Getting ‘Back to Basics’
David Taylor, Sword Apak Systems Inc.
Examines technology’s role and its support for the Asset finance industry in today’s competitive market-place
Published in the World Leasing Yearbook 2004
Every decade has its own favourite jargon phrases, and the late 20th and early 21st centuries have certainly produced their share. During the 1980's two concepts found considerable favour - one with management gurus, the other with a number of political parties. For the managers looking to retreat from the failing growth strategies of diversified industrial conglomerates, the phrase "stick to your knitting" was coined. In essence, it meant, get back to doing those things you know you can do well, and don't mess with businesses you don't fully understand or with which you don’t have any true synergy. GE, one of the few who managed to succeed as a conglomerate, has more and more focused on finance revenue as a growth mechanism. The politicians’ version was championed by John Major, then Conservative Prime Minister of the UK - It was "back to basics" - an attractive concept following the boom Thatcher years which had seen financial and social excesses take over the once sober City of London financial and equity markets. It signified a return to traditional social and moral values and a retreat from the hedonistic excesses of new found and easily obtained wealth. Sadly for John Major the campaign backfired and his moral majority position became undermined by the political realities of scandals within his own party. There are, nonetheless, parallels between both those rallying calls and the present situation in which we find ourselves in considering the role of technology and its support for the Asset Finance industry.
With interest rates currently lower than most senior and middle managers have ever seen in their lifetime there is little opportunity for finance companies to discriminate their products through better rates or lower prices. Customer and business partner service has become the main driver of business process change. The bursting of the dot-com bubble, and the failure of many acquisition and merger activities to generate acceptable returns, has led many organizations to re-examine what their core businesses should be about, and fueled a desire to "get back to basics". In the case of finance companies that has meant seeking to provide better service while containing overhead costs.
In many cases dramatically lower stock prices, especially in the telecoms and hi-tech sectors, has resulted in a freeze or at best a considerable reduction of capital budgets. System replacements or major enhancements, previously cost-justified by promises of increased business volume, have found little support during the past two years. Ambitious web-based business acquisition projects have been terminated, and business models and projections radically changed. The feeding frenzy of investment in web portals and hastily implemented e-business solutions of two years ago has matured into a carefully selected series of product / service offerings provided through more traditional channels, with the web supplementing those efforts.
Many major financial institutions that had acquired businesses that were at best peripheral to their core competencies have begun the process of divestment or dramatic restructuring around those perceived competencies.
Following the flight of investor confidence from the equity markets and increased governmental emphasis on business regulation in an attempt to redress this, audit and financial control have taken centre stage in Businesses Process Re-engineering (BPR) programs. The balance has shifted back towards business quality as well as business quantity. While it is an oversimplification to say that businesses have become wary of the promises of growth through improved technology, the emphasis is now on a more gradual growth process through the improvement and extension of existing processes. This has led to a desire to extend the reach of the enterprise by coming closer to business partners and existing customers.
The resulting drive for improved customer and partner service has benefited from some of the technology fallout from the bursting of the dot-com bubble. The technologies and techniques, spawned by ambitious web based projects were flawed by faulty business models, not necessarily technical or operational problems.
In the very best systems, wait times are short, and self-service is supplemented by contact with a representative at appropriate points in any transaction.
Those same technologies and techniques, when applied to customer service operations, have produced significant benefits to companies and customers alike. By selectively providing traditional back-office functions direct to the customer online, and enabling simple and intuitive self-service operations, organizations can provide a more cost-effective and satisfactory customer interaction. In the same way that the irritations of automated voicemail systems are being replaced by more skillfully crafted mixes of automation and human intervention, organizations are learning to use the web to provide a blend of fast self service, married to easy access to knowledgeable customer service representatives. In the very best systems, wait times are short, and self-service is supplemented by contact with a representative at appropriate points in any transaction. Good customer interaction means giving the customer easy access to the detail of his transactions in a way that is understandable, fast, and intuitive.
Customer service applies equally to dealers, brokers, vendor partners and funders, who may all be given access to information relating to their share of business transacted with the finance company. Each of these players may have slightly different information requirements, and will need the information which is important to them presented in different ways. In making such information readily available, security is, of course, a fundamentally important issue. Only the information that is legitimately the province of each enquirer must be made available, and security and content management has to be effective but not intrusive or unmanageable. Some of the best online banking applications are beginning to achieve this balance of security, access, and available human customer service. We are beginning to see examples of well-designed web sites providing access to services and information, previously buried in monolithic back office systems.
Information has not only to be accurate, but also current and timely.
This approach to customer service has not been readily available to all organizations. Not all back office systems have been receptive to web based information delivery. Not all can easily deliver the information in real time to the company's own staff, let alone across the web to those outside of the traditional enterprise. Clearly, the ability to interoperate with products developed using modern technologies is profoundly important. Information quality has to be assured or more harm than good will result from extending access. Information has not only to be accurate, but also current and timely.
Organizations wanting to maintain close customer and partner contact whilst achieving low service overheads must also deal with other issues. For many, global reach is becoming a significant strategic issue. Extending operational efficiencies and striving for service excellence becomes even more of a challenge across geographic, language, cultural and accounting boundaries. Currency, tax, legal and marketing issues all add to the complexity mix of operating on a global basis. A common back office system, flexible enough to accommodate such a mix of transactional requirements, yet present a suitable local face to each jurisdiction will become a basic requirement for the successful global player. Support for local and regional accounting, legislative and reporting standards, with the ability to provide head office acceptable consolidations will be essential if organizations are to follow their customers and business partners into new territories, or to achieve process improvements in areas currently served by diverse and incompatible systems. Web enabled user interfaces will facilitate the task of providing local language, presentation and cultural variants, but will still require the expertise and support of powerful and capable administration systems behind the scenes. A range of financial products will need to be on offer, appropriate to the local market. This means market acceptability and competitiveness allied to fiscal compliance and an acceptable risk and profitability profile. Although accounting and regulatory practices are moving towards common international standards, they are not there yet, and subtleties and nuances exist even between geographically proximate markets.
Capital spending restrictions will make an ASP or "Computing on demand" model attractive to many.
For those organizations whose present systems are deficient, wholesale system replacement may not be a current option. As we have said, capital spending restrictions will make an ASP or "Computing on demand" model attractive to many. Similarly, selective replacement or upgrading of only those components least able to support business objectives may make good sense, leaving the "least worse" pieces of present systems in place and compensating for their shortcomings in complementary or partial replacement systems. We have already seen this process used to good effect in web front end systems providing a more user acceptable interface coupled with some simple functionality extensions, not easily achievable in old legacy back-office systems. Eventually, however, such cosmetic solutions themselves become unwieldy bringing dangers of data integrity failure and poorly managed integration.
Another strategy which may be successfully applied is the selective system migration on a piecemeal basis, choosing one section of a portfolio, one suite of financial products, or one or two geographic regions. This has similar advantages to the more traditional use of pilot projects to prove concepts or retest capabilities, but allows the replacement of the most troublesome components of the business/ system capability mix with a view to a full rollout once concepts have been proven and capital becomes available.
This strategy relies on new systems with considerable interoperability potential, since they will have to co-exist with a mixture of old and new systems for some time. This approach, too, requires the availability of significant systems integration expertise. This may be available in-house, from the supplier of one of the component systems, or from third party systems integrators.
In terms of selecting major system components, we have seen a period of stability in the technology supporting the key pieces. Operating systems have become standardized at the server level around UNIX, Linux, and Intel platforms. Relational databases provided by the major industry players, Microsoft, Oracle, IBM, are substantially similar and relatively evolutionary products. Server hardware is highly capable, robust and cheap as are mass data storage devices. For the IT manager and business user, the technology poses relatively little risk of making a wrong choice, or one that will fast become obsolete. The key to system choices resides increasingly in selecting a knowledgeable, committed and competent business partner with the ability to deliver appropriate solutions within a predictable timeframe and cost structure. In that regard, little has changed in recent years. The selection of the parts, the order of implementation, and the method of payment will have more to do with decision making during the coming period than major technology choices or functionality directions. We pretty much all know where we want to go - it's a matter of choosing the right partner and figuring out how far, how fast, and at what cost.
David Taylor, Director,
Sword Apak Systems Inc.
Published in the World Leasing Yearbook 2004 |