A Dozen Misconceptions of What IT Can & Cannot Do
Credit Union Management February 2009
Reprinted with permission of CUES®
by Karen Bankston
Any business tool that has had such a profound effect on an industry as technology has had on financial services is bound to carry its share of misconceptions and contentious issues. We asked professionals in the technology wing of the credit union sector to share their favorite myths and odd notions about how to make the most of technology.
It’s Best to Leave Technology to It Specialists
The most successful technology projects have input from a variety of sources, including frontline employees who are closest to members and will likely be using the technology on a day-to-day basis.
IT professionals need to work with colleagues in other departments to eliminate the technology gap that can develop between a credit union’s business strategy and its hardware and software capabilities, says Jim Morrell, chief information officer and SVP/support services for $400 million/40,000-member IQ Credit Union (www.iqcu.com), Vancouver, Wash.
“The better the IT expertise in a credit union understands the core business strategy and vice versa, the less of a technology gap will exist,” he notes. “The less of a technology gap that exists, the more operationally efficient an organization will be.”
That doesn’t mean technology specialists need to understand every operational detail of a process being automated; nor do operational staff need to become IT experts. Using the example of implementing an automated-lending system, Morrell, a CUES member, suggests that the technology pros need to know what the credit union wants the system to do and whether it should be accessible to members on line as well as staff, while the loan department needs to know if the IT pros debunk a dozen misconceptions about what technology can and can’t do proposed lending solution can be leveraged to do both internal and external lending within the credit union’s existing IT framework.
A related corollary is the benefit of assembling a technology team with a varied background. At FORUM Credit Union, Indianapolis, for example, Doug True, SVP/technovation and president of the CU’s credit union service organization, earned a degree in business, not computer science, and he came up through the ranks of the $1.1 billion/105,000-member credit union in retail and lending operations.
“I do think my nontraditional path into the technology arena provides a unique perspective for our technology team at FORUM CU to not just deliver technology for technology’s sake, but instead to deliver technology that is going to make a difference in our members’ lives,” says True, a CUES member.
Several other members of the CU’s technology team worked in other departments previously as well, he adds. “This helps not only communication with other credit union teammates, but also helps with making prudent technology decisions and drives efficiency in delivering technology to credit union teammates and members.”
Technology Is Absolute
Sabeh F. Samaha, managing consultant of CUES Supplier member Samaha & Associates (www.samaha.com), Chino Hills, Calif., uses a personal example of taking his car into the shop with a mysterious problem. “They told me, ‘Well, the computer system in the car shows no error,’ implying that there must not be a problem,” he relates.
In reality, computer systems detect only the problems they are programmed to recognize, Samaha says. For example, diagnostic software is typically designed to identify 70 to 80 percent of the wide variety of possible malfunctions. If the problem falls into that uncovered 20 to 30 percent, the diagnostic program will issue a clean bill of health.
“Especially when it comes to diagnostics, error finding and processing, if a program processes without errors, we assume it ran correctly,” he notes. “Wrong.”
The First Step In Committing to New Technology Is Understanding How It Works
Before you start shopping for hardware or software, the first step should be establishing internally the credit union’s business strategies and how technology can support them. Technology can replicate most business practices and processes—as long as the credit union is willing to make the necessary investment, Morrell says. “The amount of time it takes to make that happen is a function of money, expertise and a common understanding of the business strategy or goals.”
Morrell uses a personal example of placing a lunch order while visiting Italy last spring. “I ordered a pizza for lunch and what I received was something that was in the shape of a pizza, but nothing at all like what I receive when Pizza Hut arrives at my front door,” he recalls. “My assumption was Italy invented the pizza. My disappointment was learning that the sauce was plain tomato paste, there was a slice of lunch meat on one part of the pizza, a slice of a hard boiled egg, and mushrooms out of a can on another section of the pizza. The spices, fully loaded sausage and pepperoni, and fresh mushrooms were no where to be found in that Italian cafe?.” In the same way, IT professionals and others in the credit union need to ensure they are speaking the same language about what technology can and can’t do, Morrell adds.
Technology Vendors are on Your Side
At the high level of credit union–vendor relationships, many credit union managers may have a misconception that the vendor’s business model aligns precisely with the credit union’s business model, Samaha suggests. In other words, the credit union exists to do its best to serve members, so the vendor must exist to serve the credit union and, by extension, its members.
In fact, the objectives of most vendors are not that linear. They are businesses intent on making a profit. Like all businesses, they must provide service that is as good or better than their competitors to get and keep your credit union’s account, but they also need to keep an eye on their bottom line.
Their goal is to use their fixed capital to generate as much revenue as possible, which may translate to overselling services and carefully allocating their resources. In rare cases, that may take the form of making promises in an RFP presentation that are not fulfilled in delivery of the service after the fact. Samaha advises scrutiny of vendors who, during the sales presentation, promise endless resources to roll out a big project. They may provide less support than you expect during implementation.
If One Credit UnIon Blesses a Technology Vendor, You Can Rest Assured
Again, even in an industry renowned for a spirit of cooperation, the interests of your credit union and those of the peer organization offering the recommendation do not always align, Samaha notes. Managers with another credit union may not admit all their problems or failures with a new system. Maybe they assume those problems have been corrected or were unique to their operations. Maybe they weren’t directly involved with the problem areas. Maybe they’ve just forgotten the rough spots with the passage of time. They might even be offered an incentive to recommend a vendor or product or be angling for leverage to correct problems with the system or improve its functionality by expanding the number of credit unions using the system.
Technology Bargains Can be Had If You’re Willing to Wait
Morrell suggests the old adage that you get what you pay for is more likely to be the case. “Oftentimes people believe that because technology is so prevalent, the cost for implementing something new has gone down,” he notes. “While in some areas that is true, many times you do get what you pay for.” That might take the form of buying yesterday’s technology, for example.
At the same time, he cautions, even a steep price tag doesn’t eliminate the need for a dedicated, collaborative effort to implement new technology. “You cannot throw money at a project and hope that it turns out well without a lot of diligent effort and working together by both the technology experts and the business experts,” he says.
You Can Learn Everything You Need to Know About Technology Systems From the Vendors
Credit unions that rely on what they learn at vendor demos and RFP presentations to make technology decisions “aren’t doing as much work as they should,” Samaha says flatly. “Vendors have an interest in skewing the information they present to make more sales. They’re not neutral. They emphasize the facts that benefit them, which aren’t necessarily the facts that credit unions need to make the right choices for themselves.”
Credit union managers must first educate themselves about the technology they are considering and then interview potential vendors. Otherwise, Samaha warns, “it’s like relying on the blackjack dealer to tell you whether to draw or not.”
Technology Contracts are Designed to Protect the Interests of Both Parties
Technology vendor contracts are not agreements, but “subscriptions” written to favor the vendor, Samaha contends. These legal documents tend to be templates loaded with cumulative responses to situations that have occurred over the years or that attorneys believe could happen and are spelled out in terms of resolutions that would benefit the party that developed the contract—in this case, the vendor.
Samaha recommends that credit unions enlist not only attorneys but experienced experts in the field to review technology contracts to ensure their organizations’ interests are adequately protected. For example, Samaha’s firm has developed a “laundry list” of 30 contractual issues—from the credit union–vendor relationship to more specific technology, implementation and service standards—that should be reviewed during contract negotiations.
“Vendors may contend that they have to create a consistent agreement for all clients, but they could easily hire several contract administrators,” he says. “The credit union should be able to specify particulars in its contract. One size fits all in terms of technology con- tracts is another myth.”
Once You’ve Developed a Solid Technology Plan, the Hard Work Is Done
Credit unions create strategic plans and business plans based on their strategic goals. Some also create technology plans that present high-level visions of how they will use technology to support their strategic and business plans. Too often, technology planning ends there, Samaha suggests. Credit unions need to follow through by assigning specific responsibilities, timelines, oversight and regular progress reports to ensure technology plans become reality.
In her book Wired for Good, Joni Podolsky notes that technology planning is not just about technology. “A technology plan is really an adjunct to your strategic plan, focusing on organizational mission, goals and strategies,” she writes. “It is a guide for making appropriate decisions about the tools and related elements needed for your organization to fulfill its mission.”
For a Smooth ImplementatIon, Hand Over Full Control to the Vendor
Vendors that have completed hundreds of implementations with other clients may approach testing a new system in a more “routine” manner than one in which focus is given specifically to your credit union’s unique issues. Instead of just relying on testing at the format level—to ensure the new system is working as promised—the credit union needs to ensure data-level, field-by-field tests are completed on data conversions, Samaha recommends. If the credit union doesn’t have the in-house expertise to oversee that level of testing, it can hire consultants who will. Also, Samaha warns, “Beware the mock conversion trap. This should be a full and comprehensive exercise mimicking the actual upcoming conversion and not just a ceremonial event.”
If You or Your Staff Has Been Through One Implementation, You’re Battle-Tested for the Next One
Some credit unions may opt to rely on managers who’ve been through similar projects in the past, but Samaha notes, “just because you have one or two people who’ve done it once or twice in the past doesn’t mean they have the necessary breadth or depth of knowledge for a big project. You have to go through 10 or 15 implementations or conversions before you really understand how these things go.”
To implement major technology initiatives, credit unions should consider hiring consultants who can provide a combination of experience and objectivity, and who can work with the vendor to ensure implementation and testing are thorough and complete, he adds.
Tech Smarts Translate Directly to Organizational Success
Not necessarily, True cautions. He contends that degree of technology aptitude does not correlate automatically to a well-run credit union. “I have seen amazing technology-centric credit unions be widely suc- cessful in serving their members, and I have seen credit unions that don’t adopt technology at a rapid rate succeed in serving their members as well,” he notes. “I do think financial services is a commodity business, and technology has already moved from a differentiator to a table stake.”
Karen Bankston is a free-lance writer and editor and the proprietor of Precision Prose in Stoughton, Wis. She writes about credit unions, business and technology.