Are You Getting Maximum Value from Your Core System?

Brad Smith, Abound Resources
May 19, 2008 | COMMENTS Click to View Comments

With technology budgets being closely scrutinized, IT professionals want to know what the best technology investment is today. A first guess might be one of the hyped technologies in the trade mags like mobile banking, online account opening, or merchant capture, but by far the best technology investment you can make is increasing utilization of your core processing system.

It is not unusual to see community financial institutions using just 50% of the technology they pay for. And since core likely represents 25%-40% of your total technology spending, that means that roughly 12%-20% of your technology budget could be completely wasted.

So consider this: If you're only using 50% of your core, why are you paying for 100%?

For those institutions under-utilizing core, there are two routes to go:

Increase utilization from 50% to something closer to 100%
Lower core spending so costs are more in line with utilization

Steps for Improving Core Utilization

There are five components of under-utilization: unused licenses, unused modules, unused functionality, duplicate functionality, and under-used functionality.

The chart below shows you how to guide your action steps to correct these five components.

What	Why	Now What?
Unused licenses	You bought extra user licenses because the vendor gave you volume price breaks and you ended up not needing those licenses.	Use them or return them.
Unused modules	You bought a new module and haven't had time to install it or perhaps you no longer need it.	Install it or return it.
Unused functionality	There were features that you didn't need at conversion and/or there are features that now exist that you don't know about.	Review the new features and evaluate whether you can benefit from them. If not, negotiate lower cost for core.
Duplicate functionality	The core functionality for a certain function (e.g., loan exception tracking) didn't meet your needs so you bought a third-party product to handle that function. Now you effectively pay two vendors for the same function.	Revisit whether core vendor has improved that functionality enough to replace the third-party product or negotiate lower cost for core.
Under-used functionality	This is the most common reason for under-utilization. You use the functionality but not in an optimal way. Perhaps a process could be fully automated but you're still doing part of the process manually (like printing off system-generated reports and then filing or shredding them, or sending CD checks instead of direct depositing into an internal or external DDA account). Perhaps you have the parameter set incorrectly. Perhaps you're still tracking something in Excel that should be in core.	Often optimization will require process redesign, policy and procedure changes, parameter resets, and user training. The best way to start is to conduct a process and utilization review. Flow-chart the process and look for redundant or unnecessary steps.

Don't Forget to Follow Good IT Management Practices for Utilization

Regardless of which route you take to see immediate improvements in utilization, you will also need to put best practices in place to avoid future utilization issues:

Planning, budgeting, and purchasing practices (including effective use of your IT steering committee) are required so you don't buy “bad” technology or end up with shelfware.
Vendor management practices are needed so you have some say in functionality improvements. Get their help in maximizing the use of their software, hold them accountable for poor service, and negotiate fair contracts.
User-support practices are needed to train and help your employees get maximum value from their technology tools.
User accountability, such as application ownership, is also needed so that the IT folks aren't the only ones responsible for continuous learning, parameter setting, and training.

Too often we get caught up in the need for more and more technology (certainly the vendors and trade mags encourage this), but devote your next IT steering committee meeting to review how well you're using your biggest technology investment. That small time investment will pay big dividends-guaranteed.

Brad Smith is president of Austin, Texas-based Abound Resources, a technology advisory firm for community banks and credit unions. To learn more, visit www.aboundresources.com or call Smith at 512-231-1750.

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Are You Getting Maximum Value from Your Core System?

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