SACU is pleased with its choice. Marroquin has already noticed the difference in new account origination functionality. "Our previous vendor did not offer internal new account origination. Our member service representatives used a manual process that required several different screens, manual data entry onto four different systems, and no automated workflow."

The new system is "awesome," Marroquin said. "We've got the new account process down to under 10 minutes now."

CUJ Resources

For info on this story:

* San Antonio Federal CU at www.sacu.com

* Cornerstone Advisors at www.crnrstone.com

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER