A credit union's productivity and compliance deal
The credit union and every number in this exercise are fictional, made up for practice.
Background
A credit union with 220 staff wants to move its email, documents and chat to a modern platform configured for its examiners, with us managing it. Its CIO likes the proposal. Its CFO says a competitor is cheaper and asks for 15% off the licences. Its board must approve any contract over $150,000 in its first year. The board meets in six weeks, and the credit union's examination is in five months.
| Item | Price |
|---|---|
| Platform licences, configured for regulated use | $36 per user per month |
| Managed administration and compliance monitoring | $4,500 per month |
| Implementation (one-time) | $48,000 |
Your task
- What is the first-year cost, and the recurring annual cost after that?
- What would the 15% licence discount be worth to the credit union each year, and would it change who must approve the deal?
- Who is involved in this decision, and what does each of them need?
- What would you propose to the CFO, and what are your next three steps?
One way to approach it
1. Cost. Licences: 220 × $36 × 12 = $95,040 a year. Managed service: $4,500 × 12 = $54,000 a year. Recurring annual cost: $149,040. First year adds the $48,000 implementation: $197,040.
2. The discount. 15% off licences is $36 × 0.85 = $30.60 per user per month, or 220 × $30.60 × 12 = $80,784 a year: a saving of $14,256 a year. The first year would be $80,784 + $54,000 + $48,000 = $182,784, still over $150,000. The discount does not avoid board approval, so it does not change the timeline. That is worth saying plainly: the board meeting is the real deadline either way.
3. Who decides and what they need. The CIO needs a credible plan to be ready well before the examination. The CFO needs a fair comparison and a number the board will accept. The board needs to understand the risk of staying on the current setup and the cost of change. The compliance officer, who is not yet involved, needs to know how records will be kept and reviewed, and will be asked about it by the examiners. Bringing them in early is one of the most useful things you can do.
4. A proposal. Ask the CFO what the competitor's price includes: a price for licences alone is not comparable to licences plus managed compliance. Rather than cutting the licence price, trade: a three-year term in exchange for a lower price, or implementation fees spread across the first year's milestones. Then: (1) meet the compliance officer with the solutions architect to walk through retention and review; (2) give the CFO a like-for-like comparison and a board paper draft; (3) agree an implementation plan backwards from the examination date, so the board sees that waiting a cycle puts the examination at risk.
Strong answers notice that the real constraint is the board's calendar and the examination, not the 15%, and do not discount before understanding the comparison.