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The Core Systems Dilemma

Banks looking to upgrade or replace legacy core systems have a choice: Do it all at once or gradually. Many factors go into deciding which is better for a specific bank.

Managing Changes

Making sure that the staff doesn't get burned out while also managing their training, expectations and morale during such a big organizational transition is often one of the biggest challenges for banks doing a phased replacement, Livesay says. It's often difficult to get those working on a bank's business side to buy into an IT project that takes so much time and money, and that also changes the way everything has been done for years at the bank.

First Tennessee handled this challenge by creating change management teams that helped address issues arising during the replacement. Each team was headed up by someone from the business side of the bank. This way the business units really felt that they were part of the project and were motivated to participate in the changes taking place, Livesay explains.

If management of this kind of sweeping change isn't done well, it can unravel the whole project, says Chris Williams, the head of core banking services in North America for Accenture, an outsourcing and consulting firm. He recalls one core replacement project where the core conversion went well, but not all of the bank's branches did the training and adopted the new business practices that were required for the new systems.

Constant communication is required across all levels of the organization to maintain project buy-in and focus when doing core replacements, Williams stresses. "Managing the business case for the project is very important … Banks with the most success manage their business case throughout the process. The business case is a living, breathing document. This is key to attaining commitments from each part of the organization in this endeavor," he says.

Williams recommends that banks start by taking on smaller parts of the conversion in the first steps of the replacement. This will help them learn lessons during the early stages of deployment that they can then apply to the more important steps later on: "First you crawl, then walk, then run," he says.

[Core System Modernization Makes Customer Centricity Possible]

Open Solutions' Miela agrees that banks should take small steps at first with the core replacement, adding that most of them start out by transferring their core deposits to the new system, as First Tennessee did. Front-office parts of the business, such as deposits, are usually less complex and easier to convert than lending and commercial accounts, which are usually saved for the later stages of the replacement.

The most important part of managing a staged conversion may be simply setting a deadline beforehand to get each stage done, says Lizette Nigro, VP of product and brand marketing at Open Solutions. Some banks that have worked with Open Solutions only set deadlines for switching their deposits during the first stage of the replacement, she says. Without additional deadlines to keep them on target further along in the process, some of these banks gave up on the project midway through the conversion as costs and delays mounted. "You have to have a master plan and stick to the schedule," she urges.

Having that master plan laid out before the conversion helps the bank keep its eye on the project's long-term goals as it deals with the interim communication and organizational challenges.

Bryan Yurcan is associate editor for Bank Systems and Technology. He has worked in various editorial capacities for newspapers and magazines for the past 8 years. After beginning his career as a municipal and courts reporter for daily newspapers in upstate New York, Bryan has ... View Full Bio

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Mike G Sr.
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Mike G Sr.,
User Rank: Apprentice
12/12/2012 | 2:15:10 PM
re: The Core Systems Dilemma
The Tier one banks do not likely have a single platform and have a number of legacy systems supporting their operation currently. A stepped approach is natural for them and as they move off a platform into a integrated silo approach the risk will be diminished over time and the return will be substancial. They are better equiped to control the risk because of the resource pool they have as a result of their size. It's the community bank that has a greater risk and forced to do a big bang cutover by virtue of the legacy systems in the market today. The typical community bank relies on a small number of people that carry the expertise of the current systems in place. Yet, they must convert to new core technology because the legacy systems lack the data base information needed to do the analytics to generate new revenue-ámodels. The current service charge models in most legacy systems are obsolete.
Jonathan_Camhi
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Jonathan_Camhi,
User Rank: Author
12/10/2012 | 8:53:37 PM
re: The Core Systems Dilemma
Looking forward to see how banks handle this dilemma in the next few years as more and more banks are expected to do core conversions.

Jonathan Camhi, Associate Editor
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