Organizational Infrastructure Review for Lending Leader Supports Flexibility and Reduces Operational Costs
Project at a Glance
RDA prepared an in-depth review of our client’s business systems, processes and organization to create a vision that supports increased system flexibility, greater IT collaboration and accountability, and reduction of overall operational costs.
About Our Client
Our client is one of the dominant players in the student lending industry.
Background
When our client’s $20 million, two-year investment in a new student loan origination system failed to produce the process efficiency and market flexibility they needed, they contacted RDA for a complete review and assessment of its people, processes, and technology.
Our client was experiencing higher costs and less impact than expected from the purchase and implementation of their new student loan system. Additionally, they were concerned about future scalability of the system as their business grew. In particular, their ability to rapidly meet the needs of a changing marketplace, the most important critical success factor for the implementation of a new loan origination system, had yet to be realized. The areas of focus for this engagement were:
- to review existing systems, processes and organization,
- to identify opportunities for reducing total cost of ownership, and
- to increase their technological ability to react to the market and grow their business.
Solution Detail
RDA examined our client’s entire IT and organizational infrastructure, including key position skill sets, processes for IT maintenance, and systems. Overall, RDA found a bias towards stability in all aspects of technology, process, and organizational structure dating back to a time when student lending was far more constrained by government regulation. In looking at our client’s loan origination and servicing infrastructure, it was clear that there were significant cost and flexibility implications for the combination of: a) legacy systems; b) the design of the new origination system which made business rule changes prohibitively expensive; and c) the methods used to synchronize data and business rules across systems. Standardized corporate development processes were grounded in waterfall methodologies most appropriate to mainframe systems and testing processes that could not keep up with release schedules. Finally, a functionalized organizational structure meant that nobody was accountable for the outcome of any given development project.
Technology: The existing origination system was a complex client server application that made business rule modifications time-consuming and inefficient. It took anywhere from 12 to 18 months to enact new rules. There were also some fundamental flaws in its design relative to our client’s business needs.
RDA recommended a multi-year plan to phase out of their current technology and into something that better suits our client’s business objectives. The plan impacted the loan origination system, loan servicing system, ancillary systems, interfaces between systems, and data synchronization rules. The replacement system would include a .NET front end, business rules engine and centralized database. Allowing our client’s employees to enact modifications without changing system code would help to reduce lead times. The new system would also be more flexible and scalable to change.
People: From a people perspective, RDA discovered that our client’s organizational structure was functionally aligned into distinct segments, including groups of developers, testers, analysts, project managers (PMs), and infrastructure specialists. This labor segmentation produced conflict between teams and made it nearly impossible to hold anyone accountable for project outcomes. It was also inefficient, requiring committees, formal signoffs, controls and audits.
We recommended that our client restructure into process-driven teams that focused on specific groups of business systems (such as origination, servicing, and Web). Each manager would be provided with the necessary staff and resources to accomplish the objectives of his or her projects.
Because PMs were not technically skilled, project requirements were often weak, resulting in projects running behind schedule, and buggy, overbudget system deployments. RDA noted that PMs needed to be technically adept to increase their effectiveness. This type of PM can understand how business needs and systems interact, plan for and manage all aspects of development, and hold their respective staffs accountable.
In order to progress from a labor-intensive, manual testing process to an automated process that would improve outcomes, we recommended that our client incorporate technically skilled testers capable of defining test strategies, writing test scripts, and executing system tests.
RDA also recommended that our client hire a Chief Information Officer or Chief Technology Officer to oversee their IT and developer initiatives.
Process: With regard to process, RDA suggested that our client move from a waterfall to an iterative approach. Introducing levels of abstraction would:
- provide a better understanding of business need and traceability to technology solution,
- eliminate current “institutionalized” high levels of change management,
- help to establish clear goals for each process step, and
- enable our client to utilize working prototypes.
This type of risk-based planning would also assure greater predictability in cost, timing and functionality.
Benefits
With the detailed overview of our client’s systems, processes and organization, RDA was able to present recommendations to our client that would help them to realize increased flexibility and reduced operational costs for their business. Additionally, the system specific recommendations are currently being implemented as funds become available to invest.