Technology Shopping? Duo Share Checklist To Ensure It's Done Right

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Choosing a technology vendor can be an intimidating process, but two credit union have some advice on how to avoid some common pitfalls.

Speaking to the CUNA Lending Council's annual meeting here, Renee Gauthier, IT program manager for Seattle, Wash.-based Boeing Employees CU, and Isaac Losch, software support manager for Pennsylvania State Employees CU in Harrisburg, Penn., agreed the most important elements of a vendor hunt are research, creating a formal request for proposal (RFP) that will allow a credit union to match its needs to a company's strengths, and having the vendors provide demonstrations.

According to Gauthier, BECU uses a seven-step process, starting with a definition of business needs.

"You will forget to ask something, so shoot for 80%. Winston Churchill said, 'Perfection equals paralysis.' Agree on high-priority functional requirements, or 'knock-out criteria,'" she advised.

Once a credit union has an idea of its needs, Gauthier recommended it create a request for information, or RFI. An RFI is less intensive than an RFP, and should be sent to approximately 12 vendors. "You wouldn't want to send an RFP to 12 vendors," she explained.

CUs then should narrow their list to two or three vendors depending on the answers to the RFI. "The key is to identify appropriate differentiation criteria," said Gauthier.

Losch agreed with the advice credit unions should do as much research as possible before getting to the RFP step. This includes online research, checking references, comparing prices and performing site visits at the potential vendor's office.

When Losch writes an RFP, it has six sections: introductory and background information; prospective vendor information, such as the number of clients it has and years of experience; information on any third-party software and-or systems; a due date, a schedule for installation and training, and pricing information.

"Make sure to clearly state all questions the vendor needs to answer," he urged.

Both Losch and Gauthier recommend using spreadsheets to compare the vendors who respond to an RFP. Losch said the left-hand column should be the features the CU wants from the technology, broken down into as many sub-areas as necessary to perform a proper comparison. Gauthier said BECU assigns a score and a weight to each element.

"The options for weight are 'required,' 'needed,' 'desired' and 'bonus.' Multiply the weight times the score for each category. Add the points together for the total score. You might be able to eliminate a vendor based on scores before scheduling demos," she said.

When the credit union is ready for the vendor to perform a demonstration, Gauthier said the CU should then supply the script. "Don't let them show you what they want; have them do what you want," she said.

After the demonstrations are complete, there still is much work to be done before choosing a vendor, according to both credit union executives.

Losch said a credit union should walk through risk assessment. This process includes brainstorming all possible risks the technology could bring, defining the top five risks, defining the impact and likelihood of those risks, and defining the controls for each risk.

"Once you have done that, create a due diligence checklist," he said. "Make sure you know a vendor's technology and industry expertise, its operations and control, and its financial condition. Pay close attention to contractual issues, such as ownership and licensing of the software and-or systems, duration, and termination."

PSECU uses a steering committee composed of managers from each business unit to ensure proper communication before final selection, Losch said.

Get What You Pay For

According to Gauthier, the vendor that charges the least amount of money is not necessarily the best.

"You don't want to be a company's smallest or largest client. Get references from comparably sized credit unions or other companies," she said. "Also, look for vendors to ask questions, not just be an order taker. The more collaborative they are, the better."

Gauthier further advised credit unions to include penalty and bonus clauses in the vendor contract-rewarding early delivery and penalizing late delivery, and to make sure the vendor has a disaster recovery plan.

"Don't forget to look to the future. Find out if a vendor can unbundle for you, or if you have to buy everything. Does the vendor have a tool kit environment? In other words, is it easy to add features, or does the technology operate in only one way?"

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