Selecting the Right Technology Platform to Support Your Asset Finance Business

by Andrew Denton July/August 2007
Customer demands, relentless competitive pressures and regulatory changes are forcing asset finance companies in North America and other markets to rethink, refine and ultimately transform their businesses. CHP Consulting’s Andrew Denton provides the keys to picking the right technological platform for your company.

Finance companies are rethinking business models to include all aspects of asset finance — offering both leasing and lending. Developing and offering new financial products and bringing them to market quickly are competitive necessities.

They are refining their businesses using tools like process engineering and workflow to maximize efficiency and improve the customer experience. Customer self-service programs and making transaction information available through a customer portal — once “nice to haves” — are now market requirements.

Finance companies also are transforming and retooling their businesses by taking a critical eye to the long-term viability of their legacy systems. The reality is, in some cases, these legacy systems are inhibiters to rethinking, refining and transforming businesses. Systems that utilize batch processes, for example, can hinder efforts to make timely information available for customer self-service initiatives. Developing new products quickly on a legacy system can require costly and time-consuming customization.

Many firms now recognize the limitations of legacy systems and are embarking on strategic systems-selection processes. This can be an unnerving experience for some but, done right; it can be a very rewarding.

Where does a firm turn to replace a legacy system? How does one assure the new platform not only meets today’s requirements, but also those in the future? How can an organization “hit the bull’s-eye” with the selection process?

The following provides a proven path that has worked for asset finance companies around the world:

System Requirements
A business needs to have a clear view of its desired strategic outcome(s) and requirements prior to starting a system-selection process. It should determine both essential “as-is” and “to-be” requirements that best encapsulate the strategic vision for the business.

While some asset finance companies have a good handle on their as-is and to-be requirements, others may find a consulting firm helpful with this process. A clear vision of where the company wants to go is essential to success.

Building a Long List of Prospects
With a clear vision of system requirements, the next step is to prepare a list of potential vendors. Sources include industry bodies such as ELFA, industry consultancies and one’s own knowledge of industry players. There are proponents of various system philosophies on the market, including package solution end-to-end, self-build “best of breed” and others, although the majority of leading asset finance companies now recognize the benefits of the package approach.

How do these stack up against the stated system requirements? A broad understanding of the options available and the value proposition of each contender should be developed. When preparing this long list, look for suppliers active in industry associations who understand the asset finance business. Also look for those with a successful track record working with organizations similar to yours.

Getting to Know the Vendors
Compared to the financial services industry, there are relatively few technology providers serving the asset finance niche. Understanding the options available and the value proposition of each vendor is crucial to hitting the bull’s-eye with a selection. The goal is to find a technology platform and a long-term business partner that fits the business. The tools typically used at this point in the selection process are the Request for Information (RFI), initial meetings and demonstrations.

An RFI is a high-level requirements document used to gather information from the long list of prospective technology providers. It is also used to help gauge their interest in your business, aptitude and understanding of the issues at hand. The contents of the RFI will both clearly describe business requirements and ask for a point-by-point response from the vendor.

One should also be looking for evidence of the vendor’s ability to deliver the project and its stability as an organization. RFIs are typically completed under the terms of a mutual non-disclosure agreement between the company and the technology provider. Some firms with a good understanding of the technology providers capable of addressing their requirements may opt to go directly to a Request for Proposal (RFP).

It is not uncommon for a respondent, upon review of the system requirements, to remove themselves from consideration. Usually the evaluation of RFI responses helps distinguish genuine contenders. When this happens, it is an opportune time to trim down the long list of vendors.

Once the short list is developed, the next step is to meet with the remaining vendors, ask for a presentation on their value proposition and a live software demonstration. Things to consider during the demo include: the vendor’s understanding of the business, alignment of the technology platform with the company’s strategic vision, and the prospect’s knowledge and understanding of the challenges inherent in business transformation projects.

It is here that a working relationship begins to emerge and companies often decide which vendor would be most compatible to work with, in terms of personalities, working styles and trust. This factor should not be underestimated. Implementing a new platform presents a host of challenges for an organization. The people in charge of making it happen need to work with others with whom they have a connection.

Refining Your Options
At this point, the asset finance company should start to pare down the short list to a handful of finalists — vendors who have proven their ability to satisfy the stated requirements and help transform the business. This is typically done through the use of a RFP.

Within the RFP should be a detailed list of requirements to solicit candid and accurate responses from the finalists. A common misstep in some RFPs is interchanging the idea of a “detailed list” with an “exhaustive list” of requirements. Too much detail can lead to an RFP that is difficult to both complete by the technology provider and interpret by the company. In addition, the RFP must ensure vendors understand they will be asked to prove their claims and clearly identify what is real, live functional software as opposed to software that only exists on the development board.

RFP development can be done either in-house or with the assistance of a third party. Using a consultancy can be a smart move if it has industry experience and is adept at translating business strategy to functional requirements. The amount of time the prospective vendor is given to complete the RFP should be commensurate with the amount of information requested. Two weeks should be considered the minimum amount. The best RFP documents provide the information needed by the respondents to make candid assessments of their capabilities relative to a firm’s requirements without ambiguity.

Once the RFP responses are received, a careful evaluation is important. An overview of the vendor’s business is standard, but there must also be adequate information about the vendor’s history. One must be especially wary of simple “yes” answers to any RFP question. There should be clear evidence presented to support a technology vendor’s claims, for not everything is what it seems on paper.

Using a well-conceived scoring system is key to objectively comparing vendors and their products. Weighing scoring to the specific needs of the business is the “art” of system selection. Asking the right questions for the right reasons is also important.

For example, at one time the number of standard reports provided by a software package was a point of differentiation commonly used in RFPs. Today, with the advent of open databases and sophisticated reporting tools, which enable customized reports, the number of standard reports provided by the system is less important.

Respondents should also readily provide references and contact information from their current list of existing clients who use the technology platform being considered. By contacting these references, a company can evaluate the vendor’s responses with its real-world performance. Do not hesitate to ask references tough questions. They hopefully will provide thoughtful, candid insights.

The experience of individual team members who will be working on the business is as important as the reputation of the firm. Do they understand the asset finance business, or are they generalists? What is the consultant turnover rate? The last thing anybody wants is a new contact every few months, especially during crucial times in implementation.

Workshops, Negotiations and an Emerging Rapport
Businesses should not select systems on the basis of RFP responses alone. There must be a strong onus on the vendor to actually prove that its technology platform can meet today’s business needs and those of the future. The technology provider must demonstrate the product’s usability and its own management expertise, industry knowledge and track record to assure the project’s success.

A powerful means to secure such proof is to ask the vendor to spend time working with you to demonstrate their technology platform, running scripted transactions and processes typical to your business. This is commonly referred to as a “deep demo” or “demo workshop.” The exercise is typically done with two to three vendors, given the time investment required from both sides. The vendor should be afforded the opportunity to go “off the script” periodically, to showcase its experience using the platform and the firm’s creative problem solving abilities.

The Decision
Having carefully evaluated the technology offerings available, one’s own strategic vision and each vendor’s ability to deliver on its promises, a clear frontrunner should emerge. It is typical at this point to assign preferred supplier status, initiate contract negotiations and move to the all-important project planning exercise.

What remains is the exciting and demanding task of actually executing the technology transformation and delivering the business benefit. If a company has invested its time wisely in selecting the right technology platform and vendor, it can feel comfortable that it will indeed “hit the bull’s-eye” and the road ahead will lead to a successful business transformation.


Andrew Denton is a director at CHP Consulting. He leads systems implementation projects for a number of CHP clients and is managing the CHP ALFA Systems launch in North America. Denton is a frequent speaker and author on leasing industry technology matters.

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