United States

Contract negotiation for core system replacement


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A $625 million credit union was making a critical decision to switch core systems and needed to be confident that the agreement they negotiated with their new partner clearly defined their expectations and created a solid foundation for a successful, long-term relationship. The credit union sought our help because:

  • Past vendors failed to understand their expectations
  • Vendors did not meet previous verbal commitments
  • IT engagements exceeded cost estimates because of unexpected add-on requirements and customizations
  • They were experiencing lower-than-expected returns on their IT investments

The client sought to negotiate an agreement with the new vendor that provided the foundation for a successful, long-term partnership and enabled the credit union to meet its strategic, operational, financial and technology objectives.

RSM's approach
The credit union selected RSM as its partner in negotiating the core system agreements based on previous partnerships in which RSM assisted the management team with development of a strategic technology plan and evaluation of alternative core systems. The scope of the contract negotiation included:

  • The core processing system
  • Interfaces with existing third-party systems
  • A document management solution
  • Item processing services
  • All conversion and implementation services

In addition to negotiating favorable pricing, RSM worked with the credit union and the vendor to develop mutually beneficial contract language around:

  • Performance requirements
  • Payment terms
  • Service level agreements
  • System audit requirements
  • Business termination provisions
  • State and federal regulatory changes
  • Business continuity requirements
  • Conversion costs and considerations

RSM's clear understanding of the client's goal and considerable experience negotiating agreements with technology vendors enabled them to effectively tailor the final agreement to the credit union's needs. Specific issues addressed:

  • Adding sections to the vendor's standard agreement to explicitly address partnership expectations (account management, usage reviews, business planning and related concerns), as well as implementation and training commitments, and service level agreements
  • Negotiating payment terms that established milestones and acceptance criteria for incremental payments to provide the credit union with enhanced control over deliverables
  • Negotiating protections against significant cost increases for license and maintenance during the initial and subsequent terms of the agreement
  • Helping to determine which solutions to include or postpone in the initial implementation, while still maintaining favorable pricing for postponed implementations
  • Working with the credit union and vendor to modify standard contract terms where necessary to provide fair and equitable protections for the credit union given the critical nature of the systems and services provided
  • Comparing proposed contracts to materials and representations made during the evaluation of the solution and addressing discrepancies prior to final agreements
  • Helping the credit union team understand what they were agreeing to, what to expect from the vendor, and how to establish a successful, long-term relationship

As a result of RSM's help through both the IT assessment and the core systems agreement negotiation, the credit union was not only able to undertake the core system replacement with confidence its goals would be met, but also more effectively aligned the IT function to support its operational needs, including creating the position of operational development director to help ensure that alignment.

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