Secondary is Primary

“Never mistake endurance for hospitality.”
– Unknown

I’m going to push your hospitality this week, GonzoMongers. We’re seeing more and more deals come across our desks from banks and credit unions looking for core processing alternatives. Time to tell you what we’ve been hearing…

At GonzoBanker we have been heavy on the mic regarding the importance of vendors having an interesting secondary/ancillary product story to tell. This is because, given a baseline of minimum core functionality, ancillary systems continue to be the most hotly debated topic during a system selection. No one argues over superior consumer loan repayment term flexibility, but watch the sparks fly if you try to slip a clunky branch automation system past the retail head.

Core functionality gets vendors into the dance; ancillary systems ice the deal.

It’s very simple. Vendors that win deals can electrify the business lines by providing appealing stories for ancillary systems, whether they are the vendors’ own products or well-constructed partnerships. Of course it’s not really that simple, but the vendors with the most momentum in the mid-sized market ($1 – $10 billion) can deliver strong ancillary functionality and/or tight integration.

“But not all ancillaries are created equal,” a wise consultant once said, and truer words have never been spoken. Some ancillary systems do, indeed, carry more weight than others with our bank clients. I’ll break them into five categories:

THE DEAL KILLERS
These are ancillary systems that have a significant influence on the core selection outcome. The vendor that stumbles here is sent back home, shooting the consultant and the bank the serious stink-eye:

• Branch and Sales Automation/Call Center/CRM
  Easily the most intensely deliberated ancillary family. Period. This is, in part, because the retail group tends to be quite vocal in system selection processes, and in some measure because sales culture and CRM are such hot topics now. Even the most grizzled CEOs are jumping on the Sales Culture Through Technology bandwagon. But suppose you could remove the controversial CRM variable from the equation; branch automation functionality would still make or break many a core deal.
• Data Warehouse/Information Management
  The data warehouse issue is a remarkably binary proposition. In the bank’s mind, either the vendor has a data warehouse or it does not. If the bank wants a data warehouse and the vendor has one, the vendor may Pass Go. Otherwise it is adios, cabron. However, subjective discussions regarding the merits of one data warehouse versus another simply do not occur. Never have I heard bankers seriously debate whether Fiserv’s InformEnt goes deeper than Metavante’s Information Desktop.

THE PRIMA DONNAS
These are systems that, depending on a bank’s actual, perceived or planned niche, are vitally important to the bank. As a result, the niched, mid-sized banks tend to go best-of-breed here. The importance for these banks is in finding a core vendor that is not only capable of integrating with established systems, but also willing to do so and at a reasonable price. Notoriously egregious fees for interfacing, professional services and transactions from the core vendor to integrate with these third-party systems can easily cause our client banks to eliminate a core vendor from the hunt:

• Retail Internet Banking
  Most of our clients simply use the system provided by their core vendors. But retail heavyweights will summarily dismiss a core player attempting to use price, politics or bureaucracy to force its own Internet solution.
• Small Business Cash Management
  Same story, different niche.
• Mortgage and Consumer Loan Origination
  Our clients that are heavily entrenched and specialized in mortgage or consumer lending get attached to their origination systems. They cast great disfavor on vendors that are not willing to work with them on integration here.

THE AL GORES
This category is devoted to systems that are important to the bank but do not individually carry enough weight to be considered Deal Killers. Cumulatively, they make a difference, but as stand-alones they do not tend to sway the bank’s decision much:

• General Ledger
  I have had a grand total of one client boot a vendor for poor GL functionality, and that was because of the system’s inability to handle multi-charter processing gracefully. In all but the most extreme cases, mid-sized banks tend to stick with their core vendors’ GL packages.
• ATM/Debit Cards
  I have seen banks excuse vendors from a process due to ludicrous pricing of ATM and debit services, but never have I seen a decision swayed by ATM or debit functionality.
• Voice Response Unit (VRU)
  VRUs are the disposable heroes of ancillary systems. Banks lean on VRUs heavily, but they do not get at all attached to them — not enough to affect their core system decisions, anyway.

THE DON’T GO THERES
These are the ancillary systems that are often offered by the core vendor, but mid-sized banks tend to look elsewhere when making buying decisions:

• Commercial Loan Origination
  Commercial loan origination for our clients is the king of Don’t Go There. This is because Baker Hill so dominates this market that the core providers do not even try to compete.
• Teller Automation
  Only in the most unabashed retail banks does teller functionality carry any weight at all. Designed for the red-headed stepchildren of the banking rank and file, the teller system is more typically tied directly to the branch platform automation decision.
• Account Analysis
  Our bank clients either do not perform account analysis at all, use their core vendors’ products (which typically means that they are only dabbling in account analysis), or they are serious about it and use a third-party system such as Hamilton & Sullivan or Weiland. In any case, the core vendor’s account analysis product isn’t changing many minds one way or the other. One notable exception is Metavante, which most commercial bankers agree does have usable account analysis functionality imbedded in core.
• Online Bill Payment
  Bill pay is nearly always purchased in conjunction with the Internet banking decision.
• Asset/Liability Management, Financial Reporting, Profitability Analysis
  The Finance staff tends to buy these systems in clandestine fashion under cover of darkness. Almost never do we see the Financial team taking any more than a polite look at the core provider’s financial analysis solution. They are rarely looking to replace the existing Sendero, HNC, Hyperion, ProfitStar, etc. system that they are already using.
• Credit Card
  Banks look elsewhere for credit card processing mainly because most core vendors do not offer this service.
• Document Imaging and COLD
  Larger mid-sized banks will use a third-party system. Banks on the smaller end of the scale will use the core provider’s solution if available.
• MCIF

THE ALSO-RANS
In a fit of lyrical genius, Mick Jagger and Keith Richards wrote that “You can’t always get what you want, but if you try sometime, you just might find you get what you need.” And so it goes with these ancillary systems. They may be important, but no one has the gall to protest if they do not get the brand they want. Sometimes it is because the system truly is inconsequential in the grand scheme of things; other times it’s because that system’s users do not carry the political clout to sway the decision. In most cases, these systems default to the core provider. These are the Also-Rans:

• Collections
• Fixed Assets and Accounts Payable
  For our larger clients these systems are sometimes stand-alone decisions or tied to the bank’s financial analysis package, but more often they default to core.
• Account Reconciliation
• Wire Transfers
• ACH

No hard-hitting themes, precious little soap-boxing, and even less (as in nil) vendor bashing this week, GonzoMongers. But fret not, loyal Readers, I still harbor much more anger than my easy life merits. More bile and misdirected aggression next month.
-smh