Read your IT contracts before you sign … or get used to living with your vendor
The core application market is undergoing significant turnover and the rate of change is increasing. Growing user demands for contemporary technology are driving the need for banks to significantly upgrade their technology. At The Copper River Group, we see six out of ten banks leave their incumbent core for new technology.
1. Promised integration not there.
2. New product releases late and not delivering on the promise.
3. Old Legacy back-end systems very difficult to upgrade.
4. High ratio of relationship managers to customers (greater than 30-1).
5. Poor customer relationship.
6. Increasing prices and declining service.
All of these reasons may also pertain to you and serve as the same motivation to move, but if you have the “YATS”… as in You Are Totally Stuck… then you are stuck!
A case of the “YATS”
More importantly, when you realize that you have the YATS, and there is nothing you can do about it, you are really mad! Let me explain.
One of the most common tricks of the trade is the auto-renewal clause. No matter how you read, I call it a trick deliberately designed to trip you, the client, up.
Simply stated, you and your vendor sign a five-year contract. The non-renewal advance notice requirement is 180 days. You start a core review project. So you send the letter to your vendor regarding intent to review other core providers. But your vendor responds with a letter saying that you missed your “non-renewal advance notice requirement” by one day and your contract has auto-renewed for another term of five years.
That’s right, what you thought was one year turns out to be five. Now you know you have the YATS.
Symptoms of YATS
Yep, you are stuck and there is nothing you can do about it.
You have no options, you are stuck for five years (or longer), and the sale rep did not point this out to you (and they will not).
You did not thoroughly read the contract and now your organization is standing still while the competition is passing you by at the speed of light.
Oh, your vendor will consider upgrades…
But then it will ask you to execute an additional extension to the current auto-renewed five-year contract, making the total contract ten years.
Is this a partnership?
Not remotely. It more resembles the Gotcha Games … and you just lost! So much for: May the odds be ever in your favor.
They’re not! Dang … the YATS!
A simple preventative: Read
Okay, you can avoid this situation by reviewing all of your contracts immediately and sending out a non-renewal letter right away informing your vendor that you are not going to renew the current contract—period!
Now, this does not mean you are not going to stay with them.
No, this it just means you are protecting the bank and your options and avoiding the YATS!
Lots more where YATS came from
The sad thing is, there are many more of these types of clauses in the average major vendor contract. We have seen them all and they are just waiting to bite you.
Your contract can be a huge asset to your organization and be the basis of a strong foundation for the relationship with your vendor or it can be full of the YATS.
Take a moment to see what type of contract you have and take action.