The Goldilocks Approach to Buying Bank Technology [Podcast]

 

 

When it comes to buying bank technology, some banks have a tendency to be overly cautious. Other banks may bite off far more than they can chew. And then there are banks who get it just right.

In this episode, Dallas Wells chats with Pam Hannett from Silverline and Bryan Lee from Salesforce about what the right balance is when purchasing new technology for the bank

   

Podcast Transcript

Dallas Wells: Hi and welcome to the Purposeful Banker, the podcast brought to you by PrecisionLender where we discuss the big topics on the minds of today’s best bankers. Hi, I’m your host, Dallas Wells. Thank you for joining us. The title of today’s podcast is The Goldilocks Approach to Buying Bank Technology.

It features two guests that we’re incredibly excited about because it seems like anytime we talk to a bank that is in the middle of a big technology overhaul, these are the names that come up. Today, we have Pam Hannett, banking practice director at Silverline CRN and Bryan Lee, director of financial services at Salesforce. Pam and Bryan, welcome both of you the podcast.

Bryan Lee: Thanks, Dallas.

Pam Hannett: Thank you, Dallas.

Dallas Wells: Let’s start with the easy question. Both of you just telling the listeners a little bit about yourselves and your company in case they might not have heard of you or be familiar with how you fit with banks. Pam, why don’t you get us started?

Pam Hannett: Absolutely, I’m Pam Hannett. I am with Silverline. I’m the banking practice director there. We specialize in highly regulated industries, both financial services and healthcare. We’re a platinum partner with Salesforce. We specialize in banking also, which kind of supports some other partners and we work as strategic advisor and really a trusted party to your bank to be able to make some really good decisions around using the platform and seeing the vision of the platform.

I also come with fourteen years of experience in community banking, leading change to make buying decisions with technology, and creating adoption strategies and really measuring the success of implementations with technology and banking.

Dallas Wells: Great and Bryan?

Bryan Lee: Thanks Dallas. I’m with Salesforce. We’ve been in business about seventeen years now. We’re one of the pioneers of the whole cloud computing movement. In that time, we’ve been really pleased to work with banks and credit unions of all sizes around the world. Part of that work has contributed to our growth to be now one of the top four enterprise software companies in the world. We’re very excited about that.

In my role, I work with a number of the banks in particular around the United States, again both large and small. We’ve got thousands of customers that occupy that space for us. I help with the solution strategy, what kind of solutions will go through the marketplace and the like.

Dallas Wells: We wanted to have both of you on to talk about something that’s top of mind for just about every bank in the world and certainly just about every bank we talk to, which is basically, the tech buying process. Banks know they have big changes that need to be made and that there are big dollars at stake. Given your backgrounds, we wanted to get your thoughts on some of those struggles in trying to purchase tech and some of the banks, too, that just get it right, the ones that seem to have a good strategy figured out.

The title of this podcast actually came out of a conversation, Pam, that we had with you in which you talked about how some banks are too cautious in their tech purchasing and some are way too ambitious and others seem to get it just right. Pam, can you start us with some thoughts on that too timid side of things?

Pam Hannett: Banks have yearly a strategic planning that they do which results in multiple projects. Those projects span across different divisions. I’ve worked with some banks that have hundreds of projects that they have to prioritize each year. Probably, eighty percent of those require some sort of technology decision that’s in there. Now, that is a challenge for them because prioritizing that many different projects with the amount of full-time equivalent people that they have is virtually impossible.

They’re looking at down a very long road trying to make good priorities for their year. When they get to the point of actually agreeing on a project and doing the due diligence for that project, when they’re sending out I’m going to do technology implementation, the first thing they always do is turn to core. The cautious banks look to the core that’s looking for a bolt-on solution so that they actually can be provided with something that they feel good about, they know about. They’re not venturing outside of the box. It gives them an alternative way of being able to justify because it’s part of the core.

That said, though, they don’t seek the time to step outside the box for the more innovation solution. Then they get sucked into using solutions like these bolt-ons that aren’t necessarily what they need, but it’s okay for now. I have a story about a bank that I worked with that they decided on a bolt-on going into it with their core provider. They submitted a hundred enhancement requests over the year and a half that they actually had it. There, actually, one was fixed. It was the increasing the character limit of the field. It took close to six months to get it fixed.

Dallas Wells: Oh, wow.

Pam Hannett: After a year and a half, they decided to go back out and make it a best decision because they didn’t look at all of the alternatives that they had available to them at the time. They ended up abandoning the bolt-on and going with something more like Salesforce.

Dallas Wells: Bryan, I’m assuming coming from Salesforce that you run into this a lot probably where you’re getting the second go at things. Pam, I think what we hear a lot is that same thing of start at the core. Really, some of the due diligence is already done. It feels like some of the homework you’re halfway through with it. It feels like the path of least resistance. Then it ends up being painful. Bryan, is that something that you run into on a fairly regular basis?

Bryan Lee: Yeah, we do see that and certainly, a lot of our customers have strong core relationships. I think, as Pam said, you can be beholden to that sometimes. I think the challenge that I see with banks now is that the marketplace is changing a lot. The demand set, they need to respond to in order to be able to add the type of experience that customers really want to have can be lost in the priority, if you will. I think the, and with the regulatory changes that are coming, certainly understand the need to pay attention to how well those core systems make us compliant.

At the same time, you really need to pay attention to whether we’re going to have customers to serve. You have to have, I think, a new approach to thinking about how to serve customers well. I think it’s not just a question of cautiousness, but it’s also a question of having the right goal in mind, having the right priority set.

Dallas Wells: Really allocating all the resources to, we always refer to it front and back of the bank and making sure that there is some balance there and that we don’t just look internally in the banking industry and solve our own mess instead of how we better serve those end customers.

Bryan Lee: It’s easy to be caught in that. We certainly hear a number of some customers that seventy to eighty percent of their budget is spent on maintaining something in the legacy transaction systems or putting. It’s certainly been a huge increase in the budgets for regulatory and compliance. What’s left for innovation? What’s left for customer experience? I think that the question we think customers, our customers, ought to be asking.

Pam Hannett: Just to add, I think sometimes banks have a tendency to go with what’s comfortable and less about what is new and can differentiate themselves from other competitors. I think that’s where they really can have an opportunity to step up and change the customer experience by stepping out of the box and trying something different.

Dallas Wells: Definitely and it tends to be a little bit outside of the banker mindset. You’ve been in that chair and so have I of you think all day about the risks and how do we keep from losing dollars. To flip that a little bit when it comes to technology can be hard to do.

Pam Hannett: Absolutely.

Dallas Wells: Pam, at the other end of that Goldilocks spectrum, what about some banks that get a little too ambitious, what kind of things do you see there?

Pam Hannett: They get excited about the technology and making these decisions. These banks are embracing becoming the next innovative institution, but sometimes, they forget that these decisions affect the people in the organization. Technology decisions are really, cultural decisions. These are a big change for the demographic of people that they have in their organization. They have a tendency to forget that. You could get into these projects. You buy really awesome technology, but you don’t have executive buy-in. You don’t have buy-in from some of the employee populations. Your system of engagement becomes a system of disengagement because they’re not seeing it.

Then when you look at it and the president of the bank comes to you and says, “Why did we guy this?” You really don’t have a reason. You don’t have an understanding of what should we have done and really taking that to a different state where you don’t want to give your bank a heart transplant without anesthesia. It’s not advisable. You really have to look at taking that and looking at the adoption strategy. How am I going to implement this in each of the different divisions of my bank? How am I going to measure success from it?

Dallas Wells: I think the way we try to phrase that is banks should really think about buying solutions, buy a solution to a problem rather than just the shiny gadget that gets everybody excited. It really has to solve something and provide some real value for it to be worth all that effort.

Pam Hannett: Right and when you look at this, these technology decisions are not small purchases. These are large-scale purchases. In some cases, like customer relationship management, like with Salesforce and Silverline basically, is a project that competes with your core. You really have to be in a mindset of change and understand what the complexities are around that, but understand that it will take you to the next level of that and create a better customer experience.

Dallas Wells: We mentioned the core system a couple times. Actually, it brings to mind a very interesting article that I saw a couple weeks ago now at Venture Beat. It was talking about the airline industry and specifically the problems that Delta had a couple weeks ago with all the flight cancellations because of their systems going down. The article talks about how the airline industry spent billions of dollars on new technology, things like rebuilding interfaces for websites and mobile apps and the actual systems that their gate agents use. All of those are, Pam to borrow your phrase, they’re bolted onto this core reservation system that was built back in the ‘60s.

That probably hits a little too close to home for a lot of bankers. That’s the same story that they feel like they’re hearing all the time. They’re spending big money bolting on internet banking and mobile systems, but all on that core. Should banks feel like they need to address some of those core systems and some of those legacy systems before doing add-ons? Is that first before the add-ons, or can they think about those customer-facing systems and feel like that is a good place to spend money even though there is some dated legacy stuff in the background?

Pam Hannett: I think if you look at that and you take it one step further, how many of those legacy systems could be retired by using something that has a platform like Salesforce? To be able to look at that and bring in everybody into a centralized system and engagement so that you have the core, but the core would essentially become the calculator for the organization.

Everything else around it would be centralized into one place so that they’re a little more effective when it comes to working with their customers because the engagement is seamless and there is one spot to make everything happen, which I think bankers are not adjusted to that. How many touches that they have to do to open an account or how many clicks does it take for them to actually onboard a loan? Those are really long processes, if you go into a bank and actually sit down and talk with someone about it.

The manual process that they have in these organizations is endless. By looking an inventory system and getting a better understanding of what functionality and features do they actually have that they’re using and what could they do by buying a technology that allows you to bring all of that together?

Dallas Wells: In some ways, I think maybe some of the criticism and the heartburn around those core vendors is a little misplaced because a lot of banks are asking those systems to do something that they weren’t designed to do, which is a lot of the processes you were talking about. That’s where we have to back up and say, “The core system has a function.”

We look at it as the heart and the brain where the core system is the heart of the bank. It’s circulating that key information, but that’s all it really needs to do is circulate it to those other platform systems that can do and were designed to do those more complex workflow-type kind of processes.

Pam Hannett: Absolutely and I think that is where we get hung up as bankers is that we feel that the core runs our bank. It does, but it has a purpose versus being able to differentiate a workflow tool, provide customers with better context to the bank to online banking and those things. I think you’re right. I think they really need to focus on something outside of the core because the core is meant to do one thing.

Dallas Wells: Bryan, now that we’ve covered some of the thirty-thousand-foot philosophical stuff, we wanted to look at some of the specific pitfalls that we see banks stumble into when they actually start rolling out some of these systems. We actually wrote about this on our blog not too long ago about how not to buy technology in a bank.

One of the first mistakes we talked about was that the IT department or procurement area makes the buying decision. Do you run across that a lot where you’re talking to someone who is not the business line, not the actual end user? If so, how do you address that issue? How do you help that bank come to the right solution?

Bryan Lee: Yeah, no, it’s a great question, Dallas. We do see it a lot I think as much they’ve gotten bigger banks is they’ve really recognized that they are technology companies in many ways. There needs to be a structure for how they design and implement the solutions that they want to provide around the areas that we’ve talked about. I think IT and procurement certainly play an important decision just bringing some order to some potential chaos should there not be any involvement on their part.

On the other hand, they can tilt towards the far end of that. If the decision doesn’t lie at the end of the day with the business who is responsible for delivering either top-line revenue or cost efficiency, I think they could just be out of sync and perhaps set themselves up for a decision that won’t reflect the value that the business expects.

I know we try to encourage there be a balance between that, certainly, to have a buying process that is structured, that is well vetted and compares the kind of value that a solution can provide. We think that that value needs to be measured against what the business really is trying to achieve and what they’re willing to sign up for in terms of making sure that this isn’t just a development project. I think as you were saying earlier, it’s really a business project that’s going to deliver some real benefit both to the firm as well as to customers.

Dallas Wells: Somewhat related to that is and sometimes, inside of those business lines even, you’ll run into what we call turf defenders, the folks who feel threatened by the new technology and the change and actually will work to discourage the purchasing of something new. Is that something you guys run into as well?

Bryan Lee: I think it’s been really interesting in the last several years like in where I think systems like CRM, for example, there was a movement for a while to build your own. We still, actually, run into a number of folks that built something for their bank in the past. I think they also realize that the demand to change that system and evolve it to handle new requirements like customers really wanting more of a mobile experience or something that’s more personalized in terms of how it feels to engage with that bank. Those are not easy things to build.

You’re seeing a recognition that, hey, there are people that do this for a living and maybe I need to take advantage of some of that type of thing. The other area I think that is pretty interesting is that cloud computing is not that new, but it’s still new to a lot of people in banking. There is maybe a reluctance or just an uncertainty about is it secure? Is it safe? Is it worth the potential risk that we attribute to it? I think there are reasons why people defend the turf.

I think on the other end of the scale, what I’ve really noticed is that people who have success in some of these newer technologies in cloud platforms and the like, they find actually, great success in being able to deliver to the business on a rapid basis on an iterative basis. You don’t take two to three years to deliver on what the project was supposed to do. When they have that success and can go to another firm and bring that experience with them, that’s a real wakeup call for an organization to say, “Hey, there are other ways to achieve success and we ought to be open to looking at those, those approaches.”

Pam Hannett: It’s really important at least for the folks that I’ve been working with that a lot of the banks are product-driven organizations. A lot of those turf defenders are people that like the way things have been done. It works the way we want it to. Bringing in that technology is shifting them to a more relationship-driven organization, a more sales-outcomes-driven organization. Sales is a four-letter word in a lot of the banks that we work with. Making that shift again is that cultural change.

Dallas Wells: Absolutely, the painful process of going from looking inward to making it customer-focused, sales-focused, and it does feel to some banks, it seems like it almost goes against their core values of we’re not as high-pressure sales-type of organization. We just sit back and wait for the customers to come to us.

I think, what they’re starting to find is that you can sit there and stare at that phone an awful long time these days waiting for those customers to come to you, and so that you see that shift happening just across the industry of having to focus outward and use these solutions as tools to enable you to do that.

It’s a painful process. One of the other buying issues that we talked about in our post and I was curious of your thoughts on is this buying and purchasing decision that comes from a committee instead of an individual. Of course, inside of a large organization, there is always multiple people that have to be involved in the decision process.

Really, it’s about moving the decision from one step to the next where you’ve got a big group versus you have someone who is a champion, who is helping you move and navigate through that process. Bryan, in doing this with Salesforce, is this something that you struggle with? Do you prefer one way over the other?

Bryan Lee: No, I think it’s like you said, Dallas. The reality is that you’ll always have committees involved in making the decisions. It’s important to do because I think if you’re going to do the kind of cultural change that Pam was talking about, you need leaders business to champion that. You need champions at multiple levels within the organization to certainly feel good about what that decision is going to be and the type of change you’re trying to make because again, it’s a business change. It’s not just a technology change.

On the other hand, helping that champion paint the vision that they can carry forward internally is also really important. On the one hand, you want to have success for the individual business lines, but when you’re dealing with customers, you also need many parts of the bank to operate efficiently and effectively together. You could certainly have an individual who wants to drive a big piece of change in their particular piece of the business, but in order for the firm to have success with its customers, there has to be multiple business lines that are working together in synchronization.

Pam Hannett: To add to that, I think it’s a misconception in banks that one person owns the customer, whether it be commercial lending, whether it be retail banking. Every single division of a bank has an opportunity to be a part of a customer’s experience because back when I was in banking, that was exactly what would happen when you had turf wars between the divisions of who owns what customer. Take that into technology and understand that the customer experience is seamless across the entire of the organization and all of those people need to be involved.

Bryan Lee: Pam, I’d add to that as well. I think certainly, across divisions, but I think it’s also important that you look at business and the IT groups. There is a strong partnership there as well. This doesn’t happen in a vacuum for either of them. I was talking to a senior executive, a client of mine last week. We were talking about how rapidly they had been able to implement one of their major CRM initiatives.

They said one of the keys was that he had a strong partnership with the IT execs that were responsible for his part of the business. This isn’t about the business just being able to do it without the support or the leadership of IT. I think if the execs leading those organizations are teamed up well together, it makes a huge difference in terms of the overall success of the project and the speed by which they can achieve that.

Dallas Wells: Bryan, I think what a lot of this comes back to, and all the little pieces we’ve been talking about, is banks just need to decide formally, write it down, how do we buy stuff? What’s the process we go through? Who is responsible for which piece of it? Have a clear process that you follow because this is something that banks, it’s not a once-a-year thing anymore. The business just moves too fast. The technology changes too fast where you have to be able to evaluate things in a continuous basis and make good decisions and good implementations around that.

Bryan Lee: I think that’s really an important point, Dallas. I think that there the piece that I really think was great about what you said is that this isn’t, I think this is less about big-bang kinds of projects anymore What the world is moving to is much faster moving. It’s much more iterative. You have to be able to take on projects that are, I won’t call them experiments, but they are aimed at a smaller goal and then use that experience to build up confidence, build up strength in terms of how rapidly you can move the organization through some of these projects.

I think that in itself is a change that we see that’s happening a lot. Certainly, the kinds of technologies that we’re built on, the whole cloud computing movement, certainly lending fuel to that fire that’s going on right now. We’re seeing that as a result, business executives are saying, “I don’t have two to three years to solve a problem. I have to two to three months to solve a problem.”

We need to be thinking as an organization about how we solve problems iteratively and what pilots that can be expanded into various parts of the organization. Through that, I think, they build up a real cadence of change that is much faster moving, much more agile. I think that’s ultimately what our organizations are going to need in order to be able to succeed.

Dallas Wells: Pam and Bryan, thank you both so much for taking the time to do this with us.

Bryan Lee: Thanks, Dallas. This was great.

Pam Hannett: Absolutely, thank you.

Dallas Wells: Great and thanks to everyone else for taking the time to listen. If you like what you’ve been hearing, make sure to subscribe to the feed in iTunes, SoundCloud or Stitcher. We’d of course, love to get ratings and feedback on any of those platforms. You can find more episodes as well as show notes at PrecisionLender.com/podcast. Thanks for listening. Until next time, I’m Dallas Wells. You’ve been listening to the Purposeful Banker.

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