The mainframe computer, whether operated in-house or by an outsource vendor, and all of today's personal computer applications are widely considered to be the heart of a bank.

Deposit and loan products are delivered by automated systems. Computer track how well the bank is doing. A variety of special needs in departments such as marketing and human resources are satisfied by mainframe and PC technology. Automated teller machines, the automated clearing house, and point of sale systems have added a new dimension to the delivery of banking services. Recently, imaging, home banking, and automated voice response are getting attention, and all these forms of automation clearly will become more important in the future.

It has become incumbent upon the banker - particularly the community banker who has traditionally been removed from technology decisions - to understand how computers affect the business now and how they will in the future.

There are four critical points that will define success or failure: (1) selection of the system, (2) installation, (3) post-installation implementation, and (4) biannual technology audits.

The Selection

The overall approach to making the right decision - look at a number of solutions, select two to three for intensive review, drive a hard bargain, and go with the winner - is well-known. My recent experience with community bankers on deposit and loan processing systems suggests the importance of reinforcing the following points.

Select a solution to support the needs of the business rather than operating the business to take advantage of the system. The system is a means to an end rather than the end itself. Selecting a computer system is somewhat like selecting a car. Any one of many models will get the buyer from here to there. The variables - comfort, features, color, style, price, and service - are important personal considerations.

Likewise, most systems solutions will solve any bank's basic needs. Its strategic needs should guide the evaluation and selection process.

The bank's strategic plan and direction should drive its selection criteria. Growth, deposit and loan product mix, customer mix, and locations are some of the issues that will need to be explored and then documented for the vendors.

I also suggest keeping the selection process as simple as possible. Cut the number of vendor candidates to two or three as quickly as possible. Talk to some users of the systems being considered. Expect to negotiate on price - there will be discounts.

Don't underestimate the cost of changing vendors. Training alone will involve everyone in the bank and is usually very expensive. After taking a careful look at the alternatives, it may make more sense to spend some money improving the current system rather than changing.

Installing the System

A critical six to eight months is needed to prepare for installing a new system. Procedures and reports will change. Equipment will be ordered and installed. Everyone from tellers to directors will need to be trained to deal with the new system.

Yet the need to operate the old system while learning the new system will necessitate concentrating only on the basics.

I see the selection and installation process as comparable to the way I have bought and initially used a VCR. Prior to going to the store I did some homework, studying which products were rated best, what features I wanted, where I could get the best price. I went to the store on a Saturday afternoon, bought the VCR, picked up a movie, and arrived home to install the unit.

I learned and mastered the basics of operating the unit from the manual. The toughest challenge - connecting the cable box, the TV, and the VCR - was not covered adequately in the instructions. Busy signals when I called the cable company only increased my frustration. Finally, with no help from the manual or the cable company, I tried every alternative until one worked.

I was so intent on watching the movie that I never read the more complicated parts of the manual about fine-tuning, high fidelity recording, the tape timer, and other features.

Patience Required

Banks take the same impatient approach when installing a new system - which is all right only if there is a plan to revisit "the manual" after installation and take full advantage of the advanced features and functions that were so appealing when encountered during the selection process.

The conversion period is a demanding time for two principal reasons. The technical staff is most often limited to one or two, and they will be extremely busy selecting options, installing equipment, learning the system, tackling the unexpected, and other related jobs.

Also, the amount of time available for clerks, tellers, and management to learn the new system will be limited because the current system must be attended to while studying the new one.

Yet the conversion period is an opportunity to clean up sloppy, time consuming, unproductive procedures and avoid burdening the new system with old procedures.

For example, products should also be reviewed and obsolete ones eliminated. It makes no sense to go to the trouble of engineering the new system to handle discontinued deposit and loan products just because a few customers still use them.

The conversion period is also an ideal time to evaluate the bank's management reporting structure. There are often too many reports - those that are distributed are not used, and those that are used contain too much data. Changes made as a result of installing a new system can be an effective way to add credibility to the new system.

The Implementation Process

This phase is often given short shrift. Typically, the six- to eight-month installation period leaves the bank and its employees exhausted, or at least ready for a breather. But the people often never get back to reading the "manual" and miss out on desirable features and functions.

The bank probably has cut corners during conversion and now needs to revisit the completion of procedures, additional training of employees, development of better reports and forms, and other productivity related issues.

The community bank may have a difficult time freeing the resources to address post-installation issues. Recognize that the issue needs to be addressed and build it into the overall implementation plan. The system's full value will not be realized unless this gets the attention it deserves.

Biannual Audits

There is no such thing as a stable environment in the use of technology. Personal computer and mainframe systems are constantly changing as a result of a number of things ranging from system upgrades and software releases to the installation of special purpose systems and/or equipment. The potential problems include:

* Failure to keep up with new releases. In the case of in-house systems, the user is responsible for installing any new software and preparing to use the new features and functions.

Banks that rely on an outside servicer must also adjust procedures to take advantage of the changes. Problems develop when a bank fails to keep up with the new releases and training staff to take advantage of them. Once you fall behind it is difficult to recover.

Failure to use special-purpose systems that have been purchased and installed. There are literally hundreds of such systems for community banks to satisfy specific objectives, and bankers are not reluctant to spend money on these systems. The problem is that they are often not utilized.

* Failure to train new employees to use the system. Many community banks employ the "buddy system" - an experienced teller will train a new one. A mortgage originator will train a replacement. Over time this is bound to result in shoddy practices being passed on from trainer to trainee.

Critical Elements

The proper installation and use of PC and mainframe technology is critical to the success of a community bank. Management must understand the nuances of the technology life cycle.

The importance of selecting the right system and an attentive vendor cannot be overstated. But the installation and post-implementation phases also need concentrated attention if the value of a system is to be fully realized.

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