Pub. 2 2013 Issue 9

l e a d i n g a d v o c a t e f o r t h e b a n k i n g i n d u s t r y i n k a n s a s 12 S EVERAL YEARS AGO, VENDOR management became a big topic at banks for lots of reasons. The trend to outsourcing was one. The fact that regulators started asking about and auditing it certainly caused more focus. The sheer number and dollar impact of these relationships made it a good idea in any case. So, a lot of effort went into vendor management projects. And a lot of information was gathered. Most banks now have a comprehensive list of providers, contracts, contract expiration dates, financial reports, DR tests, SAS 70s, completed questionnaires and other information that does indeed show aspects of vendor stability and performance. It’s all necessary, and all important to do. But, most of these efforts focused on the quantitative side of the relationship. In many cases, what they did not get to is the qualitative side of the equation – how well is the vendor really performing in terms of meeting the bank’s strategic and operating requirements? These days, when we are asked to work with any bank looking at alternatives to systems, it very seldom is for quantitative reasons – vendor stability, financials, etc. Nearly all of the time, it is because the bank does not feel that the vendor met commitments and managed the relationship well. And, when the incumbent vendor bids to keep the business, conversations always center on what went wrong with the relationship and how the vendor will promise to fix it. At that point, it’s usually too late for the promises to be credible. But ask yourself this. If you have found yourself in this situation with a vendor, can you say that you managed the relationship well during the term of the contract, and that you proactively did everything you could from the bank’s side to manage the vendor’s performance to a better outcome? Vendor performance management focuses on the qualitative side of the relationship as opposed to the quantitative. Here are some examples of “qualitative” issues banks should manage with just as much formality and transparency as the more quantitative aspects of vendor management: • Do vendor releases meet commitments? If we go back to what was promised at the user conference, did they provide it? Or, was there scaling back of the scope of the release? Delays? Things that just didn’t get done? How clean and tested was the new version of the software? • Does the bank have effective service level agreements with its vendors that are fair, achievable, and protect its own service levels to customers? Are they measured and reported? Who follows up when they are not achieved? • How quickly does the vendor escalate and solve big problems? Does the vendor get the same heartburn as the bank and does it demonstrate an acceptable level of urgency to correct problems? Does the vendor THE SHIFT FROM VENDOR MANAGEMENT TO VENDOR PERFORMANCE MANAGEMENT By Terence Roche, Cornerstone Advisors