4 Steps To A Technology-Oriented Business Model

After a decade of success, Wescom Resources Group shares how credit unions can uncover their own commodifiable IT advantage.

 
 

Wescom Resources Group (WRG) has a long history of contributing new solutions to the cooperative marketplace. But for nine out of the 10 years of its existence, WRG has also generated at least a million dollars in revenue for its parent Wescom Credit Union ($2.4B, Pasadena, CA) through the development and marketing various technology and operations services.

Although WRG’s specific role in the marketplace is already well-defined, their story serves as a blueprint for other credit unions that want to squeeze additional value from their own core and IT resources.

Step 1: Find Your Strengths. Then Monetize Them.

The path to Wescom Resources Group started in 2001 following Wescom Credit Union’s conversion to a new core system provided by San Diego-based provider Symitar.

This new system benefitted the credit union as a whole, but it was especially meaningful to Wescom’s back office technologists, who —for the first time —could take a more active role in the development of new products, services, and applications.

“It’s a flexible core platform from the perspective of being able to customize it for business processes,” says John Best, senior vice president and chief technology officer of Wescom and WRG.  “As a result, the credit union spent a considerable amount of time customizing software around the Symitar product.”

The benefits of these complimentary add-ons didn’t go unnoticed or unappreciated by the core provider. Often Symitar clients who came for on-site tours would observe teller, call center reps, and members using what they thought was a part of Symitar’s platform, only to find out it was actually a Wescom solution.

The credit union received a number of direct requests to share its software and, for a while, Wescom’s answer was always yes. But with many credit unions at the time lacking certain skill sets like computer programming, those institutions also required ongoing assistance for support, implementation, and core updates.

“As it turns out when you start giving away software, it’s a double-edge sword,” says Best. “If the credit union doesn’t have the wherewithal or the resources to support it, you wind up in a tough situation. We had to start saying we’re giving this to you, so if it breaks, it’s your issue.”

The real revelation came when one of these credit unions offered to pay Wescom for the service. Before that, Wescom had never fully recognized IT or core-related expertise as a resource it could capitalize upon.

As the credit union acquired extra employees, technology, and resources as a result of its new technology income, future opportunities —including the 2003 establishment of WRG —became clear.

Step 2: Find The Right Markets Or Create Your Own

“The value proposition of WRG is that while we have all the appropriate controls and regulations in place to separate the CUSO from the credit union, as far as the culture and ideology goes we’re not separate,” Best says.

Many vendors lack the perspective of credit union day-to-day operations as well as an understanding of where the pinch points are, so cooperatives themselves have the natural advantage in both solving and selling to their own marketplace.

WRG’s ability to spot and address points of pain in the core system and translate those solutions into a commercialized product carried over to other areas of operations, including ATMs and the credit union’s service bureau offering.

“There was a realization early on that we were going to have excess capacity in our data center by virtue of our business continuity efforts,” Best says.

Given the credit union’s technology, it realized it could potentially set up and run five Symitar systems as easily and efficiently as running one.

“We’ve been working for the past two years on understanding where institutions might want us to run things like their exchange, their SharePoint, their filing systems, and their domain,” Best says. “We asked ‘What if we could create a sort of credit union in a box?’”

Today, WRG runs 15 such institutions soup-to-nuts and has expanded its services to incorporate other core providers like Corelation. 

“That became somewhat of a revelation, that we could go beyond the bounds of supporting business processes with Symitar and even do a good job expanding into the consumer side,” Best says. “If you go to these credit union’s branches and transact with their tellers, you are essentially processing through our site in Anaheim or Pasadena depending on what mode we’re in.”

Step 3: Recognize And Reduce Your Limitations

New ideas for the credit union’s operations, products and services keep the institution moving forward, but various barriers in both technology and culture can prevent innovation from occurring.

“The core is important, but in some scenarios credit unions have to surround those systems with more and more third-party products in order to meet their needs,” Best says.

So how do credit unions know when it’s time to stop the temporary fixes and undergo a more drastic change like a core conversion?

“The litmus test for me is simple. It’s ‘If I can dream it, can I do it?’” Best says.

Start by identifying the legacy systems and processes that eat up, rather than support, innovation resources.

“Ask yourself, ‘Are we dragging this behind us like a plow, or is it pulling us along?’” Best says.

Then look at relationships and culture inside the institution as well as among vendor partners. If a credit union constantly wants to do a new kind of loan or promotion but the answer always comes back “no” then it might be time to make a change.

“We have to endeavor to find the right players to create the kind of experience we want for our members,” Best says. “There are no turnkey solutions in today’s world.”

Step 4: Use The Cooperative Model

There are some barriers related to core technology that are bigger than any one institution or vendor, but that doesn’t mean credit unions have to live with them.

“The reason technology integration is so expensive is because our world does not really have a standard,” Best says.  However, a campaign called CUFX is out to change that.

Launched by the CUNA Technology Council, CUFX seeks to create a standard that major core providers and third-party vendors will support. The movement has already received support from 10 donor organizations and is in talks with several of the biggest core providers in the industry.

“It’s a win for the cores because they get to integrate faster and don’t have to spend as much time doing that,” Best says. “It’s a win for the vendors who can integrate into more cores simply by adopting the standard. And it’s a win for credit unions because they can stop spending as much on integration.”

“If you look at it, our world is not going to end in mobile,” he says. “What about iPads? What about Xbox? We’ll have to be in all those places and it is going to be a dramatically expensive proposition for us without some standards for our industry.”

 

 

 

Jan. 1, 2013


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