When is the right time to start vendor contract negotiations

first_imgThe typical financial institution has dozens of contracts in place with numerous vendors that support its operations (both customer-facing and internal). As a result, staying on top of the expiration dates for all of those agreements to maintain an effective renewal process can present a significant challenge. At a minimum, doing so is simply best practice, but in other cases, such due diligence may also be a regulatory requirement or a board mandate.So how long before a contract’s expiration should the negotiation process begin? The answer depends on many factors, including the service in question and the length of time moving to a different (new) vendor would require. One factor that should not come into play, however, is the level of satisfaction with your incumbent. The deck is stacked in favor of the vendor in many ways, so financial institutions (FIs) must seek out leverage points wherever they can.In many cases, considering a replacement of an incumbent vendor is a non-starter as it would require a protracted process encompassing both internal disruption and detailed customer communication. Swapping out a core system can easily require two years, not including the additional year that’s typically necessary to carry out an effective Request for Proposal (RFP) process. Any vendor worth their salt is going to have its own tickler list, and an FI should expect to hear from them (on average) roughly 18 months prior to a contract expiration date if the institution hasn’t already initiated conversations. This timing is by design – if negotiations haven’t begun at least two years before the contract expires, an FI’s leverage is limited as the incumbent is quite aware of what an alternative will require. For a more in-depth conversation, listen to our podcast series about best practices for credit union vendor contract negotiations.  continue reading » 9SHARESShareShareSharePrintMailGooglePinterestDiggRedditStumbleuponDeliciousBufferTumblrlast_img

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