Getting an ‘A’ on an RFP

Getting an ‘A’ on an RFP

Wilson, Caroline

What are the most important elements to address when a community bank goes shopping for a new technology or a new technology service provider?

U.S. financial services institutions will spend $27 billion on strategic technology initiatives in 2001, according to Meridien Research, a Boston-based financial industry technology analyst firm. Unfortunately, many banks-especially community-based banks-will make uninformed or hasty decisions on how to spend that money to upgrade their technology systems and services. According to experts, some community banks overlook an important part of the process when they endeavor to provide a new service or upgrade an existing one-the RFP, or request for proposal.

A properly executed RFP will bring several vendors to compete for the job– whether it’s choosing a new core system or a simpler application, like Internet banking– and will include specific and tailored information pertaining to your bank’s particular requirements. But there is more than one way to create an RFP, and not all of them will bring desired results. A concise RFP containing specific criteria and submitted to a select group of vendors should be the objective.

The RFP Process

Typically, a bank will decide that it needs a new technology or technology service provider for its operations, to enhance customer service based on competitive reasons or because the bank is at the end of its current contract with a vendor and wants to reevaluate, says Terrence Roche, head of the RFP practice for M-ONE Inc. of Phoenix, a firm that specializes in financial institution management and technology planning. The bank may be unhappy with its current vendor or simply want to test the market for new products and services. Once a decision is made that a new technology product or provider is needed, the bank may then decide to call in outside help in the form of a consultant or write the RFP on its own.

If consultants are used, they may perform the entire process-from writing the RFP to selecting the vendors for demonstrations to evaluating the vendors-or they may have a lesser involvement, depending on the bank’s needs. The bank may have its own committee and simply use the consultant to write the RFP Or, the bank may not use a consultant at all and form its own internal technology committee to review and evaluate needs.

With or without the assistance of a consultant, a document-the request for proposal-is produced. Experts caution not to go overboard with the document, though, in trying to make it comprehensive. “I have seen 150-page documents for a small bank,” says Roche. “Probably the biggest mistake banks make when they do an RFP on their own is they write a long document with a lot of specific questions.” This may have the unwanted effect of driving away vendors who may have bid on the job, or receiving back incomplete responses to the RFP from the vendors (see sidebar for tips on what to include in an RFP).

Once the RFP is complete, a decision is made regarding how many vendors and which ones will receive the RFP The vendor typically needs about four to six weeks to respond to the RFP Once the responses are in, the bank must decide which vendors to call in for onsite demonstrations.

Most experts suggest having evaluation criteria in place before the demonstrations so that everyone is clear on the goal. In evaluating RFP submissions, for example, Roche asks his clients to designate the importance of five different factors: functionality, price, vendor strength, vendor architecture/system design and risk. A simple scoring system applies the weighting strategy the bank has designated, and a vendor is selected.

Following the demos and evaluation, the final step involves selecting a winner and performing due diligence to confirm the choice.

A typical RFP process can take from 12 to 24 weeks, and can occupy quite a bit of someone on the bank staff’s time-usually the MIS manager or chief information officer. In addition, consultant fees can range into the tens of thousands of dollars. So it makes sense that, with the amount of time and money involved, the process is done right the first time.

The Role of Consultants

One of the first questions a community bank should consider before it goes shopping for a new technology or technology service provider is whether to bring in a consultant to facilitate the process or whether to try to go it alone.

“Technology is a huge investment for a bank,” says Mike Potter, president and chief executive officer of ACB Partners. “It’s really worth spending the money for someone to help you think through the process,” he says, especially because whatever route you take you’re most likely stuck with the results for several years.

While the decision to add a new technology or service to the bank is a complex one, the RFP is really the final expression of what you have decided you need, according to Potter.

“Most banks are knowledgeable about what they need, but they don’t do it that often and they don’t know who the vendors are,” says M-ONE’s Roche. “Involving a consultant allows the bank to focus on what’s important, and not on the minutia of writing the RFP,” he says.

Vetting the vendors is one of the primary reasons why community banks choose to work with a consultant on the RFP process. Avoiding some common mistakes (see sidebar) is another.

But consultants can be as involved in the process as the bank wants them to be. Typical services include evaluating the bank’s needs; researching and writing the RFP; assisting in the selection process of vendors; rating the responses; doing cost analyses; due diligence; and so on. “We’re there to run the process and force objectivity,” explains Roche.

The process can take as little as 12 weeks for a simple solution, like loan origination or Internet banking, or as long as 20 to 24 weeks for a complex issue, like a core system. Because of the amount of time spent on the process, a good working relationship with the consultant is a must. Consultants can work with the bank to help it identify which features and functions will deliver value, says Hugh Hayman, senior vice president of business and technology planning at US. Banking Alliance of Atlanta, which works exclusively with community banks. Then, USBA helps the bank clearly communicate its specific needs to the vendor.

“Money is often an obstacle” for community banks considering the use of a consultant, says Hayman. In addition, “one of our biggest challenges is that banks are often reluctant to use a consultant; they think they can do it on their own,” he says. The value the consultant brings is mainly as an objective third party. “The consultant can serve as a ‘referee’ between the technology provider and the bank,” he adds. Plus, a consultant brings the benefit of its experience, having worked with hundreds of other banks.

Rather than working within the restrictions of an RFP, which Hayman says can create an unnecessary legal bureaucracy, he tries to line up current features and functions of the various products and find out what the voids are or what is missing.

“It can be naive and risky” for banks to try to do an RFP on their own,” says Dan Fisher, chief information officer of $6.3 billion Community First Bankshares and president and chief executive officer of Community First Services Corp., Fargo, ND. A consultant can help ensure you are not comparing apples to oranges among the various vendors’ product offerings, and also can help narrow down the list of vendors to which to submit the RFP in a pre-select process.

Banks can waste a lot of time in an area where they have little to no experience by trying to do it on their own, cautions Fisher. “Your core competency is going to be everything to your customers,” he says. Saving money should not be a reason to forgo working with a consultant. “You can always find a fee that’s workable for you,” he says. And besides, he points out, a small mistake could cost a community bank a lot more than it would a multi-billion-dollar bank.

The Vendors’ Role

Technology services vendors have a general dislike for RFPs, and with some good reason. RFPs can be quite detailed and require a lot of research and preparation on the part of the vendor, often with no return. A vendor that submits an RFP has no guarantee of even being called in for a demonstration of its product.

Because of this, “lots of technology companies treat RFPs like boilerplates,” says USBA’s Hugh Hayman. He steers his clients clear of RFPs when possible, because vendors often view them as wasted energy and they don’t want to pony up a lot of effort on an RFP when the bank is not yet serious about their products and services.

Another potential problem area with the RFP: “Vendors resist RFPs because it forces a thorough discipline on their process,” says Dan Fisher. When looking for a technology service provider, he says, “They [the vendor] have to think out of the box. They need to bring creative solutions, even before they are hired.” He says a vendor that is not willing to do so should not be considered.

Fisher also advises that compliance with the RFP is not optional. “Vendors cannot cherry pick what they want to respond to” on the RFP, he says. He adds that a bank should toss out RFPs that come back with questions unanswered or answered incompletely.

He also cautions against a common mistake: employing the vendor to consult you. “That is what you need a consultant for,” he says. A bank cannot expect to go to one vendor and get an objective picture of the industry. An RFP submitted to a variety of vendors should provide a broader picture. This is also an area where a consultant can really prove his or her worth. A good consultant will be familiar with all the players and aware of, and knowledgeable about, the products they offer.

For these and other reasons, vendors often view RFPs as a necessary evil. “The first impression a sales rep generally gets about an RFP is, `This is going to take a long time.’ But, it’s money well spent on the banks behalf, and we recognize that this is an important process for them to go through,” says Paul Gangl, sales representative with Monett, Mo.-based Jack Henry & Associates, a technology provider for community banks. He adds, “As they [banks] make a technology leap-whether it’s in core processing, Internet banking or check imaging-they should have someone to assist them.”

Jack Henry has built a strong reputation among community banks and the consultants who serve them. “It’s important for the vendor to leave a good impression with the consultants, so even if you don’t get this job they’ll call you back for the next one,” he says.

But aside from building a relationship with the consulting industry to facilitate the RFP process, Gangl says sometimes vendors get frustrated with the RFP process because “the RFP has been thrown to vendors sometimes mainly to get a price, and the product presentation doesn’t even take place. I think we should be able to show our product if we show our price. The customer needs to know what they will get for the price, and the RFP itself may not always reveal that.”

Gangl points out that the RFP can get quite detailed, but interpretation of the questions may vary from one vendor to another. “Some confusion can only be clarified in a demonstration,” he says.

The RFP is a valuable tool to the vendor as well as to the bank. “A well-done RFP is a great road map for a presentation,” Gangl says. It can help a vendor tailor its presentation to the bank’s specific interest areas.

Case Study

Century National Bank is a mid-sized ($300 million in assets) community bank serving the metropolitan Washington, D.C., area. The bank has called in outside help for assistance with its RFPs in the past, and just completed the RFP process for the addition of a home/Internet banking product.

According to Kathy Curtis, senior vice president of operations, the use of a consultant greatly facilitated the RFP process. “There are so many vendors out there. We had no way of knowing who the established players were. We didn’t even know the company we ended up choosing [to provide the Internet banking product],” she says.

Curtis adds there is another benefit of going through a detailed RFP process, rather than simply choosing a vendor without due diligence. “The OCC was very pleased,” she says, during the bank’s first exam after the selection of the Internet banking product.

Curtis thinks a lot of banks may make a hasty decision just to get something done fast and to keep pace with the competition. But, she says, “You need to take the time to do it right.” The RFP process took about six months, a comfortable time frame, she says. And the OCC was impressed and found the process to be thorough.

A further benefit of the RFP process: “We gained valuable information,” Curtis says. just having different vendors in for demonstrations was useful because, “it’s difficult to visualize how something will work without seeing it. It’s helpful to talk face-toface with a salesperson and ask questions as they occur to you.”

Without a doubt, a properly executed RFP can result in the selection of a product that’s right for your bank, a better allocation of funds and better customer service down the line.

Caroline Wilson is a freelance writer based in Austin, Texas.

Copyright America’s Community Bankers Mar 2001

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