Business Requirements Analysis for Long Beach Mortgage
The intent of this paper is to provide both the Business Requirements Analysis and use cases regarding the Broker Front Office Tool (BFOT) for Long Beach Mortgage. The BFOT system which will provide FlashQuotes that include loan modeling and pricing data in real-time from the Loan Origination System (LOS). A second requirement of this project is the real-time integration between FlashQuotes and the LOS so loan quotes can be uploaded electronically and tracked as they are funded. Inherent in these two requirements is the need for tailoring quotes to the specific requirements of customers and their unique financing and loan needs on one hand, and the need to deliver a quoting system easy enough to learn, use, and quickly traverse to capture loan prospect’s needs on the other. As integration of FlashQuote with pricing and model data is a major requirement for delivering accurate quotes, there is also the cross-system integration requirement of having FlashQuote be directly integrated into the Loan Origination System (LOS) so that potential financing prospects can be quickly turned into customers. Columbus (2002) in research of quoting systems’ integration with back-office systems has found that the greater the level of integration, the higher the Return on Investment (ROI) within an IT initiative with three or more systems delivering sustainable returns vs. The alternative of using manually based approaches. Askegar and Columbus (2002) define the integration of front office applications that encompass the functionality delivered in BFOT with back-office systems as one of the highest ROI activities a company can undertake.
FlashQuote Business Requirements Analysis
Creating an automated quoting system is one of the most effective online selling strategies any company can pursue, and this is especially true in financial services, Long Beach Mortgage’s core business. The business development team has found in their initial research that existing approaches to completing quotes, generating pricing, and then tracking specific opportunities are for the most part manual. Like many financial services and manufacturing teams, they are also finding that every sales representative has a slightly different approach to creating quotes, pricing, and tracking them. The result is that often tracking the overall sales pipeline, or value of potential prospects in total across the entire company, is difficult to achieve.
Within the broader area of Customer Relationship Management (CRM) which quoting is part of, this is called the business requirement of a 360-degree view of the customer.
CRM is defined by Jill Dyche’ (2002) as the infrastructure that enables the delineation of and increase in customer value, and the correct means by which to motivate valuable customers to remain loyal and purchase again. The quoting system delivers the most critical link in any selling strategy within the broader context of CRM in that it sets expectations not only of pricing and loan model, but also of Long Beach Mortgage’s performance. Quotes set and manage expectations by default, and that’s why the critical first business requirement of 360-degree view of the prospect and customer is the foremost business requirement in the development of this system.
A second major business development driving the development of the FlashQuote system is the shift occurring in how business strategies define the direction of investments in information technology. In the context of the FlashQuote system, the unmet needs of capturing specifics of what prospects want accurately, responding back to clients in real-time through integration to the LOS, and tracking quote status all are business strategies that need to be supported through the development of the FlashQuote system. Business managers, not IT, are driving the development of the FlashQuote application within the context of the BFOT. The rise of Software-as-a-Service (SaaS) is directly attributable to the dynamic of how business managers are choosing how to deliver applications and to which selling and service teams. SaaS is defined as the delivery of applications over the Internet, accessible through a web browser. For Long Beach Mortgages’ sales management, the delivery of the BFOT and FlashQuote on a SaaS platform is critical so that the application can be used by any sales representative at any time, all they need is an Internet connection. The market factors driving the adoption of SaaS over the traditional licensed approach to delivering enterprise-wide CRM applications is that the IT Departments of many organizations are increasingly being called on to reduce costs more often than make selling strategies work. For the typical IT department today their direction is to reduce costs first and when possible, help with business strategies. SaaS as a delivery model however circumvents the cost-reduction agendas of many IT organizations and gives line-of-business managers including Sales, Marketing, Operations, and Service Vice Presidents, Directors and other senior managers from these ranks the power to bring applications in through web browsers. At the center of the dynamic growth of CRM through on-demand and SaaS is the shift in the balance of power in software spending in organizations. Today the line-of-business managers, especially Sales VPs, want to be able to develop and refine their selling and customer retention strategies quickly without having to rely on IT. As SaaS is by nature the delivery of applications over the Internet and accessible through any web browser, Sales VPs are finding they can pilot and even deploy enterprise-wide quoting systems with minimal involvement from IT for custom programming.
A third major business requirement that the LOM business development team focuses on when defining the BFOT and specifically the FlashQuote system is the pervasive need for analytics.
The need to track what’s going on in the loan sales pipeline is only the beginning, with metrics of performance needed for tracking the performance of quoting as a strategy as well. In other words, the business development managers are already asking themselves what the pay-off is of having an automated quoting system, and as BFOT and FlashQuote ad delivered, the focus on measuring their contributions will increase. Specifically in the financial services industry, quoting systems are used for measuring the impact on company-specific, sales, quote and loan, customer service, and bad debt expense reduction measures of performance as are shown in Figure 1, Measuring FlashQuote Performance.
Figure 1: Measuring FlashQuote Performance
Areas of Measurement
Baseline: What to Measure
Example of Benefits
Company-specific
Loan costs and expenses
Use as a baseline for defining ROI
Number of loans per year
Determine quoing’s impact on loans
Current loan costs
Loan Savings
Customer Data
Lifetime cost per customer; avg. deal size by customer
Sales
Loan cycle time
Loan cycle times reduction of 65% or more recorded
Cost of Sales
Days Sales Outstanding reduction from 60 to 29 days on average
Cross-sell and up-sell revenue
Increase of 33% on aggregate
Average sales price per loan
Increase from 9% to 26%
Quote and Loan
Average costs to complete a loan
95% reduction in cost per order
Special Pricing Requests
Over 100% ROI on automating Special Pricing Requests
Bad or incomplete loans
Incomplete order reductions of 20%
Customer Service
Number of customer complaints
98% reduction in cost of simple requests
Revenue lost to churn
60% when cross-selling is used with quote-to-order
Number of calls on order status
Median level of 500 per week to 70
Bad Debt Expense Reduction
Reduction in bad debt expense
10% reduction at a minimum
Labor cost reductions
Decrease order re-work from 15% to 2%
In summary, the three most critical business requirements driving the development of the BFOT overall and specifically the FlashQuote system are better and more complete visibility of prospects and customers. The second is a strong focus on quoting as a business strategy first and its deployment being aligned with how sales representatives work. The third major business driver is on measuring the performance not only of quoting activity but of the quoting system itself.
Multi-System Integration Business Requirements Analysis
The second requirement of the BFOT is its real-time integration with the LOS for both pricing, loan rates, and uploading completed loan applications for fulfillment or continued tracking. As the financial services sector is highly competitive, the need for responding quickly to prospects that request loan quotes can very often mean the difference between winning a new client or not. The business requirements of accuracy, completeness, and speed that are driving LOM to create real time-integration links are well supported through research completed through information technology research. According to AMR Research (2003) companies are achieving Return on Investment (ROI) with configuration when these strategies are made core to all customer fulfillment initiatives starting with order capture and order management. Further, according to AMR Research (2003) best practices are elusive in configuration, with only 6% of companies being able to accurately quote Available to Promise (ATP) or loan closing date. This translates into a significant competitive advantage for LOM in that few if any competitors in this arena are capable of accomplishing. AMR Research (2003) lists the fact that fixing quoting process first delivers the highest ROI, since it offers the greatest immediate impact on complex products sales and service revenue today.
In addition to all the business requirements listed above, real-time integration with pricing is key for the continued success and competitive growth of LOM. Where pricing integration typically fails however are in the handling of exceptions. Columbus (2003) makes the point that the use of automated approaches to managing special pricing requests can be one of the highest ROI activities of any company. The focus for LOM then is in turning the one-off loan request specifically including a differing rate or structure into a competitive advantage by quickly being able to fulfill it. The use of automated special pricing requests applications and techniques as defined by Columbus (2003) are strong competitive tools that could be used as part of FlashQuote and BFOT overall.
FlashQuote Use Case Analysis
Identifier: FlashQuote Use Case Analysis
Name: BFOT System component that includes quoting, pricing, loan interest rates and the ability to electronically upload the loan, once approved, to the LOS.
Purpose: To more accurately and completely capture the quotes given to prospects over the telephone, the Web, and in person, the FlashQuote system is critical for creating a sustained and consistent response across all of LOM.
Overview: The FlashQuote system includes options for customizing a loan depending on its use by a client, including refinancing, valuing of properties, defining of term and rate levels, and any contingencies as well. Also included is the ability to quickly define a probable loan closing date based on the specifics of the loan.
Actors: The sales representatives; business development; prospects and customers are all actors using the system.
Categorization: The categorization of the FlashQuote system is actually multi-disciplinary as it impacts the following departments: Sales; Customer Service; Pricing; Loan Approval and Credit; Loan Fulfillment; and Underwriting.
Triggers: The most common triggering event will be when a prospect either calls a sales representative or visits the LOM web site and requests a quote.
Pre-conditions: The FlashQuote system will be actively tracking previous quotes and responding back to the LOS for real-time updates on pricing and loan rates.
Typical Course of Events
Input Steps
User logs in with a corporate customer ID number.
User selects the quoting system to create a quote for customized LOM products.
Quoting tool gives the user the option of configuring LOM services and loan products to their specific needs.
The user then asks for a price on the quote.
The quote comes back with the price and the user either accepts or rejects the quote.
If rejected, the user is given the option to save it.
If accepted, the user is given a confirmation number and an order tracking number.
Processing Steps
Approved quote is transferred from FlashQuote to LOS for tracking
The Quote gets transformed into a preliminary loan document and gets saved in the LOS
Quote is sent on to credit verification
Quote leaves credit verification and goes to underwriting
Once underwriting is complete, the BFOT tracks the finished loan through sign-off and delivery to customer
Post-Conditions: Loan is either approved or denied, and the history of the entire loan is tracked.
Alternative Courses: The quotes are completed manually and either faxed or mailed to the prospect.
Associated Use Cases: Loan Capture; Loan Pricing; Loan Tracking; Loan Fulfillment.
Associated Requirements: Integration between pricing, loan origination, loan tracking, and loan fulfillment including underwriting.
Multi-System Integration Use Case Analysis
Identifier: Integration between BFOT, FlashQuote and LOS.
Name: Real-time pricing, loan interest rate, and loan uploading from the BFOT to the LOS.
Purpose: Provide real-time data integration for pricing, loan interest rates and loan origination fees; real-time uploading of loan applications and quotes for further tracking and follow-up; real-time support for the BFOL data requirements.
Overview: The intent of this integration is to provide a competitive advantage to sales representatives as they complete quotes online or on the telephone with potential prospects. Real-time integration is a requirement as the rates and fees in the markets that LOM competes in change quickly over time, and can mean the difference between winning or losing a loan and winning a customer or not.
Actors: Sales representatives; marketing business development managers; prospects and customers; loan strategists who work on the specific loan and fee rates; pricing analysts and managers.
Categorization: Integration is often considered part of an infrastructure platform; and is critical for the quick delivery of quotes to prospects and customers. It is a critical component in long-term competitive advantage.
Triggers: Loan requests; loan discounting; new program and loan development; loan price and rate reductions; integration of new pricing and loan applications.
Pre-conditions: Loan is approved or denied, and the history of quotes is saved in the LOS. Pricing and loan terms are also tracked to see their impact on winning new business.
Typical Course of Events
1. Input Steps
User logs in with a corporate customer ID number.
User selects the quoting system to create a quote for customized LOM products.
Pricing and rate are delivered via real-time integration directly to the quote screen
Prospect either accepts or rejects the quote
If accepted the quote is then forwarded through real-time integration links to the sales department for follow-up
If rejected, the quote is still stored in the LOS specifically for analysis of pricing and loan interest rate attractiveness ratings
Processing Steps
Approved quote is transferred from FlashQuote to LOS for tracking
The Quote gets transformed into a preliminary loan document and gets saved in the LOS
Real-time integration links for credit verification is used for validating the client is a good credit risk.
Quote leaves credit verification and goes to underwriting
Once underwriting is complete, the BFOT tracks the finished loan through sign-off and delivery to customer
Post-Conditions: Loan is either approved or denied, and the history of the entire loan is tracked just as with the FlashQuote system. Real-time integration ensures the quote will be recorded and quickly transferred to sales for further activity, and that the pricing and loan interest rates are correct.
Alternative Courses: Batch-oriented integration slow the entire process down significantly, creating bottlenecks and lost sales as a result of not being able to deliver accurate quotes in real-time when the prospects need them.
Associated Use Cases: Loan Capture; Loan Pricing; Loan Tracking; Loan Fulfillment; pricing systems integration; loan interest rate analysis systems; Sales systems integration; Accounts Receivable integration for tracking existing customers’ payment histories; credit verification systems integration to ensure low credit risk.
Associated Requirements: Just as with FlashQuote, real-time integration requires pricing, loan origination, loan tracking, and loan fulfillment in addition to credit analysis and credit tracking. This real-time integration projects’ associated requirements also requires real-time links to the analytics applications in BFOL so reports can be created that show the performance of quoting as a business strategy over time.
References
AMR Research (2003) – Configuration is the Heart of Customer Fulfillment for Complex Product Manufacturers. AMR Research Report. Monday March 31, 2003. Retreived from the Internet on July 21, 2006 at http://lwcresearch.com/filesfordownloads/ConfigurationIstheHeartofCustomerFulfillmentforComplexProductManufacturers.pdf
Askegar and Columbus (2002) – Channel Management Best Practices: It’s All About Orders. AMR Research Report. Monday September 9, 2002. Retrieved from the Internet on July 21, 2006:
http://lwcresearch.com/filesfordownloads/SqueezetheRevenueOutofSPRs.pdf
Columbus (2002) – The Sell-Side E-Commerce Market: It’s All About Integration. AMR Research Report. Monday April 1, 2002. Retreived from the Internet on July 21, 2006:
http://lwcresearch.com/filesfordownloads/SellSideECommerceMarketIsAllAboutIntegration.pdf
Columbus (2003) – Squeeze the revenue out of your Special Pricing Requests. AMR Research Alert. Tuesday November 11, 2003. Retrieved from the Internet on July 21, 2006:
http://lwcresearch.com/filesfordownloads/SqueezetheRevenueOutofSPRs.pdf
Dyche’, Jill (2002) – The CRM Handbook. Addison-Wesley Pearson Education. ISBN. Upper Saddle River, New Jersey. 2002.
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