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COLUMBIA, S.C. – Richard Hurt says moving from the service bureau and its proprietary environment that had served his credit union for 10 years to an “open system” vendor was positively liberating. Annette Zimmerman, meanwhile, says her credit union’s relationship with its proprietary core-system processor has not inhibited her organization from interfacing with the third-party vendors they think would best suit their needs. Hurt is CEO of the Illinois State Police Federal Credit Union (8,000 members, $48 million in assets) and is a new client of Open Solutions Inc. in Glastonbury, Conn., whose open architecture is based on the widely-used Oracle relational database. Zimmerman is senior vice president and chief information officer of Mountain America Credit Union (www.mtnamerica.org) in Utah ($800 million, 145,000 members), whose core processor is California-based Symitar Systems. “We use Symitar software, which is proprietary, but thus far we have been able to interface third parties successfully to provide products and services to our members,” says Zimmerman, who is also a member of the CUNA Technology Council Executive Committee. Zimmerman’s and Hurt’s experiences provide a snapshot of what’s going on in the credit union world as executives try to provide a growing array of services while working with vendors who are generally split into two camps: proprietary or closed systems, and open systems. While the line between the two are blurring, many would argue, deciding between the two is a big question, and the answer differs for each individual credit union. It’s Up To You, The CU “There are many ways to skin a cat,” says Dave Plank, chief technology officer for CUNA (www.cuna.com) in Madison, Wis. “Many credit unions are happy with all their computing needs being taken care of by their vendors. In this case, open systems and open source are not that important,” he says. “However, open systems can be an advantage to in-house supported technologies in that it gives the credit union a greater variety of competitive options in upgrading their hardware and/or applications,” Plank says. The increasingly competitive environment, in which small credit unions have to expand their services if they want to be a complete source to their members while growing themselves, is forcing some of this change, observers say. “To a small credit union getting all its systems from one vendor, it doesn’t matter that much, for now,” says Carl Faulkner, managing director of technology services at M ONE Inc. (www.moneinc.com), the Phoenix, Ariz., consultancy that’s partnered with CUES on its CUES Tech Port electronic advisory service. “But at some point you’re likely to grow, and then it will matter, and you will want to choose between different vendors,” says Faulkner, who worked for many years on the vendor side with EDS before moving into consulting. A Case For Growth That’s what Hurt found at ISPFCU, whose members live throughout the state of Illinois. “We knew when we committed to technology in 1998 that the only way we could retain those members and have any hope of becoming their primary financial institution was to deliver the services they want conveniently, and that could only be done through technology, not bricks and mortar,” he said. The credit union now offers services associated normally with larger institutions, such as home banking and brokerage options, and it has grown from $30 million to $48 million in assets in less than three years. While ISPFCU (www.ispfcu.org) was “border line in size for investment in a system like OSI’s,” Hurt says, “we knew our long-term viability might depend on this decision. “We tried to implement our technology plan only to find out that some of what we wanted to do was not available from our core processor and that they would not allow us to pick a third-party provider for an interface,” Hurt says. In other cases, the option was available but for a higher cost than a third party would have demanded, he says. “We definitely felt trapped,” he says. Since switching to Open Solutions, Hurt says, “We have also purchased a loan origination system, a general ledger and ALM system, a voice response system and a COLD storage system after reviewing several such systems.” Such flexibility is a key to growing interest in open systems and even to credit unions’ competitive futures, says Mike Nicastro, vice president of marketing and business development for Open Solutions (www.opensolutions.com). “The non-traditional competitors – brokerages and insurance companies, for example – have gotten into client-server, relational-database architecture,” Nicastro says, “and they leverage that technology well beyond what community financial institutions are doing. “They are constantly learning more and more about the credit unions’ members and they will try to steal them.” He maintains that open systems like his company’s offer an advantage over traditional core processors, which he says simply add disparate functions, such as loan origination and teller systems, into the mix without allowing for true data interaction. Of course, the leaders of those core-processing vendors don’t share that assessment. Who You Calling Closed? “Without giving away any strategic secrets or being overly vague, the Fiserv Credit Union Division is an unhesitant advocate of open systems,” says Oscar Mireles, senior vice president for technology of the credit union group for the Wisconsin-based conglomerate (www.fiserv.com). “In addition, (we have) all the means necessary, including optional access to a plethora of Fiserv’s own complementary product and service choices, to assist the credit union in moving to an open system, if that is the credit union’s decision.” Mireles also says that most infrastructure systems, beyond the core-data processing function, already are open, and will become even more so. “As component products from third parties grow in availability and quality, they are forcing the once-monolithic applications to become more and more modular, a capability clearly benefited by adherence to open-system standards,” he says. Bruce Cormode, president of Symitar Systems (www.symitar.com), says his company also is open to third-party applications. “Technology has truly revolutionized the way financial institutions do business. To keep a competitive edge, credit unions must be able not only to deploy new technology solutions, but also to deploy them quickly and easily. Any technology provider interested in enabling its clients to be truly competitive must provide an open system,” he says. While some core vendors have incorporated the ability to add on third-party clients of their customers’ choosing, others have responded by changing their own systems from the ground up. One of those was Share One (www.shareone.com) in Memphis, Tenn. “We decided 2 1/2 years ago to move from a very proprietary system design that had served us for over 20 years to an open systems design based on Microsoft programming standards,” says Daryl Tanner, the company’s president and CEO. “It was looking like three-fourths of the new software coming out to support financial activity were based on these standards, so interfacing with third-party products appeared to easier in that world,” he says. Is There A RightTime? How can you know the time is right to make a switch? “When is the right time to inflict pain on yourself,” asks Mireles at Fiserv. “Change is traumatic. And the change to a new core application or a new environment is especially so, no matter how well planned and executed. . I would say the right time is when it is necessary because choice is essential and there is no choice.” The ongoing process of adding on new functionality, whether it’s to a proprietary core data processing system or an open, Oracle or Microsoft-based architecture, will eventually create the need for new or upgraded core infrastructure, Mireles adds. And when that time comes, should the credit union put together its own system, with an open core processor and shopping for the best in add-ons? Or should it go for the one-stop option? Here’s one blunt opinion: “The more technologically progressive the credit union, the more compelling the need for an open system,” says Hugh Butler, president and CEO of Computer Consultants Corp. (www.cccorp.com) in Utah. “An open system powerfully benefits the CEO who wants to add on technical functionality, whether for improved member service or staff efficiencies or analytical purposes, and who does not want to be held back due to dependencies on the core vendor,” Butler says. “There are other credit union leaders who believe that simple data processing should be an outsource item, who prefer to let someone else steer their technology course or who believe single-source responsibility is worth whatever paring of options or price-hostage implications a non-open system would present.” The Middle Ground Faulkner, the M ONE consultant, has a word of advice for those responsible for steering the course between the merging world of open and closed systems. “If I was a CEO, what I would want to do is make sure that all new products I bought would meet the industry’s technical standards and protocols, like SQL and those kinds of things, so that over time, all your systems will be open and can more easily interact with each other,” he says. “It’s a journey and can take a while. But if you say, `Here’s what we’re going to do,’ and make sure all your purchases meet that, then eventually you’ll get there.” Of course, a credit union could get too confident, and then put its technology vendor in a possibly unfair bind. One of the most tech-savvy in the credit union movement warns against that. “You could get into a situation where a credit union thinks its knows what it’s doing. I’ll use us as an example,” says Greg Smith, president/ CEO of Pennsylvania State Employees Credit Union (www.psecu.com), a $1.6 billion, 267,000-member organization that uses Symitar as its core-processing vendor but has started its own subsidiary to offer its homegrown technology innovations to other credit unions. “We could find ourselves in a situation where we get off into the system and start making changes to the code. The next thing you know, you don’t really have a Symitar system anymore, but when everything hits the fan, you go looking for help to them. That could put them in a difficult position.” He says of Symitar and other processors: “In their defense, you can see why they have to be a little concerned about what happens if they make it totally open. There’s no telling what some people might do with it.” That said, Smith says he doesn’t feel at all trapped by his credit union’s reliance on Symitar and its proprietary system as its primary data driver. “It’s hard for me to think of any walls that we’ve run into in terms of any limitations with them,” he says. “And as long as we stay in their safety zone, it’s kind of like the best of both worlds.” [email protected]

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