Rules for Lease Management System Selection

by Madhu Natarajan 2014

Given the expense, disruption and ruffled feathers that accompany the transition to a new lease management system, it’s no surprise that organizations tend to delay a replacement project for as long as possible.

Given the expense, disruption and ruffled feathers that accompany the transition to a new lease management system, it’s no surprise that organizations tend to delay a replacement project for as long as possible. Weighing the costs and overhead of buying and implementing a new leasing solution against the costs of living with a legacy lease management system, such postponement is understandable. And this judgment is slow to shift, despite the costs of an aging system and architecture that can necessitate added staffing, require ongoing customized development and demand ever more workarounds, not to mention its accounting, reporting and compliance challenges.

But no leasing system can be kept viable forever. Eventually, various contributing factors tip the scales in favor of replacing the incumbent solution:

  • Its inability to scale limits portfolio growth
  • A changing regulatory environment has rendered the system obsolete
  • New corporate initiatives may demand business processes that it cannot support
  • Antiquated architectural components may no longer satisfy security or compliance standards
  • Entrenched champions of the old system are no longer around to support it
  • Getting functional enhancements from the provider is prohibitively expensive and time-consuming

All such concerns may contribute to the choice to seek new leasing software that will enable the team to conduct business without the restrictions, workarounds, delays, and support costs they’ve had to live with. Whatever the precipitating causes, when the decision to move forward is made, stakeholders in the replacement must build a business case to assess the costs of the new solution and to weigh them against expected returns on the investment.

This ROI calculation sets the tone for the RFIs, demos and ensuing sales cycles in which we solution providers engage with prospective buyers. When we do so, we’re dealing with a mindset that has dominated the thought process of technology buyers as long as there have been spreadsheets, review committees, and CFOs. But perhaps it’s time to give some thought to the implications of how we define the “returns” on the investment to replace a legacy lease management system.

This is not a topic that tends to get a lot of discussion. At first glance, there’s seems little basis to argue with the proposition that a new lease management solution should enable the team to work more productively and should facilitate portfolio growth with minimal added infrastructure and human resource costs. The purpose of the legacy solution was to transform manual, paper-based, stand-alone processes into a linear, people-plus-computers workflow. How else, then, to justify the cost of a new lease management system than to establish its ability to further streamline what has been automated and to bring an even wider scope of stand-alone and high-touch processes into an information processing chain so efficient that it will, in a measurable timeframe, pay for itself?

This approach puts the focus on the pain points of the incumbent leasing system and the capabilities of a new lease management system to mitigate or eliminate them. Of course, this makes good sense as organizations seek to improve their operational effectiveness, cut costs, and justify the expense of the tools they need to achieve these objectives. (Of course, sometimes this gets turned it into doing what we do now, but with fewer people.)

But there is a mindset at work here that limits the vision and evaluation of new solutions to what can be measured. What if a state-of-the-art solution can deliver more than reduced costs and greater efficiencies of scale? What would be the implications of looking not only at the bottom-line impacts of the investment but the top-line impacts as well?

Is there a place in the ROI calculus for such benefits as…

  • More effective collaboration among the members of the team
  • Enhanced competitiveness
  • Superior support for vendor partners
  • Easily configurable browser-based information sharing tools for customers, field sales teams, funding sources, and asset partners
  • And, most critical of all, the impact of a solution’s (and a solution provider’s) capacity to enable the team to respond quickly to change?

Perhaps some answers can be found by looking at how the lease management system selection process usually works: The CFO will be looking for a solution that pays for itself by making the business run better, faster, cheaper. But the folks in the trenches − doing the everyday work of lease origination, servicing, customer support, collections, portfolio management, and asset management − may have other priorities:

  • The product sales team and relationship managers may be looking for a system that handles puzzle-logic payment streams and complex asset structures and assures the quality and completeness of due diligence, pricing, compliance, insurance management, and documentation presentment.
  • The IT team will be concerned about ease of integration, the robustness of the services-oriented architecture, desktop support and version management.
  • Vendor program teams may want a system that helps them to empower manufacturers’ sales teams, that supports white label customer portals, or that gives vendor-partners mobile access to deal terms, statuses, and documents.
  • The call desk and collections team will want user-friendly tools that provide ready access to a complete picture of the customer relationship, including payment and asset lease histories, payoff quote requests, and pending deals.
  • Asset managers, unaccustomed to having their needs given any priority in the lease management system selection process, may nevertheless get their hopes up for maturation alerts and other tools to facilitate improved collaboration with vendor sales teams.
  • Mid- to C-level managers may well wish for business intelligence dashboards that enable trend analysis, simplify performance tracking, and support strategic scenario analysis.

Thus is born the battle of the checklists. Business analysts, mid-level managers, team leads, trusted veterans all seize the opportunity to include their team’s requirements in the RFP checklist that will be sent to system providers. Of course, special attention will be paid to those high-value processes that have been most virulently stymied by the old system. At the end of the day, no stone is left unturned and selection committees are expected to sort out vendors’ responses to hundreds of multipart questions exploring the features and functions of competing lease management systems. Once the systems whose functional limitations are deal-breakers are eliminated, it should come as no surprise that the remaining contenders are awarded priority based on how they impact the bottom line. In other words… when in doubt, people focus on what is most readily measurable.

But, taken as a whole, these wish lists comprise a powerful vision of a fully enabled leasing operation. They also reflect the desire of the people in the leasing team to be contributors, not bottlenecks. Given the opportunity to choose, they want tools that enable them to be more effective, to deliver more value to their customers (both internal and external), and to spend more time leveraging their expertise and less time coping with the limits of the technology.

Times have changed and, with them, the range of benefits that a lease management solution can provide. Users of a modern system now enjoy the agility of multi-tiered, service-oriented architectures, the flexibility of a fully modularized solution, the adaptability of a browser-based user interface, and the expectation that their solution provider can leverage rapid prototyping methodologies to deliver functional enhancements as needed rather than when they can be fit into an unwieldy, calendar-based release schedule.

Because of the exponentially greater adaptability of modern solutions, buyers are now broadening their thinking about selection criteria. A new mindset for lease management system selection is now emerging; one whose focus is based on an acceptance of the rapidity — and, often, unpredictability — of change in our industry’s business environment and an appreciation of the agility that only a state-of-the-art solution can provide. In this context, buyers are asking not only what costs a system can reduce and what business processes it can facilitate but, just as critically, what kind of responsiveness they can expect when new restrictions, requirements, opportunities, or strategic initiatives must be accommodated.

In today’s business, regulatory, and computing environments, a solution’s ability to facilitate and streamline the leasing team’s existing business should be viewed, literally and figuratively, as just the starting point of the relationship between the buyer and the vendor. The real returns on the system investment will occur as the pace of change continues to escalate and new challenges and business opportunities emerge.

In a competitive landscape where being first to the deal, first to market, or first to comply can be the key to a team’s competitive edge, the biggest returns on a lease management system investment will come from its ability to enable the leasing team to win new business, to deliver greater value to customers, and to seize new opportunities as they emerge.

Madhu Natarajan is CEO for Odessa Technologies, Inc. Under his stewardship Odessa has become an internationally recognized leader in the leasing industry with major clients across the globe. Natarajan has spoken on a wide range of leasing topics at various national and international forums. He has also written for leading industry publications.

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