By Art Gillis

This is the third blog in a series of things bankers should know as they search for a new core system. The following events occurred in the '80s and '90s when a slick-Willie salesman could convince a banker that a dead pigeon under a mixing bowl was really pheasant under glass. The good news is that most snake oil salesmen and scam vendors are gone now. Pay attention to the word “most.”

1. A core system startup had two good things going for it. It’s name, USA, and its location, Orlando. The thing it didn’t have was software. But it still got bankers to sign contracts. Reality and shock set in very quickly. Software development and implementation should not occur simultaneously. Twenty-three bankers gave new meaning to the horrors of a conversion.

2. A bankruptcy court in Colorado held an auction to get some money from a defunct bank software company. A tech company in Charlotte liked what it saw and was delighted when its bid of a cool $1 million won the contest. The demo screens were impressive enough to convince six Georgia banks to sign contracts. The only problem was there was no coding behind the screens. Except for a few red faces, and some red ink, the situation ended peacefully. The Charlotte company returned all deposits with apologies and returned to its Trust Accounting business, having gained an entirely new understanding of the word “trust.”

3. Houston must be the capital for CPA firm irregularities as was observed in the Enron failure. Another Big Eight firm’s experience in their Houston office was not so global and disastrous. They were recommending the same core software company to all their bank clients, but realized they were leaving a lot of revenue on the table after their “selection study” was completed. So they acquired the software company and continued to recommend it while looking forward to picking up license and implementation fees. But implementing software required a whole set of different talents that the CPA firm didn’t have. The firm quietly closed the operation, “sold” the software company back to its original owner, and went back to counting beans.

4. A startup software company made its first appearance in all the bank trade journals with full-page ads. The exposure worked. Soon everyone was talking about the company. I had trouble figuring out what ducks on a pond had to do with bank software, but ads don’t do much for me anyway. The company’s sales approach was to bash the then mid-range-based hardware systems by promising one PC was all that a bank needed to process its work. The company failed, but a prominent systems integration company acquired the product as their entry into banking. That failed and they dumped the system onto a small bank service bureau. That didn’t work either. If at first you don’t succeed.........

5. Systems from Nigeria probably won’t play in Peoria and a few other heartland locations where the bulk of independent banks reside. But one very popular banking company decided to pour millions into the americanization of a client/server system only to find out, after five years, it didn’t work.

6, 7 & 8. Motives play an important part in failures. Three startups entered the bank core marketplace, not because they had a better “mousetrap,” which I believe is the most noble reason to start a business, but because they had selfish reasons. One company owned a relational database management system and wanted to sell it to banks. It dug up a core system, “glued” it to the RDBMS and tried to sell it. But bankers don’t buy database systems to process banking transactions, and they don’t buy dead banking systems. Another company entered the business by way of chest-beating and press releases. It was the shortest lived company ever - six months. A third company wanted to be different. In the Banking Club of America, different is like missing three loan payments in a row. The company failed twice. Once when the vendor bellied up, and second, when the customers, who took over the company and did their own thing for a while, abandoned it.

Be careful, folks. It’s safer these days, but the challenge is to select the “most right system” for your bank and second choice will come back to haunt you sometime within eighteen months after the conversion.

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