Academic journal article ABA Banking Journal

How's Your Bits for the Bucks Ratio? Some Community Bankers Find Their Tech Partners Way Ahead of Them, While Others Fret That Their Vendors Don't Move Fast Enough

Academic journal article ABA Banking Journal

How's Your Bits for the Bucks Ratio? Some Community Bankers Find Their Tech Partners Way Ahead of Them, While Others Fret That Their Vendors Don't Move Fast Enough

Article excerpt

How much of the software running in your bank is using that little-heard-of, but too-often-relied-on operating system: "Stealth DOS"?

There's really no such program, of course. But there are programs peddled to banks that are nothing more than gussied-up DOS programs married to an interface that looks current.

"These vendors build layers on top of their old, original MS-DOS code to make it appear that it's Windows software," says community banker Jan Clark, "but when you get right down to it, it's still a DOS program and there are limitations. These companies are just not willing to go back to the beginning."

This is one species of complaint about the vendor community. There are others. Take the unhappy experience of Tom Leetch, Peoples Federal Savings Bank, a $286.2 million, Boston.

Peoples' outsourcer was switching from a mainframe to client-server technology. Peoples was one of the first to convert, and it was ugly.

"Conversions are not nice, not nice at all," Leetch says. He felt the programs hadn't been tested adequately before the conversion went live. There were customer complaints that the bank had to handle, as a result, and then, glitches the bank had to fix.

"It was just a nightmare," says Leetch. "It got to the point where I demanded compensation, and I received a credit."

Are many community banks at the mercy of their software vendors or their outsourcers? Or are they pretty much in synch?

The issue of cooperative coexistence with IT suppliers was the first of the questions presented to a group of bankers, all current members of ABA's Community Bankers Council. But the stories you've heard thus far weren't the only frustrations aired.

Commonly, the sheer pace of technological change drove all these senior bank officers crazy.

"For us, the challenge of technology is being constantly behind the curve," says G. Courtney Haning, president and CEO, Peoples National Bank, New Lexington, Ohio. There's only one, albeit temporary, exception, he notes. "A bank our size ($83.8 million-assets) can go outside today, get up to date, and, for a little while, be right there with everybody else," says Haning. "But we can't afford to do that again for another three or four years." In the meantime, the world moves on.

You can't blame Haning for feeling this way. In the last two years his bank has popped for upgrades to platform automation, desktop PCs, and ATMs. Within the next year, he intends to replace the bank's teller system and its internet banking software.

Platform automation and PC upgrades were common recent expenditures among the bankers, and more than half expected tech spending to rise this year over 2004.

"I'm concerned whether spending to keep up with technology is always justified by the cost-benefit comparison," says Dean Fitting, president and CEO, Ozaukee Bank, Cedarburg, Wis., $600 million-assets. At the least, there is the need to get the best "bits for the buck."

The banker-vendor team

ABA BJ: Are bank vendors giving community bankers all that they need to remain competitive or is your thinking somewhat ahead of what your vendor can do for you?

Kathleen Steward, Chisholm Trail State Bank We outsource to Data Center, Inc., which is based in Hutchinson, Kan. I feel they are right in step with us. Our IT person works closely with DCI and totally understands the company's process. They don't talk over our level and we don't talk over their level and it's a nice partnership.

Tom Mantor, Bank of Walnut Creek We're a growing bank in the San Francisco area and we're represented by a commercial lending office in Silicon Valley, so technology is huge for us.

We've been using ITI software on our own hardware for about 12 years. We've priced the inside/outside decision, and found the cost is relatively the same. However, we didn't want to lose that element of control, and we have some pretty good IT people. …

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