At SRM, we often receive questions about how our services can deliver cost savings without harming existing vendor relationships which have taken years to cultivate. Our answer is simple: We do not believe antagonistic, adversarial negotiations are in the best interest of anyone – be it the client, the vendor, or our firm. And we have validated this point of view with the thousands of contracts we’ve negotiated, while also adding over $3.6 billion of value to the financial institutions we have served. A recent engagement with 1st Bank of Sea Isle City in New Jersey is an example of this conviction in action.
Poker Face Not Required
As the 1st Bank of Sea Isle City approached the end of the current contract with its core vendor, they wanted to be certain the pricing for those services were at market, but didn’t want to change vendors to get there. “We had a sense we were paying an above-market rate,” CEO Larry Schmidt explained, “but we were also happy with our current provider and had no appetite for a conversion. Complicating matters was that while at a meeting with a vendor, a bank employee accidentally let slip that we were not going to look at other providers - further reducing our leverage.”
1st Bank of Sea Isle City had never enlisted outside advisory help so, given the variables involved in this situation, Larry reached out for advice from peer CEOs and the President of the New Jersey Bankers Association (NJBA), an association of which 1st Bank of Sea Isle City is a member. The fact all recommended SRM as the contract negotiations partner of choice sealed the deal.
In early discussions with SRM, Larry reiterated that he was not interested in changing suppliers. He also confided the vendor knew of their desire to retain the relationship. Given the circumstances, it was natural for him to wonder if meaningful savings were achievable under those parameters. And, while SRM does recommend that their clients engage other vendors during contract negotiations in order to understand market alternatives and gain fresh perspective, in 1st Sea Isle City Bank’s case SRM was able to find savings using a combination of subject matter expertise, proprietary benchmarks, and previous work with the vendor.
No Need for Discord
A key factor for both Larry and 1st Bank of Sea Isle City was the positive relationship that had been established between the bank and the vendor. When he received a positive response from the vendor concerning SRM’s involvement his concerns about maintaining that positive relationship dissipated. “There was a sense of mutual respect, one that - according to the vendor - does not extend to all consultative firms,” Larry said.
While Larry had envisioned himself involved in a series of tense sessions in cramped conference rooms, he was pleasantly surprised to find that was not the case. SRM handled the interactions with the vendor, including working with multiple divisions within the vendor’s organization and kept the bank’s management team informed throughout the process, requesting specific guidance at any critical junctures. This allowed Larry to continue to devote his time and attention to the critical task of leading his institution, with the peace of mind that comes with knowing the work was in the hands of competent professionals.
The Bottom Line: The end result was a realigned, “at market” core banking software contract for 1st Bank of Sea Isle City, as well as a significant savings from their existing agreement - with zero operational disruption and no impact on the positive working relationship with the vendor. According to Larry, SRM was the definition of the word “partner,” understanding the bank’s needs and working to achieve them as if they were part of his team.
For more on the topic of negotiating with core providers, read Bret Herbert’s recent blog, One Does Not Simply Switch Core Systems after COVID-19.