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Improving over time?

Not if you’re locked into a conventional tech contract

Improving over time?

Technology does not stand still so neither should your vendor contract. At contract renewal time looking ahead and creating a flexible vendor strategy is next to impossible to do if you approach the event thinking in conventional terms. Most contract discussions begin with the institution demanding lower prices and the vendor responding with a demand for a longer term contract which, if agreed to, only makes matters worse. In the end, the focus of both sides is cost and term.

The deal is executed and after year one the numbers look good for the monthly financial report, but your calling officers and retail bank staff are complaining about what the bank across the street has and you don’t. You are one year into a three-year contract and you realize two things: technology has changed dramatically and your organization is trapped by an exclusivity clause and can’t move to another source for the new technology to compete. If you had only known!

Well, getting mad at your vendor for not having a technology at the time you signed the deal is not constructive. The question you should be asking yourself is how closely did you read the contract and how broad was the exclusivity?

A 21st century vendor contract should be flexible and allow for changes in both your institutional growth and industry technology. More importantly, if you focus only on cost, cost savings is the only thing you’ll get. If you focus on incentives, the same will be true.

It is not unrealistic to expect a contract relationship to improve over time given how fast technology changes. A flexible contract that leaves room for options in the future and rewards your institution for growth can be achieved. Absolutely, a contract should improve over time and reward your growth with better terms. It takes creativity and hard work, but it most certainly can be done. Don’t get caught in the technological dust of your competition coughing on your cost savings. 

Dan Fisher

Dan Fisher is president and CEO of The Copper River Group, a consulting firm headquartered in Fargo, N. D., that focuses on technology and payment systems research and consulting for community financial institutions. For nearly 30 years, Fisher has worked in the financial industry using technology to improve the bottom line. He was CIO of Community First Bankshares (now part of Bank of the West), has served as a director of the Federal Reserve Board of Minneapolis, the chairman of the American Bankers Association Payment Systems Committee, and was a member of the Independent Community Bankers of America Payments Committee. Fisher has written numerous articles on banking technology and the payments system. He has authored or co-authored six books and recently published a book titled, "Capturing Your Customer! The New Technology of Remote Deposit." You can contact Fisher at dan@copperrivergroup.com.
P.S. To understand Dan's nickname, check out "About the Wombat" on his website.       

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