The Right Business Model Does Make a Difference

The very idea of choosing a vendor to complete tasks for your organization immediately creates the potential for conflict between where you are going and where your vendor wants to be. These inherent points of conflict range from contract and pricing issues to service expectations, liability and follow-through.

Balancing the Importance of Good Partners and the Proper Technology

The very idea of choosing a vendor to complete tasks for your organization immediately creates the potential for conflict between where you are going and where your vendor wants to be. These inherent points of conflict range from contract and pricing issues to service expectations, liability and follow-through.

No area can create such a range of conflicts as when choosing a data processing vendor. The conflicts of ultimate service versus fixed investment, the need for change versus the pace of technology, and the conceptual ideals versus the abilities of the end user, all tend to magnify the differences between a credit union and a traditional data processor. Therefore, a new model is needed.

For WESCO, it's a reliance on the concepts of credit union equity, credit union cooperation, and a true partnership between the credit union's focus and WESCO's technical capabilities.

A Focus On Utilization
The WESCO model begins with the principle that the vendor is an extension of the credit union staff, with the same underlying goals, strategic challenges, and focus as credit union professionals. By always remembering that everyone is vested in the success of the member service offering-not the sale of software, a purchase order for more hardware, or a long list of new credit union conversions-WESCO's focus stays with its investors and their members.

WESCO credit unions learned long ago that patronage is investment, and that every invoice paid is an investment in better processing, better service, and new technologies applied to their members' needs. It is not only the business we did this quarter, or how WESCO services were used to accomplish credit union ROA goals-it's the long term guarantee that both the credit union and the vendor are evolving on the same path with the same goals.

The Value of Equity
Equity should lead to pride. Whether that equity is through investment in stock, a credit union's reputation based on affiliation, or the equity built through hard work, this model is designed to create pride in our solutions for both the vendor and the credit union client. It depends on participants using WESCO products to their fullest. WESCO's goal is that every credit union staff member is a power user and that the goals set in the sales cycle are met through efficient and effective presentation to every member. From the receptionist to the CEO, WESCO products are designed to focus the light of expertise on every credit union staff member.

Be The Best You Can Be
Best practices are not contingent on profitability in the WESCO model, as they are for many alternative data processors. Safety and soundness of technical solutions in today's world are becoming more important to every user and member. Redundancy, security, internal auditing and compliance with industry standards need to be the foundation of a data processor's solution, not the results of success. Often, credit unions settle for best practices according to what they can afford, not what they should demand. The WESCO model works with credit unions, examiners, auditors and industry professionals to ensure that its solutions pass the test. It is pride in the process that drives WESCO owners and staff members toward best practices.

First to Implement
WESCO resources are focused on a first-to-implement tactic, moving all of WESCO's clients to new strategies and offerings. This is possible through the development of products that are comprehensive, diverse, and driven through the creative configuration of a standard product rather than the "mix-n-match" of best-of-breed solutions. WESCO processes are developed with the total participation of WESCO clients and their staffs. While credit unions choose the pace at which they participate, no credit union is left behind due to access being based on investment or prohibitive pricing. All credit unions participate in WESCO returns.

As an example, this has allowed WESCO to transition from analog, to digital, to TCP/IP as a group, where credit unions who wish to break ground first are no more important than those who are at the tail end of network projects. It is not about being sold on something or being able to afford it; it is about what is the best practice and which technologies will lead to long-term success. It is not about the size of the credit union or the sophistication of its product offerings; every credit union is an equal investor in WESCO's sophistication and technical capabilities, and can market to its constituents all of the power of WESCO solutions.

The efficiencies gained by adopting strategies in which all credit unions participate gives the WESCO Management Team a real edge over companies who are constantly doing at-risk development, then having to sell the product to their client base. WESCO builds products according to the needs of its clients- as a consultant, a "buyer" of technology more than a "seller" of technology. This is why I often refer to myself as the "CIO" of every credit union in the WESCO client base and that WESCO's product managers and service support personnel are part of the staff of every credit union. WESCO is vested in the implementation of every product and solution it puts forward.

Return on Investment
The backbone of WESCO's vendor model is the concept that R&D is a function of credit union investment, not credit union invoice. Credit unions enjoy the benefits of ownership by providing capital funding for the research and development of new products and capabilities. Credit unions earn income on their investment throughout the development of new WESCO solutions. This shared R&D investment reduces the risk of new technologies.

During the implementation of these new solutions, WESCO credit unions benefit again from their investment by avoiding large up-front invoices for new services. For example, when many credit unions were spending more than $50,000 up front for home banking solutions, WESCO credit unions jumped into the Internet marketplace with no money down and low transaction fees. Both the credit unions and WESCO were vested in the success of home banking, one member at a time. As home banking usage grew to 1,000,000 minutes per month throughout 2001, everyone shared in the success.

Today's Market
Mergers, consolidations, and the theme that data processors must be big to be successful in today's credit union marketplace, were the headlines in the last several years. WESCO does not believe that sheer size, the amount of capital available for investment, or a stranglehold on the credit union market ensures success for any vendor, and certainly not for the vendor's credit union clients. Partnership, shared equity, and mutual goals will win in the end. This model is about tools being placed in the hands of credit union staff with a mission to serve their members. The key is that those tools are owned and directed by the very people with this important mission.

This model is obviously not the only model for success. But to us the key is that how we act as business people, credit union industry professionals, and vested credit union members, makes all the difference.

Randy Karnes, CEO
(800) 327-3478 ext 101



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March 4, 2002



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