Stay current with vendor changes in the areas of personnel, technologies, solutions, and applications.

2. Get competitive bids

Require at least two bids. Three is preferable. Make sure new agreements have specific, business-related targets. 

If your credit union lacks negotiating expertise, hire someone to negotiate your contract. Expert negotiation can save a credit union thousands of dollars—even hundreds of thousands of dollars.

Develop achievable, specific service-level agreements. Don’t be afraid to have your own agreement with the vendor. Remember, it’s your partner.

3. Evaluate the provider’s experience and expertise.

Determine if the service provider’s expertise is dependent upon another third party or affiliated expertise, or whether the expertise is available in-house.

Identify the company’s key management leaders, consultants, or advisers. And identify areas where the credit union must supplement the service provider’s expertise to fully manage its risk areas.

4. Weigh the company’s industry reputation

Request a client list that includes the length of service relationship from the service provider. Contact credit union industry references to learn about the company’s industry reputation, performance, and user group contacts, service issues, and contract issues.

Contact user groups for additional references. Include credit unions that have had negative experiences with the company to determine potential problems and the firm’s reputation for responsiveness to service disruptions and dispute resolution.

Request an opportunity to conduct on-site examinations of credit union references.

5. Explore the company’s product reputation and performance

Request and understand information regarding products and services, including full product specifications.

Determine—either on your own or by retaining qualified expertise—whether the product meets your credit union's needs. 

Inquire about timing of projected new releases, updates, or corrections.

6. Verify the company’s financial condition

If applicable, review recent Securities and Exchange Commission filings and request Dun & Bradstreet business credit reports.

In addition:

• Request audited financial statements for the past two years;
• Request any recent unaudited financial statements;
• Analyze financial statements. Analyze overall financial strength, liquidity/cash flow, and capital financial reserves;
• Request and analyze service providers’ market share information;
• Determine, based on growth or loss in market share, whether the vendor is an industry leader or is new to this product or service; and
• Weigh the impact of your credit union’s business to the company’s financial condition.

7. Examine key operations issues

Confirm the service provider has adequate staff and physical capacity to meet service requirements, and determine who will work with or support your credit union.

Obtain copies of the vendor’s security policy and testing plan/results, privacy policy, disaster recovery plan, credit reports, SAS 70 Reports, or other third-party security testing reports.

Evaluate the company’s knowledge of applicable compliance regulations related to the product or service, and obtain the vendor’s customer service standards, such as 24/7 availability.

8. Review key legal issues

Confirm the service provider’s ownership of all proprietary interests in the product or service, and confirm the company’s type of entity, legal existence, and good standing.

In addition:

• Confirm the existence and current status of required licensing/bonding (if applicable);
• Request and confirm the existence of the company’s insurance coverage (general, commercial, liability, errors and omissions, and business interruption);
• Confirm that the company’s representative has the authority to bind the company in legal contracts and documents;
• Request information on ongoing lawsuits, including jurisdiction, case number, and status information; and
• Obtain a copy of the latest version of the proposed service agreement for review by legal counsel.

9. Make on-site visits, as needed

Visit prospective vendors, if necessary and warranted, to meet and confirm staff and facilities capacity. Also, schedule and visit credit union references to confirm satisfaction of the operating product/system and interview the actual, day-to-day users.

Jackie Buchanan is executive vice president/chief information officer for $620 million asset Genisys Credit Union, Auburn Hills, Mich., and first vice chair of the CUNA Technology Council.

Rudy Pereira is senior vice president of operations and technology for $5.7 billion asset Alliant Credit Union, Chicago, and chairman of the CUNA Technology Council.