SAN DIEGO-USA Federal here saved about $250,000 on technology last year using an age-old shopper's technique: bargaining for a better price.
"There's money to be had," said Carolyn James, SVP/CIO with the $700-million USA Federal. "Vendors have cut their prices going into 2009."
That's true even for the vendor giants that traditionally have courted big banks, she said. "Large vendors, who were a little bit snobby with credit unions in the past, want to get into the credit union market because their bank relationships aren't paying off anymore. They're willing to offer some big incentives."
As with some of her peers, James and her staff found herself pinching pennies last year even as she worked to complete a number of big information services (IS) projects, she said.
"I was extremely busy in 2008 but had very little budget," James told Credit Union Journal. "The IS department was able to do a complete vendor review and renegotiate our contracts, and, in some cases replace vendors when we found vendors who could do more for less."
The credit union was able to save an additional $600,000 in direct costs or cost avoidance using other techniques, such as reviewing contracts and bills for errors and stipulations; downgrading maintenance contracts; conducting formal Requests for Proposal (RFP); implementing bandwidth optimization technology, and improving employee training, said Mike Butler, assistant vice president-network and Jim Ward, enterprise project manager.
USA FCU bargaining techniques seem straightforward. As James explained, "You just have to ask."
The CU's biggest bargain was found on a disaster recovery backup project when it saved $100,000 in "special year-end pricing."
Meanwhile, an RFP saved USA Federal $70,000 on a new communications system, due to competitive bidding, according to Ward and Butler.
An upgrade to wide-area network (WAN) bandwidth not only increased service levels but also helped USA FCU avoid $50,000 in costs, said James.
And a few months after submitting an initial proposal, an intrusion detection and prevention system (IDS/IPS) vendor slashed its price by 60%, she added.
USA FCU also shopped around on the Internet for hardware, keeping their existing vendors honest about hardware prices, said Butler and Ward.
USA Federal's newfound savings has worked wonders for the credit union, James suggested.
"As a result of the bargaining, we set up a brand new disaster recovery site. We'd had no budget for it." The credit union's phone and core systems are replicated at the site, and document management and file sharing platforms soon will be.
At the end of the year, the IS department was 4% under budget, she said.
Asked why she didn't bargain systematically with vendors in previous years, James said she hadn't been as focused on cost; her primary goal in the past had been to find services that satisfy business needs.
Besides, "achieving this kind of savings just wasn't possible a couple years ago," when the economy was stronger, she noted.
James started the bargaining process by evaluating all major vendors in 2008, including IDS/IPS, penetration testing, and annual assessment, but "didn't try to tackle the core system," she said. "We tend to ask the core vendor for free professional services or functionality."
"We are 100% sold on the concept that you always have to ask for a discount," said Ward. "Those who ask, receive, most of the time."
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How CUs Are Using Technology To Stay Strong As Market Teeters
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