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How One CFO Cut His ERP Costs by 35 Percent

Did a Kansas bank discover a new "gold" standard for application hosting?

Not all CFO job descriptions include managing and overseeing a software overhaul. But that is just what Rick Tremblay, CFO of Gold Banc, a Leawood, Kan.-based commercial banking company, is doing.

By September, Gold Banc will have finished the first stage of replacing its legacy financial applications with SAP’s mySAP Financials.

The general ledger, accounts payable, fixed assets, and accounts receivable modules are scheduled to go live in the September rollout. After that, the $2.7 billion- asset banking company will install a banking-specific profitability module and an asset and liability module (ALM) by December. In 2002, Gold Banc also plans to roll out SAP’s human resources and payroll applications.

But why is Gold Banc replacing applications it’s had for years with new ones to be managed by an external party?

“We have traditionally been getting multiple feeds from different systems, including general ledger, loan, and deposit systems, and making sure that it all balances up,” says Tremblay. But that process is manual and error prone. It was only a matter of time before the company sought a replacement.

“With SAP, we’ll have one common database, so when I’m ready to close out the reports, they’re going to balance because I’ll be pulling information from one common system,” Tremblay explains.

SAP’s profitability application will allow financial managers to determine the profitability of individual lines of business, customers, and products. “We would like to know, for example, what percentage of profits are generated by commercial banking, by the bank card department, by product, and by branch when the books are closed at the end of the month,” says Tremblay.

In addition, Gold Banc is currently beta testing SAP’s new ALM, and it will be the module’s first licensee when it is introduced late this year or early next year.

“The ALM will help us manage our assets and liabilities. We have to be able to very carefully balance the flow of deposits with loans so that we don’t end up with a mismatch,” he says.

“Once we have the ALM, we’ll have one complete system, close out the books at month end, and generate profitability and asset and liability models from one database,” Tremblay says.

Gold Banc will access the SAP applications via Sun Microsystems servers hosted by Electronic Data Systems Corp. (EDS) at a Dallas data center.

Icons on employees’ PC desktops will link them to Gold Banc’s server in Kansas City, which is connected via a phone line to EDS.

The decision to host the applications was a no- brainer, says Tremblay, who maintains it was the best option, given the prohibitive costs of purchasing the hardware and hiring the programmers to manage the applications internally. Still he would not quantify the actual cost of his firm’s contract with SAP.

“It was not a hard decision to make,” he comments. “It was just a matter of figuring out the cost of the alternative. I felt it was probably 35 percent cheaper to host than to buy the hardware and hire all the necessary staff.”

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