Changing your bank’s core technology provider is one of the most important decisions that a bank board and management team can make, and even when things go smoothly it can be the source of great disruption. The undertaking can be particularly challenging for small banks that are already resource constrained since the conversion requires that all of the bank’s data be transferred from one vendor’s system to another’s, and even for a small institution that can add up to a lot of bits and bytes. Also, changing to another vendor’s core technology platform typically means adopting several of its ancillary products like branch teller and online and mobile banking systems, which further complicates the conversion process.

“It isn’t something to be taken lightly,” Quintin Sykes, a managing director at Scottsdale, Arizona-based consulting firm Cornerstone Advisors, says of the decision to switch core providers. “It is not something that should be driven by a single executive or the IT team or the operations team. Everybody has got to be on board as to why that change is occurring and what the benefits are…”

The Bank of Bennington, a $400 million asset mutual bank located in Bennington, Vermont, recently switched its core technology platform from Fiserv to Fidelity National Information Services, or FIS. President and Chief Executive Officer James Brown says that even successful conversions put an enormous strain on a bank’s staff.

“It’s not fun,” says Brown. “I have the advantage of having gone through two previous conversions in my career, one that was horrendous and one that was just horrible. [The core providers have] gotten better at it, but there’s no way to avoid the pain. There are going to be hiccups, things that no matter how you prepare are going to impact customers. There’s this turmoil, if you will, once you flip the switch, where everybody is trying to figure out how to do things and put out fires, but I will say [the conversation to FIS], in terms of how bad it could have been, was not bad at all.”

But even that conversion, while it went more smoothly than Brown’s previous experiences, put a lot of stress on the bank’s 60 employees. “There was a lot of overtime and a lot of management working different jobs to make sure our customers were taken care of,” he says.

Banks typically change their core providers for a couple of different reasons. If the bank has been executing an aggressive growth strategy, either organically or through an acquisition plan, it may simply have outgrown its current system. A lot of core providers can handle growth, particularly in the retail side of the bank, so that’s not usually the problem, Sykes says. Instead, the growth issue often comes down to the breadth of the bank’s product line and whether staying with its current core provider will allow it to expand its product set. When banks embark on a growth strategy, they don’t always consider whether their core data system can expand accordingly. “Usually they’re unable or just haven’t looked far enough ahead to realize they need it before they do,” Sykes explains. “The pain has set in by the time they reach a decision that they need to explore [switching to a new] core.”

Banks will also switch their core providers over price, especially of they have been with the same vendor through consecutive contracts and didn’t negotiate a lower price at renewal. “If any banker says price doesn’t have an impact on their decision, they’re not being honest,” says Stephen Heckard, a senior consultant at Louisville, Kentucky-based ProBank Austin.

Although the major core providers would no doubt argue differently, Heckard—who sold core systems for Fiserv for 12 years before becoming a consultant—says that each vendor has a platform that should meet any institution’s needs, and the deciding factor can be the difference in their respective cultures. And this speaks to a third common reason why banks will leave their core provider: unresolved service issues that leave the bank’s management team frustrated, angry and wanting to make a change.

“The smaller the bank, the more important the relationship is,” says Heckard. “When I talk about relationships, I’m also talking about emotions. They get played up in this. For a community bank of $500 million in assets, quite often if the vendor has stopped performing, there’s an emotional impact on the staff. And if the vendor is not servicing the customer’s needs in a holistic manner, and the relationship begins to degrade, then I do feel that eventually the technology that’s in place, while it may be solid, begins to break.”

Heckard says that core providers should understand their clients’ strategic objectives and business plans and be able to provide them with a roadmap on how their products and services can support their needs. “I don’t see that happening near enough,” he says. And if the service issues go unresolved long enough, the client may begin pulling back from the provider, almost like a disillusioned spouse in a failing marriage. “They may not be as actively attending user groups, national conferences and so forth,” Heckard says. “They don’t take advantage of all the training that’s available, so they become part of the problem too.”

Brown says that when Bank of Bennington’s service contract was coming up on its expiration date, his management team started working with Heckard to evaluate possible alternatives. “We needed to implement some technology upgrades,” he says. “We felt we were behind the curve. Something as simple as mobile banking, we didn’t have yet.” The management team ultimately chose FIS, with Brown citing customer service and cybersecurity as principal factors in the decision. The decision was less clear cut when it came to the actual technology, since each of the systems under consideration had their strengths and weaknesses. “I’m sure [the vendors] wouldn’t like to hear this but in a lot of ways a core is a core,” Brown says.

Heckard, who managed the request for proposal (RFP) process for Bennington, says that bank management teams should ask themselves three questions when choosing a new core provider. “The first one would be, have you exhausted every opportunity to remain with the present vendor?” he says. As a general rule, Heckard always includes the incumbent provider in the RFP process, and sometimes having the contract put out to bid can help resolve long-standing customer service issues. The second question would be, why was the new vendor selected? And the third question would be, how will the conversion restrict our activities over the next 18 months? For example, if the bank is considering an acquisition, or is pursuing an organic growth strategy, to what extent will the conversion interfere with those initiatives?

Heckard also covers the conversion process in every RFP “so that by the time the bank’s selection committee reads that document they know what’s ahead of them, they know the training requirements…they understand the impact on the bank.”

And sometimes a bank will decide at the 11th hour that a core conversion would place too much stain on its staff, and it ends up staying with its incumbent provider. Heckard recalls one bank that he worked with recently decided at the last moment not to switch, even though another vendor had put a very attractive financial offer on the table. “The president of the holding company told me, ‘Steve, we can’t do it. It’s just too much of an impact on our bank. We’ve got a main office remodel going on,’ and he went through about four other items,” Heckard says. “I thought, all of these were present before you started this. But sometimes they don’t realize that until they get involved in the process and understand the impact on their staff.”