Do’s And Don’ts Of Selecting A Core Banking System

SAP did well in Gartner’s ranking of retail core banking system (CBS) providers according to ability to execute and completeness of vision.

I want to add to Gartner’s analysis with some thoughts on the pitfalls of choosing a vendor and installing the system from the perspective of someone who helped select a CBS before joining SAP.

When it comes to choosing a vendor, the biggest headache is too much information. Buyers create work for themselves by asking lots of suppliers loads of questions.

Let’s start with the request for information (RFI).

In general these documents are extensive, with predictable questions and answers. At worst, we’ve seen banks ask 400 or 500 questions with yes/no answers and invitations to write more.

The results are predictably horrific and obscure more than they reveal.

Be brutal

To make life easier and more efficient:

  • Limit the RFI’s function-requirement list to basic requirements which are relevant to your decision. If you ask whether a system can do an interest-rate calculation for a specific product you will get lots of meaningless yeses
  • Do your homework and cut the selection down to a couple of international suppliers based on analysts’ reports like the Gartner Quadrant and maybe one or two local vendors if there are any.

By restricting functional questions to a high-level description you save time. Functional discussions can be done later through a series of proof-of-concept workshops.

Next, ask how the system is designed and look at how to integrate it into your existing IT landscape. Is the solution designed to be integrated or is it a big black box?

Think long-term

Don’t forget that core banking systems are long-term investments, so take a look at the future prospects of the vendor. Will they still be in business in twenty years? Will the system platform still be there?

It’s not unheard of for a vendor to discontinue support for systems, causing lots of trouble for customers. If the hardware platform disappears, which also happens, you need to have a system with hardware and system independence.

By now you should have a gut feeling on the different vendors, so sift out the hopeless cases and concentrate your time on two or maybe three vendors for the shortlist and further discussions.

I’ll be blogging soon on getting the project going once you have selected your winner. What do you think so far – any pitfalls or points I haven’t covered?

Jesper Behr is working as a banking expert in the IBU Banking division of SAP focusing on core banking. He has more than 20 years’ experience of the banking industry