Credit Union Mergers – Mitigate Technical Risk

March 18, 2009

From my point of view a credit union merger is a ‘non-trivial’ event, however I am excited about the opportunity that this provides both entities from a technology perspective. A small credit union can come out of a merger stronger, leaner, and more efficient than before. This is an opportunity to streamline, achieve economies of scale, and combine the best of each entity while discarding the unworkable elements. The following are a list of good questions to ponder with your teams. Here is a short list of what I would consider to be the ‘tough stuff’ from a voting and discussion perspective between teams.

Technical Systems Integration Planning Steps

  • What is the plan for the coexistence of two (separate) LAN and WAN networks and what is the end state goal?
    •  IP Scheme – bridged/ routed network
    • Are the Credit Unions using disparate core systems? Different Versions? Do they have conflicting IP Scheme requirement?
  • What are the deadlines that need to be hit so that they details can be coordinated?
    •   IP Scheme
    •  Printing (Sharing, Services, Drivers)
    • Bandwidth
    •  Routers
  • What is the plan for the convergence of credit union peripheral hardware convergence?
    • Signature pads
    • Receipt Printers
    • Scanners
    • Check printers 
  • How will imaging be merged, including the old that may need to be kept for 7 years? What is the plan for current and historical images? What is the final imaging goal?
  • How will old core system records be kept (Core historicals, etc.)?

Internal Questions

  • What is the end network design?
    • WAN Architecture
    • Integration
    • POP Diversity
    • Redundancy
    • Encryption
    • QoS – quality of services to protect VoIP integrity
  • Can the credit unions use each other for DR?
  • What services will be shared?
    • Active Directory
    • Email
    • Files
    • SQL Databases
    • Domain Controller Authority
    • Imaging
    • Domain Trust
      • Is Microsoft SBS involved? If yes, there are important trust planning considerations.
  • Will Microsoft licensing be audited to take advantage of consolidation? Use a merger to negotiate and consolidate licensing.
  • What is the plan for enterprise back-ups long term?
  • How will the phone system be consolidated and converged?

So here is the summary of my merger material. I have collaborated with a couple of team mates to put this 2 part series together for everyone. I hope you like it and that it was useful to you.  

 


Considering a Merger? Is the Time Finally Right?

March 5, 2009

With the economy shifting south, coupled with the NCUA assessment fee to bail out the Corporate Credit Unions, small credit unions can combine forces to compete better and provide more value to their membership. I am observing a trend toward small credit unions merging on a much more rapid scale than I have seen in the past. The merging of credit unions is not noteworthy in and of itself, however I do believe that mergers that combine to reach the $100 million plus range are going to increase.

 

When considering a merger, it is critical to establish relationships with experts you can turn to if you go forward. These experts should span all operations in the credit union, and be able to weigh in on questions such as:

 

· What are the best practices in merging a credit union?

· How do you merge IT departments without adding risk?

·  How to plan for and cut waste during a merger?

·  How can risk be mitigated?

·  What is the best way to leverage the opportunity to build in efficiencies?

· What functions can be strategically outsourced?

· What processes can be integrated?

· How should IT integration be handled?

 

Credit Union Merger Questionnaire – Information Technology

The following questionnaire pertains to the last point, and represents the starting point for planning and implementing effective IT integration for a credit union merger. These questions are intended to bring up important issues that must be planned for in the IT space, and to start discussions that will lead to effective decision making.

 

High Level Objectives/ Co-Existence Plan

  • Is the objective for the merger:  To attain one united front or identity with the leveraged strength of a partnership……
  • or is the goal of the merger to  maintain dual identities with the leveraged strength of a partnership?  
  • What is the plan for the existing domain names and the new domain name? Is there a timeline set for the old.org sites to disappear and one new.org to replace them, or will the old sites remain in place?
  • What is the plan for the email utility in the new entity? What is the timeline for implementation? Will there be coexistence of emails between domains?
  • How will home banking be presented to the members? What is the timeline for the change?
  • What SSL Certificates can be merged, deleted and/or re-used (web sites, ssl vpns, etc.)?
  • Is there a common encryption policy for sending information to third parties ( e.g. credit card processing via PGP, or does one of the entities have ZIx email encryption)?
  • What is the encryption goal? Are there any vendors that require specific encryption technology?
  • What is the end goal for the phone system and call center/ member services? Is there a timeline set for the convergence of the systems?

o        PRI analysis – what is the call routing plan?

o        Are you launching with core phone system functionality first and then integrating Call Center functionality after the merger?

 

  • What is the goal for integration and collapse of the networks (WAN – MPLS)? Applications  (like imaging, etc.)? Data bases? Other elements?

o        Has a cost analysis been completed for the infrastructure WAN collapse of the two entitities? Data, Voice (long distance/local)

o        What questions does one need to ask when integrating carriers – Sprint, ATT, Qwest, Verizon, and Paetech for example? (This blog link is an overview of questions to ask. http://itcustrategy.com/category/mpls/)

 

  • How are third parties (PSCU, FedLine, DI, etc. ) being addressed? Which third parties will remain? Are there redundancies? Which ones are going away? 

 

On my next post I will examine most technical questions that I have to ask myself when helping a credit union during a merger. 

 

 


When to Consider Managed Services

September 15, 2008

 

I am often amazed at the lack of qualified technology staff at credit unions with less than $200 million in assets. In firms between $200 and $400 million, I do start to see more qualified staff across the necessary disciplines, but there are often talent holes.

 

Credit unions need to think creatively about how to staff for success. I have found that the best methods of staffing aren’t necessarily behind the company’s four walls, especially in the technology/IT arena. This is where Managed Services Providers are an option to consider.

 

Should you consider partnering with Managed Service Provider for your non-core technology needs? Here are some questions to help you with that answer:

 

  • Can you afford the personnel costs of managing and supporting your IT investments?
  • Does change in technology and the rate of that change negatively impact your staffing efforts?
  • Would you like your IT people to spend more time focused on core systems and member facing applications? Could you do this if the basic, everyday IT “plumbing” were handled?
  • Can you afford the raw hardware and software costs for IT today? Does this part of the budget frustrate you?
  • Does compliance risk associated with DR, Security, and infrastructure keep you up at night?
  • Are you keeping pace with requirements when it comes to compliance and IT?
  • Have you developed a multi-year approach to planning technology compliance?
  • How good is your reporting in tough areas of the network related to logging and auditing?

 

Working with a Managed Service Provider who is a credit union specialist will mitigate many of your every day IT concerns. When you have a trusted IT partner who understands and keeps up with compliance and the technical aspects of Disaster Recovery, IT Security, Infrastructure, and IT operations, you will free up valuable internal technology resources (hardware, software, and people) that can focus on more strategic, member-facing initiatives that directly impact your bottom line.