Tech Time: Selecting a New Core Vendor on a Limited Budget

young project manager reviewing a digital Gantt flowchart schedule
By Charlie Kelly

5 minutes

10 best practices for a smooth DIY vendor selection process

Your credit union has not been pleased with its core system performance in the past year or so, and your contract renewal is approaching. The management team has decided that it is time to look at alternative vendors and see if the grass is greener elsewhere. You need to keep costs down and have opted to use an internal team to manage the vendor selection process.

Smaller credit unions may not have the budget to hire a consultant to manage a core systems provider selection. As a result, we often get the question:

“What is your best advice for managing a core systems selection on a limited budget?”

Most do-it-yourself systems selections fail for one of two reasons: Either the credit union fails to dedicate a full-time project manager to the effort, or the person chosen to lead was the wrong one. The wrong individual could be a person without solid project management skills or someone without the authority to make decisions and lead the team.

So, if your financial institution can dedicate a strong project manager to the effort, what should they be concentrating on?

10 Best Practices for Vendor Selection

  1. Set your goals, timelines and project plan. Settle on a date that you plan to finish the project and establish a vendor selection committee that will adhere to that date.
  2. Complete a needs analysis. Figure out where, specifically, your current vendor is failing and document those items. You will need these for your senior management summary as detailed below.
  3. Define the criteria used to select the next vendor. Survey your power users to find out what is important to them and how they would rank the criteria. Document these criteria, as they will also be needed for the summary.
  4. Develop the request for proposal. Keep the RFP as short and simple as possible. Before adding a question to your RFP, ask yourself if it is a question that will differentiate one vendor from another. If it is not, delete the question. Keep the vendor questions focused on the areas that matter to your team.
  5. Choose the vendors that will receive the RFP. Considering three vendors is optimal; considering five is too many. Keep in mind that a large selection team will have a difficult time coming to a consensus if they have more than a couple options. Limit the vendors based on recommendations, reputation in the industry, etc.
  6. Review the RFP responses. Have a plan for which members of your team will review the RFP responses and compare financial proposals for each. Build a list of follow-up questions that can be sent to the vendors.
  7. Model and compare the financial proposals. Your senior management team will want a side-by-side comparison of what each vendor will cost them over some defined period—five or seven years, usually.
  8. Conduct vendor demonstrations. Your team will need to have a full-day demonstration for each vendor that responds to the RFP. All vendors should demonstrate within a reasonable time period of the others, to ensure that the committee has a fresh memory of each when it is time to rank them. (CUES members can read more about core system demos in “Assembling the Cast.” Login required.)
  9. Score results and prepare a presentation for senior management. Show how you scored each vendor, based on the selection criteria you built in bullet No. 3 above. Note that the score is simply to provide guidance on the decision, not the deciding factor.
  10. Make your decision and negotiate a contract. If you have been successful at modeling each of the financial proposals, you should have a decent feel for what each solution will cost you. The contract and pricing negotiation phase may be the right time to bring in a pricing consultant to get you to a final rate and proper terms and conditions.

The bottom line is that the key to a successful do-it-yourself core vendor selection is a matter of dedicating the time, staying organized, managing the internal team and controlling the scope of the engagement. This process is useful for any major technology selection.

Why Hire Consultants?

If your organization has the budget, consultants often have access to several tools that can boost the efficiency and reliability of vendor selection:

  • a time-tested RFP template that can be customized for each client;
  • a proprietary financial model for comparing the proposals;
  • project managers with multiple selections under their belt;
  • a proven systems-selection methodology;
  • a vendor scoring process that can be easily customized;
  • a strong understanding of the timelines; and
  • a management reporting template to more easily summarize the selection results.

Additional Tips for Success

Plan four to five months from start to finish for a systems selection. Expect to pull the internal person that will manage the project off of all other duties during that time. The selection committee members will not be 100% dedicated, but can expect, on average, to increase their workload 15-20% when the systems selection is in full swing.

If the organization truly plans to change vendors, start your project timeline by working backwards from your contract date, estimating four to five months for systems selection, another three to four months for contract and pricing negotiation, and up to 12 months to get on the new vendor’s conversion schedule. A safe bet would be to begin the process no fewer than 18 months before the end of your contract, but 24 months is more realistic.

Make sure your core team involves a combination of financial and product experts. The financial modeling in particular could take even a seasoned CFO a long time to grasp. It is typical for vendor proposals to have several hundred line items—including network connectivity, check and item processing, debit/credit/ATM processing, data management and reporting, and beyond. Unfortunately, product names and rates across vendors are rarely consistent. During the modeling, a product expert is a useful partner for your financial expert. This individual can ensure that each vendor’s proposal includes all required elements. Items that are needed but excluded from a proposal can make a big difference in the total cost of ownership.

A good systems selection process often comes down to digging in and getting the process started. Those contact renewal dates will come up faster than you think, so there is no time like the present!

Charlie Kelly is a senior director at Remedy Consulting, Northbrook, Illinois. Remedy Consulting is a bank and credit union advisory firm, specializing in technology systems selections, vendor contract negotiations, and core conversion project management. Prior to Remedy, Charlie spent 14 years as VP/pricing, contracts and product pricing for a major fintech vendor. He can be reached at or by calling 312-270-3490.

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