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The Inevitable Conversion: Achieving Faster Return on Investment

POV 08.09.2010

Whether banks approach them as positive or negative, technology conversions are inevitable at every institution. Each year, nearly 1,100 banks replace their core systems, and countless others undertake less critical application transfers. Despite the prolific nature of conversions, it’s the unusual bank that achieves ROI as quickly as they hope.

In fact, three quarters of all banks struggle to achieve conversion ROI within 16 to 18 months. In that time, some will reach the promised functionality of the system they purchased, but in most banks more than one year post conversion, the benefits that executive and technology teams thought they would realize have yet to materialize.

Oddly enough these problems with new technologies are very rarely actual “technology” problems. Most frustrations with project conversion stem from operational, training, and other “people” issues - easier to diagnose than to fix! In our work with banks across the country, Brintech has found these three fundamental principles help minimize conversion “dig out” problems:

  • Appoint an internal project leader
  • Design the project for success
  • Facilitate communication among vendors.

Appoint an Internal Project Leader and Conversion Team

Check any user group or message board, and the general consensus among bank staff about core conversions is, “It’s horrible. Nobody wants to go through it.” Yet because of merger, acquisition, mandatory upgrade, or a need for increased functionality, a full 15% of banks will change core systems every year.

Appointing a strong internal leader, such as the COO or other head of operations, will help enormously. This kind of leader understands technology to a thorough degree, yet also understands the managerial and strategic aspects of the key areas of both sides of the bank, loans and deposits.

This leader will also play a key role on the conversion team and will act as a lead negotiator with the core provider. In the negotiation process, training is a hugely overlooked issue. More than just scheduling pre-conversion training, the conversion team should also stay aware of the ongoing training needs that all employees have after the conversion.

The conversion team itself also plays a key role in finding and countering resistance among the staff. The front line, daily users are those most able to point out problems with a process and create the most efficient workflow. Unfortunately, it’s not the core provider’s responsibility to define or create these workflows - it is the internal conversion team who must work with employees across the bank to define those processes and find ways to map them to the capabilities of the core system.

Design the Project for Success

Achieving project ROI often comes down to planning on the front end. Incorporate the strategy of the bank at this early point - consider updating the technology plan either before or during the planning process. This way, you will be reminded of your key initiatives and priorities in areas like ATM, Internet banking, merchant capture, and all ancillary applications. The biggest problem for banks having to “dig out” from technology project conversion is that they have tried to mirror the new system to the legacy system. “But we used to do it that way,” is the reason bankers give when they become frustrated with new functionality. Because people are creatures of habit, we end up trying to build workarounds, developing extra reports, or creating more work than we need to in order to make a more efficient system less efficient - so that it seems more familiar.

Facilitate Communication Among Technology Vendors

Recently one of our client banks, post conversion, could only run a loan application through 20% of its workstations. The ops team later discovered that two systems they had tied together, the core system and the commercial lending application, were not integrated properly. Both the core vendor and the loan system vendor were “blaming” each other’s technology, when in fact the technologies themselves were working properly, just not together.

The Bottom Line

In a conversion, the technical part of the conversion will happen 100% of the time. The old data will go into the new system, and the users will be able to log in. What makes banks miss deadlines, lose money, and struggle with ROI is the process and workflow associated with the new technology. Always make sure you have articulated a way to define the effectiveness of the conversion.

Remember that a month of planning on the front end of the project can make the difference of more than a year of dig-out time post conversion!