Well, well – It was only 11 months ago, that I published the article, “What does the Ontario Systems acquisition of Columbia Ultimate mean for the industry and Columbia Ultimate’s users? That was a very tough one, because of the fine line you have to dance on, when you are a consultant who sells a collection platform. On behalf of Quantrax, I appreciate the positive responses to that article and others that followed. Our goal was never to sell, and I appreciate the encouraging feedback I received from many of you. Thank you – We will continue to share!

In that article, I had said :

  • Fred Houston of CUBS has stated “Beyond the people, I’m confident our customers will benefit from several of the Ontario Systems product and services offerings, helping move their businesses forward.”

 

  • No one can predict the outcome of this interesting “merger”. Historically, when companies are acquired, resources are consolidated, expenses are cut and products are consolidated and some are eliminated.

 

  • It is unlikely that Ontario will invest heavily in enhancing the existing CUBS products and maintaining two major products.

Yogi Berra famously said ““It’s tough to make predictions, especially about the future.” Considering the fact that Ontario Systems has announced end of life for Ajility, and what seems to be the recent departure of the key Columbia Ultimate people, we may have proved Yogi Berra wrong. This article is a response to a growing number of inquiries from Ontario Systems clients, about converting to a new system. The confidence in our experience is greatly appreciated and I will be as objective as possible.

As we travel to collection conferences around the country, we have seen some important changes in the industry.

  • After many years of maintaining the status quo, we are now seeing renewed activity and interest in new ideas and emerging technology

 

  • Smaller companies are struggling to keep up with compliance and automation requirements. In many cases, older technology is not providing effective solutions and custom code is becoming and expensive line item

 

  • Once software is paid for, no one wants to change systems even when there is value to modernizing. Faced with aging technology that can not deliver what is needed, and rising maintenance costs, there is definite shift in C-level thinking to look at alternate solutions

Unfortunately, the costs and implications of changing collection software have not changed. A change can be disruptive, risky and challenging. The transition (education and short-term loss of productivity) could cost more than the price of the software. Some of you have heard stories of conversions that took as long as 2 years! How much of all that is true? Unfortunately, most of it is true. The logical question is “What can and should one do”?

Sometimes, the simple and obvious conclusions are the best. Let’s look at some of them.

  • Enterprise software such as collections technology has to be supported. It needs to be updated to keep up with technology and industry changes. If this is not happening, it’s probably time to start running (away)

 

  • Waiting is expensive. You will continue to spend on interfaces and custom code for the old system. In most cases, these changes will need to be rewritten for the new system

 

  • Delaying the decision will not lower your costs and or make the learning curve easier to overcome

 

  • You will not enjoy the potential benefits or financial gains of modern technology, while you wait

 

  • Risk and challenges, the initial loss of productivity and long conversion delays, can be mitigated and managed with commitment and clever planning by your company and your vendorDo we have any objective advice for a company that is considering new software?

    This is a great time to look around. Tax season is upon us, and summer is a good time to make changes and be ready for the better collections months to follow. And what about making that difficult choice of a software vendor and navigating a dreaded conversion?

    We offer the following outside the box thinking, for this difficult proposition.

  • Most collection companies do not have technology experts. When talking to a vendor, insist on “Show me” and not “Tell me”
  • For serious collection operations and for work with top-tier clients, the industry is complex and demanding. Most products need to do more that they currently do. Insist that application specialists demonstrate products and answer your questions, as opposed to sales or marketing people
  • Do not assume anything. Make sure you see and understand how important areas of the system will work and handle you key business requirements
  • Do not be easily taken in by “We can add that for you”. Programs are easy to change, but large gaps and major design changes are complex and expensive. As an example, if a system can not count and limit phone calls and messages based on client, state or city rules, creating those features will be extremely complex and time consuming. Today’s technology must be able to handle “disaster” areas. It is easy to predict that secure e-mail and text messaging will soon be a part of offering outstanding customer service. A modern collection system should already have the ability to take advantage of smart phone and mobile technology. Find out what options each system currently offers
  • As you evaluate systems, remember that you should not make a major change to do exactly what you currently do, on a different system. There has to be a significant value proposition. Look for greater efficiency, customer service and better results for your clients. A new system should increase collections and cut costs, based on better analytics, increased efficiency, modern features and higher levels of automation
  • Set a reasonable time frame for “converting”. The conversion process (the data conversion, user training and custom programming for letters, client statements, dialer integration and clearing of electronic payments) will take at least 2 -3 months. Ask for very good reasons why your implementation will take much longer than 3 months
  • There are a few key milestones on the way to implementing a new collection platform – Management training, data conversion, custom interfaces, reporting and clearing electronic payments (handling checks and credit cards). Understand how and when these areas will be completed. Management training will usually confirm that your system is going to work as advertised. It should take not more than 2 weeks for you to get a good idea of how the new system will work. Try to convince your vendor to answer your questions and make you comfortable, prior to substantially releasing a downpayment
  • Consider including penalties for major delays that you are not responsible for
  • Before making any downpayment, make sure you are confident that your vendor understands the interfaces and custom programming required, and has included these items in a proposal
  • Your existing vendor will often want a ransom for giving your data to your new vendor, along with the “file layouts” for that information. This is unethical and wrong! It may be their software, but it is your data. It is our opinion that while there should be a some billable charges for producing test files, transferring larger data files and answering questions, there should be no charges for “giving you your data”
  • Successful data conversions require a programming effort and an understanding of the collection industry. Why is it so important for a vendor to have collections knowledge? Because in addition to data, you will also be migrating or setting up new processes such as work-flows. Few software companies have people who have ever worked in collections at an operational level. Look for the “warning signs”, and some significant challenges in moving your data and processes to a new system. If you are dealing with the right company, given test files and file layouts, you should be able to see partially converted data in about 2 weeks
  • There are some significant challenges in changing systems. Some examples are – handling partially completed letter series, credit reporting on the new system, handling interest calculations, converting client accounts receivable and bringing over accurate account statuses. Encrypted data has to be considered (for example, socials and financial data). Make sure these areas are understood well in advance of the date you go “live”
  • Carefully plan for the final “cut-over”. Make sure you have run at least one test conversion with your complete data set. Run key reports to make sure your information is accurately converting. Typically, “going live” would happen at the end of a month, after you have run month-end and remittance processing. Your data will be moved to the new system and the conversion process would be started. Depending on your data volumes, the data conversion programs could run from a couple of hours to well over a full day
  • Carefully discuss product support and enhancements. Are “standard” options included in the base system? (E.g. cell phone scrubbing, credit reporting, system access for your clients) With a reliable product, most of your maintenance charges should go towards base system enhancements, which will reduce or eliminate the need for much of your custom programming. What will custom work cost? Why will you need it (for example, client interfaces)?
  • During a conversion, you are responsible to testing everything. That is not easy, when you have to learn a new product, set up the new system and “keep the lights on” for a few months. Your new software company will be responsible for “programmer-level testing”. They do not know your data, or your processes as well as you do. It is in your best interests to have a very good test plan for your data conversion, interfaces and business processes. A good vendor should be able to provide resources to help you with this important area. It is well worth any reasonable cost.Checking references and justifying your costs

    A question that is often asked is, “How should you check references”? Like many industries, software companies will probably not give you the names of any unhappy customers. In addition, the way someone does business will probably not be the way you will use the new system. This is a complex area, and I think it is worth sharing our own process.

  • We stress the great importance of where a vendor is going, compared to where they have been.
  • We do not believe in “references”. We will usually give you a list of our users in your segment of the industry.
  • While we encourage you to talk to as many people as you would like, we do not recommend site visits.
  • Depending on the timing, we have invited prospects to our annual user conferences. Many vendors would consider this a risk, but we believe that it is very important that a new client understands what they are buying.
  • RFP’s are expensive to create and evaluate. Live presentations give you much more information, and there is less room for misunderstandings
  • After years of being in business, most vendors will say “Yes” to every question on a “Comparison chart” or RFP. How does one make sense of vendor claims? Simple. It’s not about what what a system does. It’s all about how they do it. And that is usually the difference between a $5,000 system and a $100,000 system.
  • Interestingly, a company with 50 people can probably afford to replace their collection technology every 2 years, at a capital cost of even $150,000. Compare that with the annual cost of running a 50-person operation, which could be more than 2 million a year. People and process costs are recurring costs that never go away. Always consider the long-term total cost of ownership and return on investment. Does your system require technical people? How much will you spend on custom programming? Spending $50k more on that second (and perhaps the better) system will always seem like a lot of money. But what if the other system was 15% more efficient? That could be more than $400k in savings and increased fees a year!

    Thirty years after computerization, the collection industry in now in its second generation of products and vendors. It is evident from the transition of Columbia Ultimate, that this industry needs modern thinking and new people in the collection technology space. Software does not age and mature like red wine. Those who failed to realize that and did not invest in modernizing their systems, will fail. Just look at Nokia, Blackberry and what Uber did to the taxi business. Think wisely!

    Ranjan Dharmaraja

    Ranjan Dharmaraja is founder and chief technologist at Quantrax Corporation, a company that created an intelligent collection platform over 20 years ago but “have struggled to get the message to the broad ARM industry”. Self-funded, they have continued to successfully develop and deploy technology that leverages the great potential of Artificial Intelligence. www.quantrax.com – (301) 657-2084