By Peter Carter

When soliciting new lending technology platforms, the RFP is only the beginning of the process. Here, we go beyond the RFP and examine the due diligence process and how to properly and effectively scrutinize selected vendors.

By approaching the vendor evaluation process well armed with knowledge and insight, the lender seeking to implement an enterprise lending system will have a leg up on the over-zealous vendors, and will be in the position to ask the crucial questions of those vendors that were selected after the RFP analysis.

Seek out the References

This entire industry is rife with vendors busy selling ideas for products that exist only in the fertile imaginations of company executives, salespeople and developers. Many companies believe they can develop a product that will meet the needs of the prospect. Unfortunately this becomes the product roadmap for many of these vendors. However, lenders interested in buying products that exist - and more importantly, work - must be wary of these companies.

One of the best defenses lenders have is to carefully investigate the vendor's references. This means not just asking for references, but actually calling the references provided to get their assessment of the product, see how the vendor is as a partner, and ascertain how the reference is using the vendor's system. Additionally, lenders need to be sure the references are using the same system (version/platform) that the vendor cited in the RFP that the lender is investigating. If the vendor allows prospects to attend user conferences, this would be an ideal opportunity to speak to an end-user or inside developer in an uncontrolled setting.

A list of concrete questions should be created to ask these references, preferably in the form of a questionnaire that the lender can send ahead to the reference before the call. The questions asked should have direct relevance to the lender's projected use of the vendor system. They should go beyond merely gauging positive or negative reactions of the system or vendor.

Not all references will complete such a questionnaire, but having the questions as points of discussion will still be helpful in guiding the call or visit. This approach allows the lender to define the agenda.

Onsite Visits and Reviewing Documentation

Site visits to other vendor clients can be a tricky affair, but well worth the effort to attempt. With some vendor clients, there may be insurmountable privacy or competitive issues preventing an onsite visit. However, if possible, the lender should definitely ask to visit clients where the system being evaluated is actively functioning.

While it's obviously important to have a good take on executive satisfaction with the vendor, their product, and the vendor-client relationship, it's not the only source of actionable knowledge a lender can take away from an onsite visit. It's more important to see the tool being used than to hear how top management thinks the tool is being used.

Lenders should use the opportunity to walk through the shop and visit with the staff using the system on a daily basis. Evaluate their satisfaction, or lack thereof. Has the system given them the tools with which to do their job more efficiently? Was there a steep learning curve? Answers to these questions will often give an advance understanding of what the lender's own staff will face, should they decide to partner with the vendor.

It is also important to ask the vendor for samples of all the relevant documentation. User manuals, administrator guides, online help systems and product release notes are all samples of documentation the lender should evaluate along with the system itself. Obviously, the absence of such documentation should set off warning bells for the lender.

Work With the Tool

It's impossible to overstress the importance of having some hands-on experience with the system a lender is considering. All vendors have canned demos that present their systems as the ideal solution. When the vendor controls the context, setting, actions, and variables of a demonstration, they can construct a carefully staged performance.

Instead, lenders should ask for live demonstrations, configured to real world scenarios. The best approach is to ask the vendor to configure some of the lender's own specific workflows. Buyers should seek to use both the system in practice and the admin tools, to ascertain what level of control the lender's staff will have over the system.

If the lender has an as-is workflow diagram of their business processes the vendor system would handle, the lender should require the vendor to configure the test system according to portions of those flows and explain, point by point, how their system would increase efficiencies. This will give the lender expected gains with which to calculate ROI.

In the next edition of this publication in the second part of this two-part article Mr. Carter shares more helpful tips on successfully executing vendor due diligence.

Peter Carter is the vice president of marketing for loan origination vendor Mortgage Cadence. The Greenwood Village, Colo.-based vendor can be found on the web at http://www.mortgagecadence.com.