Rube Goldberg (1883 – 1970) was a genius cartoonist whose enduring legacy is the concept of the hilarious Rube Goldberg Machine that performs the simplest of tasks ‘automatically’, by completing dozens of seemingly unnecessary tasks along the way.
MythBusters concocted one of the most complex Rube Goldberg machines, the sole purpose of which was to knock a dummy doll out of a toy sled, by way of almost 100 different actions involving Diet Coke and Mentos, toy monkeys, trains, bowling balls, and windmills.
You would think a mature financial services firm would have no place for such a machine or process. But many financial institutions have unwittingly cobbled together dozens of disparate systems to accomplish different tasks, through lack of a clear technology roadmap and lack of understanding of the enterprise software market.
Why Companies Build Disparate Systems
There is an enterprise software for almost everything. Data management, BPM, CRM, digital signature, client onboarding, HR, compliance, accounting, underwriting, on and on. When procurement teams see the sticker price of some of these software platforms, they balk, and begin immediately stitching together alternatives in their mind. “If we just tweak our internal CRM, purchase a license to that data API, hire a developer to build a simple BPM system, and integrate with this service, we’ll save $100,000.”
That is a recipe for disaster.
But sticker shock isn’t the only reason FIs opt for a cobweb of systems.
Often times, firms don’t consider solutions until they encounter a problem. As more problems arise, they purchase a band-aid solution for that particular problem, perhaps at an annual license or an expensive one-time installation, making them far less likely to switch to an integrated solution further down the line. For example, in response to a rising amount of paperwork and client expectations, FIs may opt for a digital signature product. A year later, they find that signing paperwork is easy, but the mounting administration of rekeying information from a PDF into a CRM is not much better than before. They now feel stuck with only a partial solution.
Problems with using Different Systems
If you can get a handle on the problems associated with assembling different systems before you go down that road, you will save yourself thousands of dollars, hundreds of man hours, and much frustration. So we’ve assembled a list of some of the biggest problems we see with firms who begin purchasing technology without a clear technology roadmap beforehand.
1. Incomplete Integration and Data Re-Entry
Unless there is an established partnership between vendors, with a robust API, you are going to spend a significant amount of time re-keying information between systems. And even if there is an API, something could (and often does) break when there is an update on either end. And that’s not even the worst-case scenario. The worst, and sadly, most common, is when there is no integration available. For example, when some wealth management firms want to build a paperless client onboarding process, they move everything to digital PDFs, the data from which can’t be automatically ported to any system. So the paperwork administration turns instead into a full-time back-office data entry job.
2. Time and Cost
Ironically, the very reason FIs say ‘no’ to enterprise systems comes back around through the extensive time and cost associated with managing disparate systems.
Not only does it take extra administrative support to manage re-keying of data and picking up the pieces of non-integration, it also takes time and money to troubleshoot problems caused by multiple systems. An example from the sales and marketing world is Salesforce and Marketo, two world-class sales and marketing systems respectively, who have an extensive partnership, deep APIs, and pages of documentation on how they work together (a rare gem in the software world). Our Marketing Operations Manager still has to reach out to Salesforce support for various issues, only to be routed back to Marketo, and ultimately forced to do some creative problem-solving when neither side can figure it out.
3. Auditability
But there is something far greater than time and cost on the line for financial institutions, namely, auditability. The spectre of compliance is looming larger and larger for financial institutions, and they can not afford to have records that aren’t auditable. Many payments companies and wealth management firms have “as-at” client records, that give you historical information such as “As at June 8, 2011, John Smith is a client.” But in the event that John Smith is being investigated for money laundering, his wealth firm is going to be looked at for “temporal” records. They will want to know when he became a client, why he became a client, who approved him, why they approved him, exactly when they approved him, with time-stamps and robust documentation to prove it. If your firm can prove innocence every step of the way, only then will you be fully cleared.
Disparate client onboarding systems cannot achieve that level of auditability. Only a centralized client onboarding platform can.
4. Compliance and Regulation
Since 2008, the regulator’s eye has been much more keenly felt across all financial services companies. New regulations and compliance processes are being mandated every year. New regulations means your systems have to produce different kinds of information to different people at different times. Trying to harmonize your multiple systems to keep up with new processes is like teaching an old dog new tricks. It might be possible, but the effort probably isn’t worth it.
Solutions
How can FIs prevent themselves from building a technology Frankenstein? At least 3 ways.
1. Create a Technology Roadmap
Mapping out your business goals to technology adoption may seem like an unnecessary task, but it’s vital to getting the most out of your tech stack. A few key metrics for roadmapping we see in the financial services industry include number of client applications per month, number of advisors a wealth firm has, or how many underwriters and compliance staff you plan to hire in the next fiscal year. A roadmap is meant to understand exactly when a certain technology would provide positive ROI, and when you need to adopt it. Many clients come to us far after Agreement Express could have provided a positive ROI, so they’re missing thousands of dollars in cost savings that could have been realised with a technology roadmap.
2. Audit Your Business Processes
Today, how many different systems is your organization using? Conduct a comprehensive technology audit with the help of IT to understand the current use of each system, the potential use of each system, and how much it is all costing you, combined.
We’ve had clients come to us after trying to piece together an onboarding solution with web apps, CRMs, digital signature, compliance tools, underwriting tools, and finding it just as frustrating as their paper-based process.
Once you see the big picture, the enterprise route will start to look much more inviting.
3. Invest in Enterprise Software Early
The earlier you invest in enterprise software, the sooner you can free up resources for moving towards your business goals, instead of managing disparate systems, data entry, support calls, and duplicate work.
Of course, not all enterprise solutions are created equally. Just because it does all things, does not mean it does all things well. Do your homework, ask for references, and check that the vendor you choose is an expert in one area of business. Some larger vendors carry with them brand clout, but have a solution for literally every area of business, and won’t be able to answer nitty gritty business questions related to their software.
Conclusion
The cost of acquiring software ad-hoc as you go is much greater than you think. Without a clear technology roadmap, you will end up a legacy system graveyard of Rube Goldberg machines that don’t play nice together, and most importantly, are almost impossible for auditing when the time comes.
For the sake of your business in 5 years, create a technology roadmap today, and get clear on how your technology choices today will have a ripple effect on your organization for years to come.
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