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COLUMBIA, S.C. – It’s budget time and IT managers across credit union land are busy preparing spending plans for 2003 that must pass muster from CEOs and boards both as monetary investments and as part of the institution’s strategic goals. A check with several credit unions around the country found that while IT expenditures continue to undergo fiduciary scrutiny, they also are taking on an increasingly integrated role in the delivery of the service and products that credit unions exist to provide. For instance Eastern Financial Florida Credit Union in Miramar is planning to expand its branch network next year and are very excited about creating a new look for these offices, says Sharon St. Clair, vice president and CIO. “We made significant investments in several key systems this year, including teller, lending and document management platforms. Our primary focus in 2002 has been on training and implementation of these replacement solutions,” she says. St. Clair expects IT spending at the $1.2 billion, 160,000-member CU to be comparable to 2002. “We expect our investments in these platforms to continue throughout 2003 as we take advantage of more robust functionality in the areas of automated sales tracking, CRM initiatives, true online lending, signature capture and forms integration,” she says. St. Clair cites her CU’s relationship with core processor Aurum Technology and e-commerce vendor Digital Insight as crucial elements to Eastern Financial’s strategic plans. “Part of the vendor selection process includes how quickly we can bring new services to members,” she says. INVESTING IN NEW SERVICES Delivering new services to members also was a major investment in 2002 for SC TELCO Federal Credit Union. “We launched a portal to our Web site, Internet home banking and bill pay, and are pleased with how these services have been accepted by the members,” says Toni Davisson, vice president of finance at the $94 million, 27,000-member CU based in Greenville, S.C. And in 2003? “E-statements, an HR portal and automated loan-decisioning software are some of the technology-related services we are planning to review or implement in the coming year,” Davisson says. “As with most technology we evaluate, either the members are requesting the service or the credit union perceives there will be a cost or time savings associated with it,” she says. IT spending will be up in 2003 at SC TELCO, a Liberty FiTECH client, Davis says. “We are in the process of purchasing an optical system for COLD storage, imaging and paperless receipts and documents,” she says. “The core processor has a significant influence on hardware purchased and third-party relationships. If you are considering a third-party processor that does not have a relationship with your core processor, you have to assess if it’s worth the time and financial investment to develop that relationship,” Davisson says. “Sometimes it is.” And as time goes on, he adds, “there is less scrutiny of IT expenditures. It’s accepted as part of doing business today, the same as other operational expenditures. “Larger ticket items are planned, and cost-benefit analysis performed just as with any other large purchase. Technology investments are no longer a huge investment made once every five or 10 years. Today it is smaller investments made more frequently.” At Boeing Employees Credit Union, those investments in 2002 included installations from OSI, Appro, Maxxar, Ontario, QBT and Corillian, “all strategic solutions,” says Butch Leonardson, vice president of information technology. He is anticipating a 5% increase in the operating budget for 2003 and a decrease in capital spending. “2002 was a very big capital spending year for IT,” Leonardson says from BECU’s Seattle headquarters. “We’re not planning to implement any new technologies in 2003. Our focus now is on leveraging what we have.” Integration and leveraging of technologies, indeed, takes on major importance at the $4 billion, 320,000-member BECU. “We reject the concept of a core processor,” Leonardson says. “We have an integration engine as the center of our architecture, with applications running through the engine. No application system is considered to be in the `core.’” At another notably tech-savvy outfit, FORUM Credit Union in Indianapolis, IT expenditures are expected to again go up in 2003 as investments are made in such things as security, Microsoft SharePoint software for a more robust intranet, and software that will allow members to use decision-tree technology to find products and services and at the same time get help from CU staffers. “We are looking for opportunities to improve member service and for efficiency gains with our staff,” says Doug True, senior vice president and CIO at the $620 million, 76,000-member CU. True says that like many credit unions, FORUM’s relationship with its core processor, USERS Inc., affects technology-buying decisions, but says that “we are unique here in that our IT department is set up as a wholly owned subsidiary company (FORUM Solutions). This structure allows us to offer our internally developed software solutions to other credit unions.” Of course, he adds, ROI remains important whether the investments are in member-facing or internal processes. FORUM and the other credit unions expecting to spend a bit more on IT next year won’t be alone. Despite a rocky economy and the dot-com implosion, Gartner Dataquest estimates IT spending worldwide will increase from $2.23 trillion in 2001 to $2.3 trillion in 2002 and more than $2.4 trillion in 2003. The bulk of that spending is in telecommunications, about 58%. Next are IT services at 24% of the spending, followed by hardware at 14% and software at about 4%. While spending will be increasing, not much is likely to be on “bleeding-edge” technology. Instead, it will be on the unglamorous requirements of infrastructure, security “and other areas that don’t necessarily rise to the top of the strategic importance pile but are going to be required nonetheless,” observes Terence Roche of Cornerstone Advisors, the Arizona-based consulting firm which jointly produces the CUES Tech Port online info site with CUES. “Perhaps the best perspective I’ve heard on discretionary technology spending came from a CEO whose opinion I greatly respect,” Roche says. “He said, `I’ve hired the people I think I need to hire. I’ve bought most of the technology I think I need to buy. 2003 will be a year where I just need to take it all and execute my plan.’ ” He says he and his colleagues at Cornerstone Advisors feel the hot areas in the next year will include imaged checks and statements, commercial loan automation and encouraging increased use of revenue-creating debit cards. The bottom of the list for credit union IT spending dollars and staff time? Wireless access, account aggregation and ATM’s as Web access devices. Surfing the Web at the ATM while people are standing in line hasn’t exactly taken off, Roche observes. Indeed, questions that Roche says Cornerstone Advisors consultants ask themselves, and recommend credit union decision-makers do the same, before committing to a technology investment include: Does the technology work. Is it past the beta stage. Are there real installations? Would sane, rational customers really use this technology? Can credit unions see and quantify some sort of payoff from the investment? WHAT’S HOT AND NOT Guy Russo sees it much the same way. “ I think wireless banking has really cooled down,” says the senior vice president of information services and CIO at Community America Credit Union in Kansas City. “At the end of the day, I don’t think anyone has seen the adoption rate be too big for this product offering. “I think there is a 50/50 split on whether account aggregation makes sense for credit unions. I think it largely depends on the type of membership you have. Those that tend to have a very Web-savvy membership base are more inclined to offer account aggregation. “There’s also a lot of talk on the whole CRM issue by a lot of CU’s. Does it make sense? If so, why? And what really is CRM?” As the $1.2 billion, 110,000-member credit union prepares its 2003 budget, Russo says, “For us, the focus is on integration of all our delivery channels so that I can provide consistent answers to our members across all channels. “We also are very interested in the whole data warehouse/data mart issue so that IS can provide our members with consistent information regardless of which system it originated from.” Russo says he expects CACU to spend a bit less on IT this year than last, primarily because in 2002, a consolidation of two corporate headquarters into one involved gutting an entire hardware infrastructure and putting in new servers, routers, voiceover/IP system and fax servers, as well as installing Windows 2000 on the CU’s servers and Windows XP on its desktops. His CU, a Summit Systems client, also will be carefully watching “how the eventual migration/conversion from the current MPE operating platform to a UX platform will work out for everyone. “I know a lot of CU’s are taking the opportunity to look around and sniff the market for other host offerings if for no other reason than to see what’s out there.” Meanwhile, proving once again that exceptions prove the rule, account aggregation is a hot item at Pennsylvania State Employees Credit Union, another credit union planning to continue major investments in information technology in 2003. “We currently have about 5,000 members using the program now and may follow a model set by several large banks and actually integrate aggregation back into home banking itself,” says Greg Smith, CEO at the $1.9 billion, 275,000-member technology leader. “One program that we reviewed even allowed for transfers between accounts being aggregated. We believe that having the aggregation tool within home banking will cause participation rates to soar,” Smith says. Overall, “even if 2003 was a normal year, we’d probably be looking to spend more, but this year we’re likely to be adding a second data center which serve as a mirrored facility to our primary data center. We may even split some of our call-center operations to this second facility,” Smith says. Other major investments at PSECU include $250,000 for an OFX server interface that will allow a direct connection between home banking and Quicken and MS Money, and $500,000 for a call recording system. “We now digitally record every call into our call center. Using computer telephony integration, we’ll now be able to append the member’s account number to the call,” Smith says. “I’ll actually be able to retrieve phone calls by member number.” Other member-service improvements include digital images of deposit items, a program that allows members to administer their own payroll distributions and another that alerts members when certain account triggers are tripped, such as when share balances fall below a certain number. “A core part of PSECU’s strategy is to create applications and systems that encourage member self-service,” Smith says -

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