Conservatism towards IT investment isn’t a wise strategy, warns Paul Hunt, managing director of Phoebus Software
The key to remaining competitive in any industry is being more efficient than your competitors. Failure to do this means your peers will be able to offer a better service at a lower price, leaving you trailing behind. Just as airline transporting passengers in converted World War II bombers haven’t survived companies using outdated IT systems today will ultimately fall behind their competition.
Investing in technology is a vital decision for managers. Paying for an update is certainly a daunting prospect, but failure to update early enough can prove costly when your customers move to a competitor.
The recession has seen companies’ attitudes toward investment in technological infrastructure become increasingly risk-averse. CIOs have been understandably more concerned about protecting themselves from losses rather than focusing on potential future benefits of investment.
When a market is growing, firms which passively seek ‘me too’ improvements in their tech can rapidly find themselves at a disadvantage. Waiting to see whether anyone else has made a technological innovation work for them might protect you from an expensive failure, but it also guarantees that when a significant tech advance comes to the market, you will be behind the curve. There’s no reward that comes without some degree of risk.
In the mortgage industry, the focus is beginning to shift toward growth and competition between lenders is heating up. Bridging is booming. Lenders are hoping to take advantage of rising yields for buy-to-let landlords which have brought a growing number of borrowers into the market. According to Mortgages for Business, but to let mortgage products are proliferating rapidly, as the number of products has rise by 35% in the last three months. Last month, remortgage lending increased by 20% and through 2011 an increasing number of two year fixed rate products have come onto the market offering rates below 3%. The need to survive has been replaced by a drive toward growth.
Mortgage companies today have another reason to think hard about their tech infrastructures -TCF – the post crash regulatory environment has put serious stain on operating systems as regulation has placed a greater emphasis on TCF and ensuring individual borrowers are treated to the greatest possible extent as individuals.
Doing this requires complex and highly malleable systems. If a mortgage servicer wishes – in compliance with TCF – to identify in advance borrowers who are likely to fall in arrears an to create an alternative repayment plan. Older systems are likely to fall short. The risk of failing to take an open view on updating technology is not only that you may open yourself up to inefficiencies, but also that you could suffer the reputational damage that goes with non-compliance with TCF. In the mortgage industry, the memory of AVMs has left some companies reluctant to use technology to build efficiencies in case it leads to a reduced level of service. But the reality is that technology in the industry today is primarily a means of maintaining compliance and thoroughness, rather than cutting corners.
The mortgage industry has more to gain than most form innovations and advances in computing technology, because improved systems mean not only a cost saving, but provide the most effective means to ensure regulatory compliance. A cautions approach to new technology may not be prudent in the long run.