The following article has been approved for viewing by mature audiences only. Young managers, bankers approaching retirement, and anyone with a compromised cardiovascular system may only read this material with permission slips from their doctors.
We’ve heard it said that choosing a new core processing system is really not all that difficult—the hard part is in getting the actual conversion done. After all, so “they” say, the options with respect to core system providers have been declining in recent years to a point product differences are negligible. Someone should probably share that “news” with the folks at Harland, OSI, Metavante’s newly rejuvenated Kirchman group, Fiserv/ITI with its new iSeries platform, and the credit union and thrift systems being re-written or “updated” to include new technology architectures and business functionality. All of these systems—and there are even more than are listed above—have something new and different to offer those financial institutions seeking a system positioned for the future rather than stalled in the past.
Folks, let’s be brutally honest: Core system conversions are difficult. It is never wise to embark on a core system change without compelling reasons—several of them. Darrell K. Royal, the legendary run-oriented football coach at The University of Texas, once said, “When you pass the ball only three things can happen and two of them are bad.” (Hmmm… wonder how he reconciles that with UT’s national championship win with 267 yards passing vs. 289 yards on the ground?) When a bank undertakes a core system conversion virtually everything that can happen is bad, at least in the short term. The best that can be expected is that things will work as well on Monday morning after the conversion as they did the Friday before. Down the road, many things may be improved, but in the short run just maintaining the status quo is a huge win!
Yet organizations do make these painful changes. Why? See if your bank fits any of these criteria:
If any of these sound familiar, your bank is operating a system known to vendors as a “cash cow.” Your dearly beloved vendor is content to invest whatever is minimally necessary to keep on milking it, but there is no commitment to keeping it alive for the long term.
The same industry consolidation that has reduced the number of financial institutions has also diminished the future prospects for those bovine core systems that should be Quarter Pounders by now. Even if your system is adequate for the time being, if your organization has changed significantly as a result of growth or acquisition, or if it is changing as a result of shifting strategic objectives, you may not have much choice about making a change.
So what do you do if you’re in that very uncomfortable position of needing to change systems? Get ready to be even more uncomfortable as you read on, because the world of core system conversions has changed, and it is not getting any easier! Increased complexity in our systems environment is requiring an even higher level of conversion expertise and excellence.
Let’s explore an imaginary example. Hypothetical Bank’s conversion team wants their conversion to be a major success. The team sets the following best practice goals for the conversion:
While Cornerstone would include all of these classic best practices in our project plans, these attributes no longer guarantee a successful conversion. This is 2006, and Hypothetical, despite a classic conversion plan, is going to experience a nightmare. This nightmare will primarily stem from the increased complexity of today’s technology environment and the inability to thoroughly identify, plan for and mitigate the “gotchas” that arise so often these days. Let me bring this point home to you, GonzoBankers, with some real-world examples. Listed below are actual “gotchas” I have seen in our industry coupled with unfortunate reaction (in quotes) that bankers have when these issues occur:
After weeks of fighting with (and generally putting an end to) these types of errors, oversights and misunderstandings, banks ultimately breathe a sigh with relief. (“TGIF… but wait! Our new grocery store branches are open all weekend!”)
Had enough? While I know of no single organization that was unlucky enough to experience all of these real-world problems, almost every bank seems to run into a few of these issues. Technology may be evolving at a rapid pace, but ask yourself, “Are my bank’s conversion processes and expertise evolving fast enough to handle this change?”
There are financial institutions that pull off core system conversions even in this brave new world of around-the-clock, raging system transparency. While banks still need to embrace the best practices that Hypothetical Bank used in our example above, there are some new rules for the road in conversions these days.
#1: Project Management – Solid project management methodologies have to be embraced for all aspects of the conversion, not just those activities touching I.T. Best practices organizations are injecting project discipline into the business areas as well during conversions.
#2: Testing – Testing activities are being expanded to ensure that all functionality and all delivery channels are pushed to limits that may not seem “normal” on conversion day. Interfaces and interoperability between ancillary systems and the core application are receiving a much greater level of attention.
#3: Training – Best practices banks are putting teeth into their conversion training. A strong commitment to training, including proficiency testing and formal certification techniques, has to be present to ensure that users are ready for the switch to be thrown.
#4: Command Center – Banks today are finding better success with extensive up-front planning and execution for those “intensive care” days immediately following conversion. Problems will arise, but those whose command centers can identify issues and implement/communicate solutions quickly can make these issues seem immaterial within a week after going live.
We’ll share even more of the details about how successful conversions are accomplished in a follow-up to this article in the near future.
Like it or not, old banking systems pass into oblivion, just like old football philosophies. Your vendor can’t keep milking that cash cow of a system forever (and at your expense). Core system conversions are to be avoided like the plague, but the harsh reality is that the features/functionality available with an updated system will compel some organizations to take on this onerous task. If your bank is in the position of “when” and not “if” to make a change, remember that the name of the conversion game has changed, too.
“Luck is what happens when preparation meets opportunity.”
—Darrel K Royal