For Chicago-based LOGS Financial Services Inc., (LFSI), managing basic business processes better held the key to continued growth and profitability. LFSI provides IT and business management services to a nationwide network of attorneys who charge a flat rate for simple legal tasks related to mortgage default processing, such as title searches. The challenge for its constituent firms has been to keep services priced competitively yet profitably, while making sure tasks are completed on time, and clients are accurately billed for their services. LFSI was engaged to provide a replacement software solution to meet these criteria.
"To streamline the business operations and gain profitability, Jerry Alt, COO for LFSI, looked at implementing business process management (BPM), a technology-enabled solution that streamlines the default management process by routing tasks, documents and data to the right person or system. In some cases, tasks such as title search requests or 30-day demand letters, can be completed nearly automatically, with little human intervention.
But he found the large vendors of BPM such as EDS far too expensive and rigid. The only possible solution was to turn to a lower-cost provider that could shave upwards to $3 million off the estimated $5 million cost. "We would not have done it at that price. We would have looked for Band-Aids, not limb replacement; we made a better choice because we leap-frogged our current capabilities," reports Mr. Alt.
In searching for an affordable solution, he found Don Pettingill, head of systems integrator Prizm Technologies of Charlotte, NC, and an evangelist for BPM. While Don's seven-person IT development team couldn't create the solution, Don and Jerry agreed to put their heads and wallets together, forming a new company, AP3 Solutions, to scope out the needs requirements, find the appropriate independent custom software house to create the application, and manage the development and implementation.
"We felt some urgency. Our industry has a limited number of players, the other two main ones at the time were international and publicly held. We knew that if we started doing something slowly, carefully and methodically, we ran the risk of them applying dollars to it, and beating us to the market," Alt says. He adds what while his competitors have not yet caught up, "they're trying."
AP3 stands for Any Person, Any Process, Any Place, and it's Alt's mantra, posted prominently on the white board in his office. "That includes downstream vendors. We didn't want to have to log in and out of applications, we wanted one common portal, we wanted to be able to create virtual work groups, and we wanted flexibility to change the system when new laws change their (our customers') business operations," recalls Mr. Alt.
In June of 2002, AP3 hired E-Style Software, a custom software developer with headquarters in New York City that provides full project lifecycle management and customer interface, and a team of system engineers in Moscow, Russia.
Igor Kruglyak, vice president of product development for AP3, explains, "To make the entire project successful, we needed more than just a formal project management methodology and the ten golden rules of outsourcing'. We had tried traditional offshore outsourcing first. We had been frustrated by the slow progress very little was accomplished in the first six months, although we did everything right. We were very concerned about the feasibility of the entire project at that time. But then we realized the problem was in the "code-to-spec" relationship. We decided we needed a peer technology partner who would be inspired by our vision and understand why we are doing this. Fortunately, we were referred to E-Style, and we could see the difference immediately in the peer technology partner approach. In just two months we got a working prototype of the system that met all our architecture and performance expectations. To my mind, the mission critical success factor is a proof-of-concept stage with a new vendor."
E-Style provided the technical leadership to create a seamless user interface between the new case management system, the Microsoft SQL Server database and the workflow engine. By December, only six months after E-Style was brought on board, the new XML-compliant case management system was fully deployed at its first customer install, LFSI. By the end of the first quarter of 2003, the new product, named MasterView Default Manager, was up and running in 32 states, and more than 18,000 different documents had been automated and web-enabled.
Written in J2EE, MasterView is designed for any office environment, with colorful graphical user interfaces, and all tasks appear on one screen, customized according to each user's authorized tasks. "The hosted model means that as new features are developed they are immediately available to LFSI employees. As new features are added, automated regression testing ensures that all previous features still work. If a new feature needs tweaking, because of time differences, it can be done overnight," explains Mr. Alt. "It provides us with the benefit of having critical issues fixed on demand in a very short period of time, helping us continuously increase the productivity of our workforce."
Control in the Hands of Users, Not Programmers
Most important to LFSI, the new application allows authorized users to change the process definitions, without altering the computer code. "With this, business processes can be altered quickly, and inexpensively. The ability to create an application with this feature was particularly important because foreclosure and bankruptcy are heavily regulated and subject to frequent changes, which is disruptive," recalls E-Style Software President Alexey Potapenko.
As head of production at the time, Mr. Potapenko worked on the emerging methodology. "In most cases, businesses must change their operations after some time. Our system is designed so that when those changes happen, the business users can make the corresponding changes to the software by using just a graphical editing tool. It is a business expert, not the programmer, who makes changes on the application in the real time."
By designed the application for business-user modification, maintenance and support costs are reduced because the need for continuous system enhancements and changes has been eliminated. Mr. Potapenko adds, "This is a very smart way of developing large corporate systems for continuously changing real-time environments. It mitigates such common risks as scope creep, uncertain requirements, changes in business environments, and so on, which under well-spread code-to-spec' methodology is sometimes disastrous, and is a leading reason for so many failures in IT."
The new application had to do more than just monitor activities. It had to handle a complex billing system that automatically registers billing events based on the information from MasterView Default Manager. It also had to integrate both MasterView Default Manager and Billing Manager modules with popular mortgage industry platforms such as the referral systems like LenStar from London Bridge, Vendorscape from First American Corporation and others. The Data Exchange integration module lets LFSI-managed law offices get legal cases from practically every industry platform.
Greater Visibility, Accountability
Previously, the general office operations were outside the system. Employees would perform tasks, and then report task status to a DOS-based system. "Now, MasterView drives the work. When employees log in, they get a list of cases and the specific tasks that must be completed for them that day. If the tasks are not completed, then the supervisor is notified by the system, because very important that certain components, or tasks, get completed and delivered at a certain time," explains Mr. Alt. "It guarantees that we never miss a deadline, never fail to bill for a service, never get stuck in between a complex process because somebody drops the ball. The system ensures smooth operation 24x7. As a bottom line, it should further reduce our law costs, because they will be able to deliver more with less overhead."
"Like anything, there's a learning curve and an acceptance curve for the users. Our law firm users were used to the old DOS system; there were initial concerns about the complexity related to security and performance of the application hosted at AP3's data center. Now, few if any would ever go back to the old system" says Mr. Alt.
The centralized hosting using the Application Service Provider model (ASP) passes numerous benefits over to the AP3, too. "A centralized workflow-based system allows our clients, such as LSFI, to define their own business process for each office or location. In turn, it enables us to focus on managing system requirements such as new features, enhancements, performance, security, integration. And we have these requirements implemented in a prioritized fashion by our development partner, E-Style Software, using their offshore development center capabilities. Sometimes they can do the job overnight, by utilizing the time difference, but usually we deploy bi-weekly builds seamlessly to all our dozens of thousands of users. By having E-Style Software as our technology provider, we are able to hire business process and industry experts and not focus on technology issues at all. We tell them what to do and they know how to do it in the most effective way. We now effectively manage application development without any backlog," says Mr. Kruglyak.
Key success factors
The complexity and scope of the project required a multi-disciplined team of professionals. In addition to Mr. Alt, who was the visionary and executive sponsor, the team included Mr. Kruglyak, and Mr. Potapenko, a subject-matter expert, Sally Hendrix, LSFI director of national operations, Don Pettingill, president of Prizm Technologies, and many business visionaries, industry experts, technology geeks, and results-driven project managers from E-Style Software, AP3 and Prizm. Mr. Kruglyak was the liaison between the project stakeholders who were spread across the U.S. and the development team in Moscow.
Adds Mr. Alt, "We learned that it is all about the changes in such projects. When dozens of business units are involved from various locations, there is no way you can nicely and precisely define everything without leaving something out of the picture. And when you suddenly realize that an important requirement is missing, it is critical to be able to fix it immediately without consequences. Otherwise, the project will be doomed for failure. The benefit to working with E-Style in the technology partnership approach is that it allows you make those changes, and make sure you aren't breaking something in the process," Alt says. "With some other companies, we felt it would take too long and be too difficult to make the changes."
Alexey Potapenko, who was production leader at those times, recalls: "It never happens that the scope is fixed and the plan is never revised. Scope freeze sounds good on paper, but changes happen all the time, so you simply must plan for changes and have a well-defined change management methodology, both on the system and business levels. In my opinion, most project failures occur simply because the team is not prepared to introduce the changes, and the project falls apart."
E-Style uses its own Change Management Methodology, based on the industry standard Capability Maturity Model for Software set by the Carnegie Mellon Software Engineering Institute governing the principles and practices of software development.
"Changes on the business level are handled by the business rules (workflow) without coding in real time. The changes on the system level that require intervention into the code are managed in a highly elaborate fashion that constitutes our know-how now. Whenever a change to the code is introduced, it is traced back to original requirements document, user documentation, use case and data models, etc. As a result, version integrity is preserved not only code is versioned, but test cases, requirements, models, libraries, and so on. We have total control over any changes. We can even see visually how a change is going to affect other parts of the system. This guarantees the delivery of the project," Potapenko adds.
New Company, New Way of Doing Business
The initial decision to find a lower-cost solution led to the development of two new venues for capital creation. First, AP3 now provides dynamic workflow solutions to other companies in the financial services industry. Second, LFSI is now able to turn competing vendors into suppliers, subcontracting the work to other law firms. It's all part of the larger picture, says Mr. Pettingill. He sees adoption of business process management as critical for the mortgage industry to realize electronic mortgage transactions. Moreover, Mr. Pettingill believes that MasterView Default Manager is going to change the game rules and change the landscape of the mortgage industry.
"Creating some transparency among the law firms involved in default management allows managing them like other service providers," he says. "Companies like Ocwen have a high dependency on the law firms, but they have no capability to manage those relationships. What they have with us is complete case file visibility."
"Previously, we'd throw the case file over the fence into some other state a thousand miles away where it disappears from the lender's control. The default process is highly dependent on the law firm, but no one has ever had control or true visibility into a law firm's operations. With MasterView Default Manager, all parts of the process have that visibility."
Mr. Potapenko adds, "We strongly believe that the workflow approach to enterprise application development is the silver bullet against the financial industry's pains associated with transition to flat-fee environment, growing competition, and consolidation. In fact, we see the same trend in other service industries, such as healthcare, and in manufacturing."
When LFSI first started looking for a solution, the goal was to facilitate company growth by increasing employee productivity and improving its on-time, complete delivery record with customers in order to gain new customers and increase the level of repeat business. "But as we got into this project, we realized that the real win would be to have this technology adopted by the industry as the standard, that this not be just one more black box application that we used and no one else could connect to," explains Mr. Alt. "We've achieved the first stage by developing the right application and successfully establishing the platform for achieving our own internal growth goals."
First American Title Company acquired LFSI in June 2004.
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