The $1.07 billion, Rapid City, S.D.-based BlackHills Federal Credit Union has continued to detail itsmeticulously-plotted core system overhaul in the second in a series of articlesdocumenting its conversion process.

This inside look follows BHFCU's pre-conversion choices, fromdeveloping a strategic initiative through completing RFPs, vendorinterviews, scorecards, gap analysis and negotiation, to making acore selection.

The core project officially kicked off in January when thecredit union selected the Chino Hills, Calif.-based Samaha &Associates to help with analysis, planning, implementation anddocumentation.

Now that it has completed the RFP and interview/demonstrationsegment, the credit union is in the home-stretch run of its coredecision-making process. It's currently focusing on a scorecard andgaps analysis.

“The scorecard process is where we create objectivity to whatwould otherwise be a subjective decision,” BHFCU SVP of IT JohnBuxton said.

“This phase of our process is critical as it reveals issues thatwould otherwise manifest themselves following contract signing andduring the implementation. Or, worse yet, after conversion,” Samaha& Associates President/CEO Sabeh Samaha explained. “It isthrough this phase that we are able to render the entire processpredictable and transparent, thus providing lift to the creditunion, its team, and most importantly its members.”

In June, the core conversion team asked vendors that were onsitefor interviews to elaborate on and conduct demonstrations relatedto issues, questions and concerns that arose.

“We call them interviews, unlike a demo where you sit back andgrab a Coke and popcorn and just listen,” Samaha & AssociatesManaging Consultant Adam Denbo said.

“It is very much a show-me interview,” Buxton added.

Each of the three vendors that were being vetted visited thecredit union for three days and met with a variety of credit uniondepartments in comprehensive question-and-answer sessions. Duringthe interview process, the conversion team looked for likes anddislikes related to each core system, as well as functions orfeatures that each credit union department needs.

The different departments cycled through the interview processand into a lab, which was located in a neighboring room. Whenemployees of each department shifted over to the lab environment,they received hands-on experience with the different coresystems.

“When [staff] gets hands-on, they can really dig in, understandhow it works, get a feel for it and ask more pointed questions intheir environment,” Denbo noted.

Every department in the organization is involved in thescorecard process. Senior management decides on the weight thateach category and sub-category carries. Additionally, the detailswithin each main category and specific functionality sub-categoriesare highly customized for the credit union. During the scorecardprocess, the core team has been assessing the followingcategories:

• Strategic alliance, in which the credit union rates the vendoras a partner at the industry and relationship level;

• Strategic initiatives, in which the credit union assesses thevendor's ability to help BHFCU achieve its goals now and in thefuture;

• Functionality, which involves the core system's capabilitiesacross all departmental disciplines; and

• Return on investment, in which the total cost of the system overthe contract period is evaluated.

After the scorecard process, the next phase consists of adetailed gap analysis. Denbo pointed out that all systems havegaps, especially when third-party providers are involved. Samaha& Associates works closely with clients to hunt down those gapsand find resolutions. During this phase, core vendors receiverequests for more information on certain features and functionsthrough web demonstrations and follow-up conversations.

Subsequent to the gaps analysis comes the negotiation phase.

“We have a preselected No. 1 vendor, then a runner-up vendor,”Buxton said.

BHFCU is negotiating with its vendor of choice at the moment andfollowing up on some of its interoperability with different thirdparties to ensure it made the correct decision.

As part of the core selection process, the credit union identified everysingle system and vendor currently under contract with BHFCU.Integration of online and mobile banking channels, for example,also becomes a factor in the core agreement.

The current timetable works out great for BHFCU, Buxton said,because it includes plans to initiate other third-party productsbefore starting the core conversion process.

“We have a little bit of time as a luxury because of multipleprojects going on,” he said.

He also emphasized the importance of a strategy that enables thecredit union to peel off different third-party software packageseither before or after the core conversion – but not during. Thisdecreases the likelihood of increased member impact and allowsstaff to focus their internal resources on third parties that aremaking changes at predetermined times.

In addition to conducting a core search, Buxton said BHFCU isevaluating some of its key ancillary systems.

“We are not just reviewing core, we are also repeating that sameprocess with some other systems such as mortgage, consumer lending,and online and mobile banking,” he said. “That is a little bitdifferent; a lot of organizations go through just a core selection,but this is really much more than that. We have several otherselections going on in parallel to the core.”

Some services are further along in the conversion process. Thecredit union already selected Digital insight, an NCR company, toprovide its home banking product, which consists of online andmobile channels.

One reason why the credit union must proceed more quickly on theonline and mobile banking side is because those channels aremember-facing.

“With the core, the members don't interact with that directly.”Buxton said. “Our thought there is we can complete the selection,make that conversion and get that all done before we do the coreconversion.”

Buxton pointed out BHFCU took a holistic view.

“Let's look at everything simultaneously. How do these otherproducts fit into the new core?” he asked.