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COLUMBIA, S.C. – ROI. Return on investment. Those three little letters can take on a lot of meaning to a credit union’s technology chief and his or her fellow senior managers, when it comes time to deciding how or when to spend scarce dollars on new high-tech systems and equipment. For some, ROI is a moving target. For others it’s not even in their sights. And that can change from project to project. So, how do you measure ROI? A growing number of software solutions are out there, offering formulas that will take your numbers, crunch them and tell you whether that tech buy will be worth it, or if it was. But such solutions, while useful, may not be able to factor in the human equation, which is really the bottom line in many cases, according to at least one industry expert. “Predicting ROI is an art as much as a science,” says Jim Eckenrode, senior vice president of consumer banking at TowerGroup, the Boston-based financial services research and advisory firm. For instance, how well the technology was implemented can have as much to do with ROI as the technology itself. “Look at CRM,” Eckenrode says. “You could certainly point to examples where a financial institution was sold a bill of goods in terms of promised returns for its investment in customer-relationship management tools. “But I would say the fault may not lie in the technology, because in terms of analyzing and amalgamating customer or member data, it’s pretty good. The problem arises in getting that data into the hands of the right people and educating them on its proper use so that they can influence retention and cross sell,” he says. “And that’s where the art of ROI comes in. You’ve got to have commitment across the organization to have a successful implementation, and it all ultimately relies on your people to make it work,” Eckenrode says. Eckenrode and others agree that assessing ROI in that sense can be, as he puts it, “terrifically hard to measure.” At least one large CU doesn’t even try. ROI? What’s ROI? “We do not try to measure ROI,” says Butch Leonardson, vice president of IT at $4.4 billion Boeing Employees Credit Union. “At BECU we look at all investments with the following question: Will the initiative enhance member value, service and trust? . Consequently, this helps eliminate from the radar unworthy projects, and therefore ROI as a governance tool becomes less important.” Leonardson, whose CU recently deployed six new software systems in an $11 million capital project that involved 52 staffers over a period of 14 months, adds: “With CUs I would suggest that ROI analysis borders on worthless activity. We need to serve our members in incredible ways and everyone should be on that page. “Accordingly, an ROI, for example, on a Web-based mortgage application solution is not really relevant. Like we are going to do an ROI and then decide against a Web-based mortgage system? “ROI analysis for CUs is a governance tool protecting us against stupidity. If the executive management team is on the same page and is focused on the member experience, then ROI will be replaced by more simple cost estimates, schedules and resource planning,” Leonardson says. Valuing With iValue Chris Gardner and Ray Lotta might beg to differ. They’re financial services veterans who list CitiBank among others as clients for the services of their iValue software-driven solutions for measuring ROI. Gardner and Lotta now are offering a compact version of their methodology for $499 a license, which they say would be a good tool for a mid-size credit union. “The reason this can help them is because while they’re not looking for the most sophisticated analytical tool, they do need to know that they’re getting technology that they can rely on to be efficient from an operational standpoint, that can deliver strong member service, which is their lifeblood. Technology investments are critical to that,” Trotta says. iValue’s Excel-driven solution was created using Visual Basic tools. Information is plugged in that allows for calculations of such things as total cost of ownership and scenario outcomes, as well as automatic report generation, giving the user “a comprehensive framework, a methodology for capturing the benefits of an IT project,” Gardner says. “We strongly recommend clients use the product through the lifecycle of the project. Often, an organization will use a tool like this to make the decision to invest and then no one ever looks at it again,” he says. “It needs to be used through the operational part of the lifecycle, too, to help guide your activities, so you’re always focused on creating value.” Such a focus, they point out, will help point out gaps in adoption and usage rates, which can help prompt management to take steps to raise awareness and use the new technologies and their capabilities. “That allows a much more active approach to managing IT projects in a way that increases the chances of economic success,” Gardner says. Actively managing various IT projects is also a way of life for $2 billion Pennsylvania State Employees Credit Union, but the big East Coast CU – a tech-savvy organization that now offers other credit unions solutions it has developed – doesn’t use vendor software to measure the return on its tech investments. “Our ROI analysis is pretty basic,” says its CEO, Greg Smith. “For example, with the recent purchase of a Cisco VPN system, we considered the cost of the unit against the savings we’d generate by moving management and board members from the current frame relay and ISDN setup for their connections at their homes. “While achieving bandwidth improvements of 10 times or more, we cut costs by about $80,000 per year. The cost of the unit was around $30,000, so we recovered our investment in just a few months.” Meanwhile, not so easy to measure would be PSECU’s $96,000 investment in hardware and software to help manage version control issues with internally developed software. “There really wasn’t a vigorous ROI analysis since this is something that we know we need to maintain best practices in our software development program. This was just the cost of doing business but we expect that it will lead to efficiencies and savings in our operations down the road,” Smith says. “It would be difficult to perform a true ROI analysis on this purchase.” Another example, Smith says, would be the addition of 200 licenses to its eCU Technologies home banking system to ease the problem of busy sessions on Friday mornings (payday for many of its members). “This $40,000 purchase was predicated primarily on providing a high level of service. We didn’t specifically analyze the ROI of the purchase since member service is our primary purpose,” the PSECU chief says. Eckenrode, the TowerGroup vice president, says he sees the combination of ensuring top-shelf member service (“That is, after all, the key to their success) while keeping up with the technology needed to do that as “dictating more of a focus on ROI,” but concedes that questions of how and when to measure it defy easy answers. “Many large banks won’t consider any investment unless the vendor can show a pretty sharp ROI in 12 months or less,” Eckenrode says. “Credit unions would like to do the same, but it’s hard,” he says. “A lot of IT investments have returns that are really hard to prove. Perhaps as you become more efficient in dealing with members, you can expect a certain amount of uplift in share dollars or member retention, but how do you definitively model or predict that?” -

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