The Next Big Trend: Equipment Finance is Ready for a Platform
by Monitor Q&A July/August 2017
In a Monitor Q&A, executives from five software companies — Michael Campbell from International Decision Systems, Simon Clark of Alfa, Farooq Ghauri of NetSol Technologies, Madhu Natarajan of Odessa Technologies and Jeff Van Slyke of LeaseTeam — discuss keeping up with the digital demands of today’s martketplace, including harnessing the power of Big Data and predictive analytics while utilizing the cloud. They outline how technology can help a company achieve intimacy with its customers and predict the next big technological trends for the industry.
MONITOR: According to a survey cited in ELFA’s 2016/2017 Business Technology Performance Index, 58% of respondents reported their companies as “conservative” or “beginner” in the CRM space, indicating a deliberately slow adoption of technology. What actions can these companies with cold feet take to become more comfortable with technology?
CAMPBELL: This is a very open industry — talk to the people who have achieved great success with CRM and origination systems. These platforms support better standardization, more thorough and rapid documentation and provide a platform for consistent offer management.
Standardizing on a generic platform that is extensible and configurable allows each line of business to tailor it to its needs and allows for a business-wide platform without sacrificing business line impact. Don’t confuse a CRM system with an origination system for a particular line of business — find an originations system that works seamlessly with a generic CRM platform (to optimize the best of both).
CLARK: In our industry, making significant changes is seen as an exception; an event delivered as part of a large project. For a company to be comfortable with change, especially in technology, then its culture should be one where change is happening constantly. This sort of cultural identity enables the organization to stay current technically and provide a competitive advantage over its peers that adopt more slowly.
In order to be comfortable with constant change, the organization needs to have the appetite for it, the skillset to manage it and a technical platform that enables change by making it simpler.
GHAURI: There are really two key reasons companies have been slow in adopting and adapting to the CRM space: tradition and fear. Equipment finance companies have been around in one form or another for decades. There has never been a true demand to update the process or experience, but, as customers become more savvy with their technology and time, companies must find a way to meet their expectations or become irrelevant. The process of becoming more technologically dynamic can seem intimidating, and many companies fear the cost, manpower and time involved. That’s why offering technology solutions that are out of the box, cost-effective, easy to adopt and relatively maintenance free has become necessary to ushering in the CRM technology that is vital to customer loyalty. CRM is proven to simplify business workflow and enable better onboarding of new business. Finding a vendor who can offer a CRM solution that is already tailored to the equipment finance industry workflow is critical to putting slippers on those cold feet.
NATARAJAN: Technology today allows users to take bolder steps with the speed and scope of automation. With usage-based models, companies can pilot different products and modules without committing to them until they’re fully vetted. This mitigates risk while allowing companies to be more ambitious with tech adoption. A pilot-based approach is a cost-effective and unintimidating way to get a taste for the benefits of newer technology and accelerate the adoption process.
VAN SLYKE: Companies are sometimes hesitant to adopt new technology because they are not sure how to approach it. Working with a technology partner that understands your business and strategic goals will make the process less daunting. The first step in the process should be to identify your needs and then lean on your technology partner to educate you on the best practices to meet those needs.
While it is tempting to try and use technology as a competitive advantage, you should never adopt technology just for technology’s sake. This type of practice often leads to over-engineering, creating a complicated, and, often, slower process. Conversely, a well thought out plan will create a well-engineered solution that is more efficient and seamlessly automated.
Furthermore, technology requires a continued focus on improving business processes based on practical experiences. Companies that embrace technology with the intent of meeting business objectives create an environment that fosters innovation, which is crucial to evolve and remain competitive.
MONITOR: The same ELFA report stated that achieving customer intimacy is the primary value discipline for 58% of respondents. How can technology help an organization achieve this goal?
CAMPBELL: In its basic form, a system never forgets an interaction. So in environments with teams and relationships over time, thorough documentation of customer interactions supports more consistent and deep relationships. As these platforms move forward, the use of analytics around customer behavior can dramatically improve customer understanding, leading to more and better customer interactions and deals tailored to a customer’s desires.
CLARK: Companies that excel in customer intimacy combine detailed knowledge with operational flexibility so they can respond quickly to almost any need, in a manner tailored to the relevant customer.
This knowledge is dependent on having an accurate, current and consistent view of the customer across all data sources. To deliver this, an organization must typically overcome a number of challenges, the toughest of which is often to integrate all of the data (held on their current and legacy systems) into a single, current customer view or data source. This requires a detailed understanding of the data in the context of both the organization’s processes and the data’s flow between systems.
Operational flexibility is built on adaptable and responsible business processes whose customer touchpoints take place through a channel or device of their choosing. The technical platform that delivers this service needs powerful workflow and business rule capabilities, allowing customer-focused processes to be mapped directly into the system and standardized across the business. Combined with automated business rules running over detailed customer profiling, this enables customer-focused ‘once and done’ processes. In the hands of a workforce with the creative decision-making skills required to respond to individual customer needs, this type of technical platform will help drive customer intimacy for the organization.
GHAURI: The more you interact with your customer, the more you inspire loyalty and satisfaction. Having the right technology solution that allows for swift customer service, mobile access and user-friendly applications is integral in allowing customers to feel that their unique experience matters to the organization.
NATARAJAN: CRM technologies today have evolved way beyond just contact and opportunity management. They are capable of micro-targeting customers through business intelligence-based automation. Salesforce, for example, offers a variety of solutions that allow users to track customer behavior online and respond through tailored messaging. This significantly boosts customer intimacy and enhances customer experience all with minimal overhead.
VAN SLYKE: Customer intimacy is a compelling value discipline, and using technology to focus on this discipline is achievable by providing customers with a solution that is flexible, sophisticated and reliable.
Flexibility in your technology solution is a critical differentiator to being able to provide valuable solutions to your customers. Flexibility is paramount to the entire equipment finance workflow, including structuring, credit adjudication, servicing and end-of-term operations. Customer intimacy is further enhanced by adopting a technology solution that is flexible enough to meet both your customers of today and tomorrow.
A sophisticated solution will utilize the process of capturing and mining data to better understand your customer’s tendencies, preferences and hot buttons. Furthermore, understanding what your customers want will allow you to go beyond the basic services and provide them with a solution that is both intimate and efficient at meeting their needs. However, it is not just a matter of mining and analyzing your customers’ data. To be effective, you must take action and only a flexible technology solution can adapt to your customers’ individual needs.
MONITOR: How can equipment finance companies harness the power of Big Data and predictive analytics?
CAMPBELL: The use of full lifecycle solutions, coupled with deeper customer interactions around managed solutions, will help equipment finance companies compile the data necessary on interactions, usage, and both positive and negative outcomes over time. The data then helps to develop behavior models that will significantly improve customer understanding and offer management. On the flip side, these same models can give early warning as behaviors change to the negative — allowing a more proactive management of negative financial outcomes.
CLARK: Big Data is concerned with the collection and organization of vast amounts of data. Making sense of this data is often complex and confusing. In order to properly analyze and interpret this data, organizations must have a platform, which can collate data from multiple sources and present this information so that it is accurate, consistent, up-to-date and available. Without selecting a suitable platform, it is impossible to make sense of the data across multiple systems within an organization.
Once this platform is in place, organizations can use their data to better understand customer behaviour and predict market trends, thereby allowing them to keep abreast of change and ahead of the competition. Specific examples might include monitoring the communication patterns of customers to ensure that the appropriate communication approaches can be used at the right point in a process for each customer.
GHAURI: Equipment finance companies can use Big Data and predictive analytics to save money and make money. It gives true visibility of one’s business and analytics. An equipment finance customer of NETSOL’s implemented Big Data through their different core areas. They connected all their data from the following areas: manufacturing, finance and leasing, customer services and maintenance. They noticed that by wrenching a bolt 25% tighter, there was a 60% lower failure rate with the windshield wipers. Without the collection and correlation of data from such seemingly disparate sources, such a small detail may have been overlooked and yet it yielded a huge improvement in customer satisfaction.
Predictive analytics can be used to predict the most optimal time to begin the asset remarketing process to achieve the lowest cost of inventory and the best cost of resale.
NATARAJAN: Our industry has barely scratched the surface of the potential that Big Data and predictive analytics hold. While industry wide data is not readily available, companies can certainly use the concepts of Big Data and predictive analytics at an organizational level. Companies that have been around for years can tap into the goldmine that is their historic data to drive business decisions.
VAN SLYKE: There is no doubt that analyzing isolated data can provide an intimate look at your customers’ wants and needs. However, in order to further your advantage you have to expand your scope to include Big Data and predictive analysis. Unlike isolated data, to harness the power of Big Data and predictive analysis you have to synchronize the data from every customer exchange and house it in a centralized location. Once this process is in place, you will get a more complete picture of the relationship between the customers and the data.
Predictive data analysis can help you adjust your processes and timing to reflect changing trends in customer behaviors and expectations. For example, the data can help detect payment and default patterns so you know when and how to increase your collection efforts, thereby decreasing the chance of default.
MONITOR: What are common obstacles equipment finance companies may encounter when trying to upgrade their technology? How can they avoid these pitfalls?
CAMPBELL: It is critical to distinguish between vendor promises and vendor ability to deliver outcomes with proven results. Has the vendor worked in your line of business before? With your volumes? With your level of compliance? Will the vendor partner be with you until business results are achieved? As the industry changes to more siloed participants in the decision processes, assuring that the vendor selections are made by people who actually understand the complexities of the equipment finance business is critical.
CLARK: Organizations with a complex legacy systems landscape can often struggle to describe the interactions between these systems and the way in which these interactions contribute to the wider processes. They will often try to design integrations with a new system in isolation from the processes, which these integrations support, or vice versa.
Establishing a clearly documented start position, a set of processes and interface touchpoints, will set an organization on the right path to successfully design their desired future state.
GHAURI: The single biggest obstacle in upgrading technology is that companies try to recreate bad, old processes in the new system, negating the benefits of the new system rules and workflows. Companies can avoid this pitfall by having strong executive sponsorship to create a mandate for change. Then the change mandate must be tied to specific outcomes that the project will yield. Only then will project teams hold themselves accountable for meaningful change.
NATARAJAN: The biggest pitfall to upgrading technology in our industry is not looking past the next upgrade. Companies often fail to ask a very simple question of their vendor: Can you show me your product and technology roadmaps? Looking at these roadmaps for the past 10 years and the plan for the next 10 should paint an immediate picture of what your future on the upgrade will look like. Remember that technology choices, including upgrades, have 10- to 15-year time horizons. Companies often forget that context and look past just the next upgrade when making technology decisions.
VAN SLYKE: Scope creep is one of the most common obstacles encountered when upgrading technology. [It] is not necessarily a bad thing and may actually be needed if not all requirements are identified initially. When assessing, it is important to keep a clear focus on the overall project goals when assessing potential scope creep. The potential scope creep may be needed to meet 2016your goals, and therefore, becomes a no-brainer to add. In the end, the most important thing is to keep scope in alignment with the project goals.
MONITOR: Thanks to technology, most people can work from anywhere these days. When updating technology, how can a company ensure that their team is able to function on the road or at home just as well as in the office?
CAMPBELL: Having technology that is web-based is required. One area that companies overlook is connectivity. Wi-Fi is often considered ubiquitously available. It’s not. Back-up connections through MiFi’s or personal hotspots assure connections are available when the business requires. When thinking about people working remotely, think about all the applications needed — not just specific job applications. And security is a must.
CLARK: Relying on a geographically dispersed team, often across different time zones, is becoming a standard challenge for all organizations. As a result, there are now some fantastic tools available to support the collaboration and communication requirements of the distributed team structure.
Future technology being implemented should be required to allow an organization’s users to work remotely. The key requirement to achieve this is that the new technology is delivered via the web and most likely hosted in the cloud. The technology platform should allow access via a variety of devices including laptops, tablets and mobile phones.
GHAURI: Any system implemented today should have a digital platform to enable a mobile workforce to work on any device anywhere. This is integral to having a successful mobile business team. In addition, if dealing with a geographically dispersed project team implementing a new solution, it is imperative to not lose the human factor and touch points in achieving the shared company vision. Daily scrums (huddles), instant messaging and screen sharing remain tried and true methods of staying on the same page.
NATARAJAN: A well-designed software system should be agnostic to the device on which it is consumed. It should intelligently recognize the device being used and automatically rationalize the data displayed, enhancing user experience while providing key functionality. When selecting software, companies should ensure that their software is device independent (with a strong bring your own device design philosophy) and works seamlessly across all platforms.
VAN SLYKE: When looking at technology to support remote employees, it’s important to conduct thorough testing for internet bandwidth and storage capacity to ensure the technology is fast and secure enough to handle remote day-to-day operations. If your business operates in the cloud, it’s easier for employees to work via the web. But if your technology is in-house, applications like Microsoft 365 can make it easy for employees to access email, collaborate with colleagues, and access documents online.
MONITOR: In your opinion, what will be the next big technological trend in equipment finance? How can companies that are early adopters of technology stay ahead of the curve in this time of rapid technological advancement?
CAMPBELL: Big data and analytics are inevitable and should be in play today. In many cases they are not. Talk is not an analytics program. With managed solutions and the advent of assets-enabled in the Internet of Things, the opportunity to use this data for fundamental changes in customer-vendor relations is at hand.
To stay ahead, network, look outside our industry, elicit input from everyone in your business — younger/newer employees, partners, customers — to help find the new opportunities and ideas that rapid technological advancement can enable.
CLARK: The move to the cloud is the key technology change being made by equipment finance organizations at present. This trend is set to continue as customers continue to demand more flexible access to data and transactions across a variety of devices. These distributed, cloud-based solutions offer a more flexible, resilient and scalable architecture, which better meets the demands of customers and users. IT infrastructure is not a competitive differentiator, so the use of cloud solutions allows focusing on business and technology solutions to deliver business value.
The next technical trend in equipment finance will be the convergence of applications in order to provide a real time data landscape to deliver online, accurate and immediately available data. This will be driven by customer’s demands for immediately available access on a device of the customers’ choosing and by organizations driving to make faster decisions and respond to trends more quickly. This real time integrated environment will mean that the traditional nightly batch will no longer be required to synchronize systems.
Equipment finance companies that have already made the move to a real time integrated data landscape can gain a competitive advantage by driving the benefits delivered by Big Data and predictive analytics.
GHAURI: The clear trend now is self-service through a fully mobile experience. Equipment buyers expect to do all their quoting and paperwork on their phone, as well as all the in-life servicing. This requires a couple things; firstly, a strong digital platform is required to be able to create an intimate experience during all stages of the relationship. Secondly, all the systems must be integrated to create a flexible and flawless workflow.
NATARAJAN: When you look at what is happening in technology in general, the trend is very clear. The future is not going to be written by the success of products, but by the success of the platforms on which they exist. It’s what Amazon has done to merchandising, Apple to music and entertainment, Google to all things technology and Salesforce to business applications. Their genius is not their product but their platform. They tied together the fates and destinies of all their stakeholders. Our industry is ready for a platform. This is going to be the next big trend.
VAN SLYKE: I believe the next big technological trend in the equipment finance space will be the continued expansion of streamlined and efficient data movement. For example, the continued proliferation of the cloud and interconnectedness of systems will take the labor-intensive process of purchasing and servicing equipment finance transactions and create an environment where there is easy movement of transactions and information between systems. This will promote efficiency in the flow and accessibility to capital, while providing transparency to all stakeholders.
Managing Director, Head of Leasing National Sales,
The Bancorp Commercial Fleet Leasing
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