Whenever a credit union selects any major technology solution and in particular a core system, there's much more to the decision than a choice between the functionality offered by the solution and the vendor of the system. You have to decide on how you want the technology delivered. Do you want your credit union to run the system in-house or do you prefer to establish a relationship with a provider who will deliver this service to your institution?

While any change in delivery options relative to your core system must be looked at like a conversion, if the core system is delivered both in-house and service bureau, transitioning between the two options is easier. Your staff's knowledge of the system minimizes any required training which is a major part of any system change.

Careful analysis should include answers to the following questions:

o What does the right technology partner mean?

o How much flexibility is there in terms of delivery options?

o What is your internal IT staff's capacity and level of expertise?

o What are the security considerations?

o What are the costs of in-house versus service bureau delivery to your business and is your analysis of those costs consistent?

o What must you do and what will your vendor-of-choice do to mitigate the risks associated with this type of change? Selecting the Right Technology Partner

Whether you choose the in-house or outsourced delivery method, selecting the right technology partner is critical. Start by taking a hard look at the solution you are being offered. Is it both scalable and flexible enough to support your institution's long-term strategic growth plans? Is the core system the same–offering the same functionality–whether it's in-house or outsourced for your size credit union and for the size credit union that you plan to grow to? After that, consider the business philosophy of your prospective technology partner. Does the vendor offer one solution or multiple, integrated products designed to meet the specialized needs of your credit union? In addition to strong experience and a solid track record, your core system provider must be a company that you believe that you can work with long-term. So, your best partner should operate from a business model and with a business philosophy that closely aligns to your own. Your best partner will understand that you expect the risks you face with this decision to be borne together, not either party solely. Your best partner will be able to demonstrate what processes it deploys and actions it takes in order to mitigate risks within its delivery capacities and capabilities, as well as risks to or within your credit union constituency. Flexibility

What will your IT requirements be three, four or five years from now? If you had a crystal ball, you would have the answers to these questions. Absent a crystal ball, a sound IT strategy needs to include plenty of flexibility. Specifically, you need the flexibility to move as seamlessly as possible between delivery options–in-house or service bureau as any change requires the inward focusing of your business for many months. Within the service bureau delivery option, additional flexibility includes the ability to run your systems on a dedicated server or shared server basis. Information Technology Staff

The deployment of a system in an in-house environment requires in-house IT staffing for day-to-day system operation and maintenance. With that staff comes training, turnover and the other traditional HR related issues. Much of their work is required to be completed after normal business hours, which means that their schedules will sometimes be vastly different than that of the rest of your staff. This means that you must have access to human resources that can manage this type of team outside of the usual operations of the rest of your business. The experience levels of your IT resources can vary greatly based on market conditions and geographic location. The key to operating successfully in an in-house environment is finding and retaining the type of staff who enable you to use your technology to gain a competitive advantage. Security

Today, security is fundamental to all types of businesses, and credit unions are no exception. The continuing rise in fraud and theft at multiple access points and levels has redefined what constitutes an “acceptable” level of security. If you maintain your system in-house, it's critical that your IT professionals establish and enforce complex security procedures across the institution. These procedures need to be constantly evaluated and upgraded to keep pace with new, potential threats. The types of activities included here are firewall deployment, hardening, constant monitoring and upgrading. Off-site information storage and emergency data retrieval are also important elements requiring expertise. Audit procedures need to consider intrusion detection, penetration testing and other internal and external security measures. Costs

Typically, credit unions that opt for in-house system delivery are those that want complete control of the hardware, software, security and networking equipment that they operate and after careful analysis, have determined that they have, or have access to, the expertise necessary to manage this type of environment.

There's no “right” solution for every credit union–only a solution that's right for your credit union. Before you make a strategic business decision like this, take the time to evaluate your market, your member segments, analyze both the soft and hard costs of each alternative, review your staff capacity and determine what it would take to create the secure “member facing” delivery capability necessary for true competitive advantage. Only after completing all of this analysis are you then in a position to accurately determine whether or not you already have the right provider, or whether you need to find a provider more closely aligned to your business model, needs and strategy. Once this analysis is complete, you'll know whether an in-house or service bureau delivery model from your core processor is best for you.

Instant Insights /

In-House or Service Bureau: Which is the Right Option for your Credit Union?

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