Some of you may have experience with vendors that will work with your organization and do "audits" of cost and agreements. I've been through these before when it comes to telephone and Internet service (since many of us miss the subtle elements that unknowingly cost us more money and can be cut - or at least re-negotiated to save money in the future). But I've recently been contacted by a former vendor (and friend) that left one of the major core processors to start a business that can come in to a financial institution and help with this function as it relates to the "big" contracts. I'm wondering, after sharing some of what they have told me are key differentiators of theirs, what your take is and if this strategy holds water.
- No Risk: They work on a contingency basis and only are paid a percentage of money saved. This protects the institution from having someone come in, charge money and then deliver minimal results that don't justify the cost. I'm told if there is not an opportunity to save a client at least $100k or more, they will walk away.
- Former Vendors: They believe this is important since they know where the "skeletons" can be in contracts and can act as an advocate on behalf of their clients. While the initial reaction (if you are a vendor) may be negative to this, they also understand the value of extending contracts when the time is right and how to leverage this for the mutual benefit of the institution and the vendor (signing a 5 or 7 year deal can result in some significant savings for the institution and a longer-term customer for the vendor).
- Maintain Existing Relationships: While some in this space focus on helping an institution generate an RFP and shop out the service to get a competitive bid and present cost savings this way, these guys realize that switching vendors (unless there is a good reason), ranks right up there with root canals. Their focus (as referenced above) is working with the incumbent to help achieve a cost savings through product combinations, contract terms and areas for savings that preserves the relationship and helps keep internal operational disruption to a minimum.
- Time Savings: You're busy enough these days, right? Rather than you take the time to comb through agreements looking for things that may (or may not) be able to save you money, they take the burden off your shoulders and do it for you.
- Proven Results: It's nice to know, that while I'd still consider them a "startup" they have been able to save some clients money in their short time of operation. They have been doing this for almost two years and their average savings over a five-year period (most standard contract terms) is around $750k with an average institution size in the $500MM asset range. I'm sure as with anything else, performance and savings will be a factor (to a degree) based on asset size, but would even a few hundred thousand dollars be worth it (that's what I'm asking)?
- Vendor Respect: They have received actual testimonials from some of the major core processors for their work, which seems counter intuitive since they work for the customer and seek to save them money. But, I suspect due to their past "vendor lives" they are able to bridge the gap here and ensure that both sides walk away happy, since the institution and vendor are the ones that have to "live together" once the negotiations are over.
Looking forward to your comments and getting some ideas. In the sense of keeping this informational and NOT sales related, I'm not sharing the name of the company or any of the individual names. Only if you are interested in learning more about the actual service will I share this and ask that you contact me directly so as to not turn this into something that would not be appropriate for this type of forum.
eric (at) poweredbywsi.com