Pay Attention to the Bad News When Converting to a New Core System

There's a bit of an uptick in the marketplace right now regarding core conversions among banks of all sizes, even the giants. But be aware that this is the kind of stuff that arrives at the Gillis Gossip Gateway. It's mostly hearsay, whereas I deal in proof as supported by numbers. In 2007, the churn rate for core conversions among the 16,881 financial institutions was only 2.7 percent. It's been dropping every year for at least the past six years. So the accurate realization will arrive this time next year when the numbers roll in for 2008.In the event, however, that this time there will be a hockey stick rise in the core sales business, I believe a few words of caution are appropriate for every banker facing a core conversion.

Here are some vendor promises that should get you to break out in a cold sweat:

We'll have a conversion team (no staff numbers offered) here two days after you sign the contract. Don't worry about a thing. We'll take care of the entire conversion project. This will be a slam dunk. (After George Tenet used that one, I thought it would have died.) This conversion will be a piece of cake. We've done thousands of conversions. It's a routine project now. We've converted several banks that were using your old system. We're ready to go. Everything will look transparent come Monday morning. Your customers won't even know you changed systems. Our system is so intuitive that you won't have to train your employees. Don't even think of ordering new forms. Our system will change to suit your forms. Our data mapping programs will load your system records without manual intervention. Leave the Excedrin in your medicine cabinet. Just bring the champagne.

If your vendor sounds like that, then the bad news is you made the wrong choice. Conversions are still a nightmare, not to be treated lightly. Here's a story about treating conversions seriously, and how one vendor knew when to say "NO."

I was hired by a $4 billion bank in 1997 to do the grunt work (analysis) to find a replacement for the bank's outdated core system. In fact, "outdated" is a mild word. The vendor had walked away from their system years before and the bank stepped in and performed maintenance of the system. That was my first clue of this bank's gutsiness, but there was more to come. My recommendation at first was not widely accepted, but this bank had a science-like ability in evaluating the results of my 36 tools.

So after I got paid and sent home, the bank was comfortable, but still not convinced about the vendor. The CFO then organized his own study team and asked the CEO for 30 days to confirm the consultant's recommendation, or start over. His approach was to interview some of the recommended vendor's customers. He returned with an overwhelming acceptance of the SilverLake system from Jack Henry & Associates. Then the fun began.

The bank had an early window in which to fit the conversion. They called me back to see if I could influence Jack Henry to put the bank in the #1 spot for implementation priority. I took the challenge, but I knew my job was to adjust the bank's expectations, not to twist the vendor's arm. I still remember the position of the Manager of Conversions, who today is one of seven execs who run Jack Henry. "We have six top notch conversion teams that are assigned to new clients as they come due. Any one of them could do this job the way it should be done. But they are all committed to clients that signed contracts before you did. And we don't know the words we would use to convince a scheduled client to give up their position for another bank. We have to stick to our promised schedules."

The bank's CIO bitched about it for a couple of days, but Jack Henry stood firm. Today, that bank is Jack Henry's largest SilverLake customer at $13.1 billion in assets.

Sometimes it's very comforting to hear a vendor say "no." That's when you know you're in the right hands.