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Similar to ICBA 2019 - Negotiate Core Contracts Like a Boss - redacted
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ICBA 2019 - Negotiate Core Contracts Like a Boss - redacted
- 1. NEGOTIATE LIKE A BOSS TAKING A LONG GAME APPROACH TO NEGOTIATING
- 2. 2 DEFINE: “CORE & IT” Account & Data Processing Item Processing ATM/EFT Services Internet Banking Bill Payment Card Services Network (WAN) Monitoring Server Management / Protection
- 3. Senior Vice President & Chief Information Officer DAN DECOSTA First engaged Paladin in 2014 Bank IT turnaround specialist “Loves” to negotiate vs. Core & IT suppliers. Closely follows the Fintech industry $1.6 Billion ddecosta@BayCoastBank.com | 508-678-7641 ICBA Community Bank Service Award Grand National WINNER
- 4. 4 BAYCOAST BANK OVERVIEW Financial data as of 12/31/18 Headquarters: Swansea, MA Founded: 1851 Locations: 19 Total Assets: $1.6 billion Total Loans: $1.33 billion Total Deposits: $1.31 billion Number of Employees: 376
- 5. CEO of Paladin fs & The Golden Contract Coalition Professional Negotiator & Industry Disrupter AARON SILVA 138 Wins / 0 Losses $346 Million in Cost Reduction $108 Million in Merger Value Accretion Paladin Blue Book $500 Billion + 30 years IT Contract Negotiations Launched June 2016 Group “Offensive” Negotiations 100+ Institutions asilva@paladin-fs.com 877-746-4859 x 704
- 6. 6 9.15% 8.77% 10.71% 0.30% 3.75% 15.08% 13.75% 19.76% 12.78% 8.67% 2014 2015 2016 2017 2018 PercentIncrease Total Non Interest Expense Data Processing Expense TECHNOLOGY & RISING Technology cost rising faster than other non-interest expenses Source: Financial Information Systems Core IT Solution Market Competitiveness
- 7. 7 TECHNOLOGY & RISING Technology cost rising faster than other non-interest expenses Source: Financial Information Systems Core IT Suppliers are essentially Hedge Funds… They haven’t innovated or invented anything new in many years. They buy, bluster, bolt-on and then make their clients pay to convert their really legacy services to the outdated solutions they just acquired… Because they can! Aaron Silva (Me)
- 8. 8 FIS Fiserv Jack Henry Free Cash Flow $1.6 Billion (+$100M) $1.2 Billion (+$100M) $228 Million (-$3M) Capital Expenditures 7% of revenue 5% of revenue 2% of revenue Product Development 8% of revenue 8% of revenue 12% of revenue Focus Modernization of Core and Payments platforms User experience updates Treasury services ERM Biller Direct Code-Connect (gateway) Enhancements to platforms Banno Mobile Data center consolidation Payments integration Faster payments Secure cloud Information redacted due to confidentiality limitations. Please request full version by filling out the form, or contact Paladin @ info@paladin-fs.com
- 9. 9 WHY ARE CORE IT AGREEMENTS SO UNFAIR? MARKET PENETRATION: OLIGOPOLY 93% institutions ABOVE $1 billions assets 85% institutions BELOW $1 billion assets American Banker May 2018
- 10. 10 IT’S NICE TO BE THEM! Market Performance, Penetration & Control 2012 68% 2014 74% 2016 85% DOW, NASDQ, S&P Launched in 2016 Information redacted due to confidentiality limitations. Please request full version by filling out the form, or contact Paladin @ info@paladin-fs.com
- 11. 11 THE BAYCOAST BANK STORY A relationship started in August 2014 2014: Long term plan to negotiate three critical suppliers, reduce costs and realigned agreements Expire 2019 Expire 2016 Expire 2016 Competitive Bid Process: Digital Insight vs. COCC Digital Banking (ACI) Concession: COCC attempted to take-a-way internet banking. Failed. (Pocket for later!) Final Result: Digital Insight + Bottomline survive. All agreements coterminous with COCC. $1,986,321 Cost Reduction Information redacted due to confidentiality limitations. Please request full version by filling out the form, or contact Paladin @ info@paladin-fs.com
- 12. 12 THE BAYCOAST BANK STORY 3 Years Later…the Table is Set – Let’s Eat! 2017: BayCoast again partners with Paladin to renew their COCC, Digital Insight and Bottomline Agreements Situation: Bank no longer satisfied with Bottomline – they must be replaced. Expire 2019 Expire 2019 Expire 2020 Strategy: COCC and Digital Insight fight to keep existing business and take-a-way Bottomline services. MOBILE RATING USABILITY CONVERSION NIGHTMARE ECONOMICS CONTRACT TERMS
- 13. 13 THE BAYCOAST BANK STORY 3 Years Later…the Table is Set – Let’s Eat! 2017: BayCoast again partners with Paladin to renew their COCC, Digital Insight and Bottomline Agreements $2,438,468 Cost Reduction Situation: Bank no longer satisfied with Bottomline – they must be replaced. Final Result: COCC agreement renewed with major changes. DI renewed. BottomLine negotiation remains open. Expire 2019 Expire 2019 Expire 2020 Strategy: COCC and Digital Insight fight to keep existing business and take-a-way Bottomline services. Information redacted due to confidentiality limitations. Please request full version by filling out the form, or contact Paladin @ info@paladin-fs.com
- 14. 14 BOSS-LEVEL RESULTS Playing the long game reduces risks, costs and improves supplier relationships Total cost reduction $4.4 Million • 75 commercial terms modified • SLAs improved across all relationships • Rights of termination and exclusivity reduced or eliminated • 25 quotes protection checks completed over 4 years Information redacted due to confidentiality limitations. Please request full version by filling out the form, or contact Paladin @ info@paladin-fs.com
- 15. 15 GUESSING IS NOW A THING OF THE PAST SERVICE LEVEL AGREEMENTS (what you think you have) Upload any ancillary or ‘one-off’ quote from a major supplier. “Buy” or “No Buy” decision intelligence within 48 hours. Advice, direction and contract term reviews BEFORE you sign. Make buying decisions with confidence. Never overpay for Core or IT services again LEARN MORE @ PaladinQuoteCheck.com Paladin Quote Check
- 16. 16 Accepting only ECONOMIC BENEFITS Outsourcing to your LEGAL COUNSEL Allowing your SUPPLIER RELATIONSHIP MANAGER to negotiate for you Relinquish the POWER SEAT COMMON NEGOTIATING MISTAKES
- 17. 17 Are YOU prepared to risk millions of franchise value and make long-term mistakes on a GUESS?
- 19. 19 IS MY BANK CONTRACT & PRICING VULNERABLE? 8 of 10 contracts are 13.1% - 43.1% above FMV Average impact is $ 1.38 Million per institution or more 99% of contracts have critical business & legal term defects Vendors do not volunteer benefits (you must demand) Information redacted due to confidentiality limitations. Please request full version by filling out the form, or contact Paladin @ info@paladin-fs.com
- 20. 20 DO YOU KNOW THE DIFFERENCE? SERVICE LEVEL OBJECTIVES (what you ACTUALLY have) SERVICE LEVEL AGREEMENTS (what you think you have) Commitment to perform (subjective). Processes or functions that are not necessarily critical nor can be measured easily by bank. Not defined or described. If a ‘miss’ continues – buyer can ‘redial’. They fix the problem using ‘best effort’. If buyer is harmed you must beg for compensation or pay great penalties to leave the service or contract. Guaranteed performance standard. Tied to meaningful defined processes or functions. If a ‘miss’ occurs – a credit is issued. If a ‘miss’ continues – buyer gains certain rights. If a ‘miss’ occurs too many times – buyer may leave the service or contract with no penalties. Information redacted due to confidentiality limitations. Please request full version by filling out the form, or contact Paladin @ info@paladin-fs.com
- 21. 21 IT CHASM COMPETITIVE TECHNOLOGY “CHASM” IS LARGE Friendly FinTech is moving to fill the IT CHASM created by Legacy Core & IT Loan Origination Systems Robot Process Automation Online Banking Artificial Intelligence Advanced Payments Mobile Banking Decision Intelligence Block Chain Voice Banking Chat BOTs Crypto- Currencies
- 22. 22 CONTRACTS LIMIT FUTURE COMPETITIVENESS RESULT: SMALL INSTITUTIONS ARE UNABLE TO COMPETE WITH LARGER COMPETITORS Alternative Competitive Suppliers Fintech Suppliers & Solutions Incentives for Innovation (The IT GAP) Fair Market Pricing
- 23. 23 BARRIERS TO FINTECH ACCESS Contractual and Financial Penalties designed by Core IT Suppliers Your Data
- 24. 24 Early bird Red zoneSweet Spot 36 30 24 18 12 0 Least Good Most CostReductionOpportunity THE QUICK AND THE DEAD Begin research 24-30 months Sign in the “sweet spot” Switching leverage erodes quickly in RED ZONE Call to Action: Yellow – Get started. Blue – Get it done. Red – Get moving!! Months Remaining on Contract Sweet Spot 18 months 24 months
- 25. 25 THE VENDOR SHELL GAME Month 2 Month 2 Years 1 Year 4 Years 5 Years 3 Years 3 Years 6 Months 0 1 2 3 4 5 6 7 Managed Services Network / WAN ATM / EFT Bill Payment Internet Banking Item Processing Account Processing
- 26. 26 BAYCOAST BANK KEY LEARNINGS Negotiating like a BOSS takes time and patience • Attention to details buried deep in contracts. Hard to see if you don’t know what you’re looking at. • Net Savings from Core IT contracts = found $$. • Repurpose savings toward fintech projects or expansion. • Play the long game, vendors do! • Don’t underestimate the benefits of Blue Book data.
- 27. 27 UNLEASH YOUR COMPETITIVE ADVANTAGE NEVER let your trust for a vendor get in the way of your critical thinking, business sense and fiduciary responsibility. Your vendor will NEVER volunteer something that benefits you more than them – you have to know what to ask for. NEVER go into a multi-year, multi-million dollar negotiation without doing your research and having hard market intelligence in your pocket before the negotiation!
- 28. 28 $0 COST REDUCTION AND CONTRACT ASSESSMENT EMAIL US Call Us: 877.746.4859 paladin-fs.com 3 Current Invoices + Contracts Completely Confidential No Cost No Obligation
- 29. 29 Join now @ GoldenContract.com Footer The only national banking coalition fighting for Banks against the Core IT oligopoly for a fair deal.
- 30. paladin-fs.com Aaron Silva 877-746-4859 x 704 asilva@paladin-fs.com asilva@goldencontract.com Dan DeCosta 508-675-4341 ddecosta@BayCoastBank.com THANK YOU