Technology Modernization: Keys to Finding a Best-Fit Partner

Michelle Macartney recently shared best practices about finding partners when updating an organization’s systems and practices to ‘keep up’ with the digital landscape. She provides valuable insight on the process of selecting a solution partner, highlighting strategic alignment, thorough planning, and objective evaluation.

Q&A with Michelle Macartney on Solutions for Technology Modernization

What are the primary drivers to consider when modernizing platforms?

Michelle:  There are a few key drivers. Firstly, the current platform might be outdated and no longer supported by vendors, making maintenance costly. Secondly, the functionality of legacy systems often lags behind modern technology, which now includes AI capabilities and machine learning. Plus, FOMO is real. Financial institutions (FIs) might feel they’re missing out if they continue using outdated systems.

From a business perspective, outdated technology can hinder the ability to offer new products or services, requiring manual workarounds that are inefficient. For example, if an FI is still using green screens developed 20 years ago, they are definitely missing out on modern functionalities and improved customer experience . Lastly, increased regulatory scrutiny requires more sophistication across process and systems. Technology modernization can ensure required evidence of actions and documentation that is stored and accessible.

Why should financial institutions choose an outside vendor rather than build a solution internally?

Michelle:  Internal development is typically more expensive and time-consuming than anticipated. It also requires ongoing maintenance costs. By opting for an external vendor, FIs can avoid these issues and benefit from the “network effect,” where vendors continuously improve their products based on client feedback. Additionally, many services are now offered in a Software as a Service (SaaS) model, reducing the maintenance burden on the FI and ensuring they stay up to date with emerging technologies. A good vendor who is in business full-time is more likely to stay on top of evolving technology and incorporate it into their offerings, unlike an FI whose primary focus is banking or lending.

How should financial institutions address concerns about the risks and costs of outsourcing technology vs. internal development?

Michelle:  It’s essential to conduct a thorough cost-reward analysis. This involves not only considering the costs of selecting and implementing a vendor solution but also fully accounting for internal costs, including personnel and platform maintenance. FIs should also consider the costs of lost business and manual workarounds due to inadequate technology. Building a business case with a clear ROI can help justify the investment.

How does a financial institution ensure that new technology aligns with their business goals?

Michelle:  Clarity on strategic business goals is crucial. FIs need to identify the business problems they aim to solve with technology. Instead of jumping to specific system requirements, they should first define the problems and then determine the necessary capabilities. This approach ensures that the selected technology supports their strategic goals and business needs. Starting with the question, what business problems are we trying to solve? helps to define and prioritize the capabilities sought in technology modernization initiatives.

Can you share an example of what happens when technology needs aren’t aligned with business goals?

Michelle:  There was an FI who wanted a combination servicing and collections platform that had to be hosted. They hadn’t clearly defined what was important or what wasn’t working in their current system. This led to a situation where they spent a significant amount of money on a solution that didn’t meet their needs because they didn’t do proper due diligence upfront. They were sold on the technology without a detailed review of the necessary capabilities. The result was a greatly prolonged implementation timeline and very high budget overrun.

How can financial institutions make sure they’re asking the right questions in an RFP?

Michelle:  Always tie questions back to critical capabilities, business needs, and the problem you’re trying to solve. When we guide someone through the process, we spend a lot of time focusing on these aspects. The RFP must truly reflect the business need. While it can include the standard procurement requirements, the business itself needs to define the critical capabilities they’re seeking.

When it comes to vendor selection, it’s essential to ask the right questions that get to the heart of what the business needs. If FIs don’t solicit enough information, they might miss crucial details. This is why it’s important to engage all the relevant stakeholders to help define those capabilities and ensure the RFP is thorough.

However, it’s not just about involving decision-makers. You need critical stakeholders from all parts of the organization, especially those who will be directly impacted by new technology. For example, if you’re looking at a new collection system, talk to frontline collection agents. Find out what hinders them today, what works well, and what they wish the system could do on a day-to-day basis. This way, you ensure the technology meets real needs and ideally makes their jobs easier.

On the flip side, senior stakeholders will be focused on the long term aspects, like how the technology stack will hold up over time and how compliance considerations are included. This is particularly crucial in the consumer banking space, where there are many facets to consider. The key is identifying all stakeholders early on and gaining insights from people in the operation.

What are common pitfalls to avoid when developing an RFP for technology modernization projects?

Michelle:  A big pitfall is focusing on the technology as the “shiny object” rather than clearly defining business needs. Sometimes, organizations jump into the latest tech without understanding what they need. It’s crucial to ground the decision in what the business actually requires.

Another common mistake is not investing enough time upfront to prioritize critical capabilities. The RFP should be fit for purpose, reflecting the specific needs of the business rather than following a generic template. It’s also important to ask the right questions and ensure the RFP process is objective and thorough.

Often, procurement departments use a standard template for RFPs and just send it out. As recipients, we find ourselves thinking, “OK, this question has nothing to do with the service or solution you’re actually seeking.” They don’t fully understand the business needs, or the business itself didn’t clearly articulate them. For instance, they might say they want a solution that does XYZ, but they don’t explain that XYZ is a service, not just a product off the shelf. There’s a disconnect.

Can you share what makes successful RFP process?

Michelle:  A successful RFP process starts before you even receive responses. It’s all about structure, prioritizing capabilities, and using a scorecard to maintain objectivity. Go through each capability and decide what’s a “must-have” versus a “nice-to-have.” Be clear on how you’ll score these elements. For instance, if a vendor doesn’t have a “must-have” feature today, is it acceptable if they have partial functionality, or keep them under consideration if they promise it in the next release?

Once responses come in, it’s crucial to evaluate them objectively. We conduct blind evaluations for clients to keep the process unbiased. Everyone has biases, like when the business gets along great with the sales executive, which might predispose favor over others. To counteract this, it’s essential to stick to a quantitative evaluation.

How can FIs avoid the “big gotchas” from a technology modernization RFP process?

Michelle: Clarity is key, especially when you narrow down to the final two vendors. Make sure vendors know exactly what they need to showcase in demos and meetings. How do you ensure clarity? The FI drives client demos. One demo can be vendor-led to highlight specific functionality and go through the sales pitch. However, subsequent demos must be guided by the FI with scenarios provided to vendors in advance. This builds confidence that precise functionality will be used in day-to-day business activities. Additionally, using the same scenarios across vendors makes for easier comparisons. FIs need to fully understand how vendors answered questions, what they showed in their demo, and what functionality their solution supports.

One of the biggest “gotchas” in technology modernization is around customization. It’s crucial to know what’s available out of the box, what requires configuration, and what needs customization. Vendors will rarely deny the ability to accommodate a specific function but it’s important to clarify if the functionality exists today or are they adapting to accommodate the RFP, because that customization often comes with additional costs.

For example, we’ve seen instances where the FI selected a system that wasn’t even built yet; it was only on PowerPoint. They chose it based on concept alone, without being informed on the underlying technology. It ended up costing them a lot of money. These are the kinds of pitfalls to avoid by being as clear and informed as possible throughout the process.

What additional insights can you share about aligning RFPs with strategic goals and implementation?

Michelle: It’s important to consider the future state operating model and how it might change because of new technology. Business outcomes should be a key focus. At Bridgeforce, we emphasize objective, fact-based decision-making to ensure positive outcomes. Our technology modernization methodology includes researching potential vendors, developing functional capabilities, creating and scoring RFPs, and conducting thorough evaluations to select the best solution.