Assignment #2 1

Group #2

Group participants: Mary Student, Joe Pupil, David Michaels, Bess Lee

A. Organizational Analysis:

As Information System # 483 students we chose the financial sector to investigate for our group project in IS management and in particular we chose the company Peller Financial, Inc, a leader for more than 80 Years in the financial sector.

A 1. Organizational mission, goals and strategies:
Raymond E. Peller founded the company in 1919; Peller Financial has grown from modest roots into an international financial service organization with approximately 3,000 people and a reputation for customer service.

Presently, Peller Financial Inc. is a worldwide commercial financial service organization and a leading provider of financial products and services. Peller provides its clients with cash flow and collateral-based financing, real estate financing, equipment financing and leasing, sales finance programs, factoring and working capital loans, and small business loans. Peller operates through its Chicago headquarters, and through regional sales offices, joint ventures, and wholly owned operating companies located in the United States, Canada, Europe, Asia, Australia, and Latin America

Peller Financial is a leading provider of specialized financing solutions to small and mid-sized companies in the US and abroad. We are a NYSE company with nearly $19 billion in assets and 2700 employees worldwide. We have helped businesses succeed for 80 years thanks to our straightforward, innovative approach and by offering a full spectrum of products to meet your financial needs.

The Mission statement: Our mission at Peller is to provide high-quality financial services and capital to help small and mid-sized businesses succeed. We have the financial tools to support your business needs during every phase of growth - from start-up to expansion - to acquisition.

We work with you under two assumptions:

1) Your business is unique
2) Your time and energy are valuable

Our objective is to fully understand your business, what you do, your challenges, your competition and your vision for your company. Once we know all the facts, we roll-up our sleeves and put our extensive experience to work for you. Our goal is to develop financial solutions that meet your particular needs.

Our straight talk approach means that we deliver on our promises. We believe in candid communication and responsive service. Best of all, we structure your financing so that it works for you, with the options and flexibility you need. The result is a customized solution that leaves you with more time and energy to devote to your business. 1

The Scope of company: Peller operates in the middle-market and small business segments of the commercial finance industry. Which generally includes clients in the manufacturing and service sectors with annual sales in the range of $5 million to $250 million and in the real estate sector with property values in the range of $1 million to $40 million. Peller is structured around five core businesses:

  • Corporate Finance. Cash flow and asset-based financing.
  • Real Estate Finance. Financing for income producing properties.
  • Leasing Services. Commercial Equipment Finance and Global Vendor Finance.
  • Small Business Finance. SBA 7(a) and 504 loans for small businesses and franchises.

In 1998, Peller generated approximately $783 million in operating revenues and earned $193 million in net income with total assets over $14 billion. In 1997, Peller generated approximately $754 million in operating revenues and earned $158 million in net income with total assets over $12 billion.1

A 2. IT mission strategies and tactics:

Overview of Peller’s Information Technology Division

The mission of Peller's Information Technology (IT) division is to provide strategic business process consulting, cost effective technology solutions, and high quality customer service. Over 200 professionals comprise Peller’s IT division. Application development, application support and the majority of the technical infrastructure staff are located at Peller's corporate headquarters in Chicago. Other IT personnel are assigned to regional offices.

IT Infrastructure Management, in alliance with Computer Sciences Corporation, provides operations and support for Peller's operating environments, including desktop computing, LAN server, database administration, telecommunications, help desk, security administration, and disaster recovery. The mainframe-processing environment is managed under an agreement with Acxiom. The IT Technical Planning and Integration group provides direction, planning, and integration affecting the technical infrastructure. IT business relationship managers and application groups plan, develop, implement, and support software applications for the desktop, client/server, mid-range, and mainframe environments.

Technology: Peller IT embraces and deploys scaleable and sustainable technology solutions that enable our enterprise to achieve its objectives. We deliver solutions that facilitate a collaborative, mobile, open and flexible environment for our key stakeholders. We make sound investments in technological innovations that are the best fit for the Peller enterprise.

Customers: Peller IT establishes and maintains long-term partnerships with our customers by providing innovative, high quality products that create significant value to the company. We are agile and adept quickly to technology changes, which enable us to meet and exceed our customers’ expectations.

Associates: Peller IT strives to be an Employer of Choice composed of a diverse team of professionals committed to delivering value to the company’s success. We value and reward achievements, teamwork, commitment and mutual respect. We provide opportunities for growth through training, mentoring and personal empowerment. We constantly challenge ourselves to develop the skills that enable new technologies.

Approach: Peller IT rapidly delivers solutions aligned with business needs. We leverage repeatable processes and best practices, apply current and emerging technologies and foster strategic vendor alliances. We strive for the highest level of quality by continuously improving our processes and encouraging creative thinking.2

A 3: Organizational Chart:

(See Appendix A)

A 4: IT operations and rational:

Peller Financial, Inc., a worldwide commercial financial services organization that uses combination modes of operations to meet the growing needs of our customers and provides the latest and best technology and products to our customers.

Peller IT has a distributed technology. Their main headquarters are in Chicago and they have many locations where their processors are interconnected and operating at the same time.

A 5. The velocity of change in IS in past 3 years:

Human Resource: As noted above this is a growing company for past 80 years in its history. Yet with present times with rapid technology changes we are growing at a much faster rate than in the past years. Peller Financial IT division has grown from 100 to over 250 technical and managerial professional working at the Chicago headquarters. We have added IT divisions at our Troy Michigan and Weybridge, England offices. At these centers IT carry out its role in business applications acquisition, development, delivery and support. IT also serves Peller Financial in its responsibility for the corporation's technology Infrastructure and operations, application architecture and information services implementation.

Technology:

1) In the recent years we have replaced two mainframe applications with current client/ server systems.

2)IT is in the process of in stalling three different web applications.

A: Risk management system

B: Loan pre-approval system

C: Contact management system

3) IT is also in the process of rebuilding an Interface for all these systems

A 6: IS governance for determining strategies and tactics:

At Peller Financial IT the projects are initiated by the steering committee then each one gets reevaluated and prioritized on the need and budgetary basis. Any project over $50,000 has to be approved by the Investment committee, otherwise the business group decides, where to invest in a particular project.

The IT division fills out the business case form and submits it to the Investment committee. A formal request proposal presentation may be given by the steering committee to the Investment committee. When these projects are approved a budget is set for each one and then the steering committee takes the project totally under their wings from the start to the time it is finished. The steering committee has the total control of modifications as needed by all parties involved.

The following individuals with their titles are the Investment Committee:

Laurel Martin - Chief Financial Officer

Frederick E. Wolfert - Chief Operating Officer

Bill Jenks - Chief Information Officer

Robert E. Radway - Executive Vice President of Corporate Development

A 7: The Is evaluation and procurement process:

Steering Committee is responsible for ensuring business resources are available, keeping the project team informed of anything that might impact the project, monitoring project progress, periodic review of project deliverables, and making business decisions as requested by the project team.

The Steering committee may vary from project to project depending on the need of the department. The vast diversity of Peller Financial operations make it much more complex to come up with each steering committee.

As a group we decided to focus on Small Business Finance steering committee.

  • Mike Rock – President of Small Business Finance
  • Mike Amos – Business Lead
  • Jim Brunner – Business Lead
  • Gina Pasker – IT Direct Report
  • Mike Solyack – Relationship Manager

A 8: Overall Fit:

Peller IT strategies and goals are to improve client services by investing in current technology. Productivity improvement through customer getting better answers faster, satisfied customers bring in repeat customers and refer new customers to Peller Financial, Inc.

B: Requirement analysis (Pre-RFP)

B 1. Problem statement:

Peller Small Business Finance (SBF) is a high volume, transaction-based business with 3 core products - Small Business Association (SBA) 7(a) and 504 products, Small Loan Program real estate transactions and the Peller Select owner-occupied real estate product. In order to be successful in the small business lending market it is important to have an efficient loan-processing platform. Currently, there are several systems supporting SBF:

  • Excel and Word documents (Originations)
  • Monty (Prebooking)
  • Shaw (Servicing)
  • Prism (Portfolio Reporting)
  • Tracker (Collections)

None of these systems are integrated, and there is a significant level of duplicate data entry into these systems. In order to keep all these systems in sync it takes the following nine employees to underwrite and close a loan, all which have an annual salary of > $35,000:

  1. Underwriter Assistant
  2. Underwriter
  3. Underwriter Manager
  4. Closing Assistant
  5. Closing Analyst
  6. Closing Manager
  7. Documentation Administrator
  8. Compliance Analyst
  9. Compliance Manager

SBF underwrites 30+ loans a month at an average amount of $400,000 per loan. Out of these 30+ loans Peller is only able to close about half of the loans they underwritten. The other half is either declined or withdrawn by the borrower. In most cases the reason why the borrower will choose to withdraw their loan is the amount of time it takes Peller to close the deal is too long. On average the processing time to underwrite and close a deal takes 3 to 4 months. This is an extremely large amount of time to keep the borrower waiting for their money.2

B 2. Current risks:

The current risk that Peller is faced with is opportunity costs. Since an average of 15 potential borrowers out of 30 are choosing to withdraw from the deals that are worth about $400,000 we are losing the opportunity to finance $6,000,000 worth of loans every month and $72,000,000 annually. Even though Peller holds the Number one spot in Chicago for SBA lending this business groups profits are not that justifiable to Peller's overall portfolio. SBF doesn't bring in as much money as all the other business groups within Peller. That is really how the market as a whole is performing now, but SBF can bring in some more money by closing those other 15 deals. SBF can also cut back on their expenses by staff reduction. SBF has 150+ employees which triple the amount of employees in all the other business groups. In most cases these employees are needed to keep all the SBF's systems in sync with each other as well as various Excel and word documents. If there was one system that would includes most of the current systems functionality Peller can reduce their staff by 30 to 40 percent. Every underwriter and closer have an assistant, this is obviously not needed with one system. SBF can go from 150+ employees to 90 employees which would save them an estimated amount of $2,100,000 (60 employees x $35,000 annual salary) a year. An integrated system (from underwriting to closing to servicing) will assist SBF with achieving efficiencies in processes that will ultimately lead to higher productivity and decreased costs.

B 3. Alternative Solution Summary:

Success in the volume-oriented small business lending market hinges upon an efficient loan-processing platform. An integrated system would significantly improve loan processing efficiency and quality control through reductions in manual processes and duplication of effort.

We looked, defined and documented the business requirements and came up with the following functions that are needed for the betterment of the system:

  • Marketing (analysis needs only; assumes eventual interface with contact management software)
  • Origination
  • Underwriting
  • Closing (assumes interface with document preparation software)
  • Serving/Portfolio Management
  • Service Requests
  • Customer Services
  • Collections/Workout/Liquidation
  • Multiple Disbursements (Construction loans)
  • Compliance
  • Security/Secondary Markets

With the above requirements we came to the following alternatives:3

  • Keep the loan-processing platform the same as it exists today and re-evaluate the processes used.
  • Keep the "Monty" system, the current pre-booking system and re-design it to have more functionality than it currently has.
  • Buy a vendor package that includes the desired functionality.

Ballpark estimates and rankings:3

Cost options / Keeping the Current Situation / Re-designing "Monty" / Vendor Package
Potential costs:
Up-front / 5 / 3 / 1
On-going / 5 / 2 / 3
Potential Benefits
Short-term / 5 / 3 / 1
Long-term / 5 / 1 / 2

On the scale of 1-5 Peller estimates the ranking as following:

  • Current Situation: Keeping up with the current situation at Peller would be rated 5 because of the following reasons:

a)The business seems to be going down and continuing with the current situation would further deteriorate the situation.

b)People not happy.

c)Company losing money.

  • Re-designing "Monty" : The in-house building would be rated as 3 because:

a)Training the employees would be very expensive and time consuming.

b)Hiring experts to train the employees would further add to the expenses.

c)The in-house building over all would be cost unjustified.

  • Buying vendor Package- RFP would be rated 1 because:

a)Profitable for the company.

b)Lasting solution.

The new pre-booking system would allow SBF to manage a transaction from pre-qualification and origination through underwriting, closing and booking on Shaw, and thereafter, support the servicing, portfolio management and secondary markets functions. It should also support the ongoing analysis and reporting needs of the finance and marketing functions.

B 4. Selected Alternative:

As a first step to a fully integrated system, SBF wishes to focus on replacing its current pre-booking system – Monty. This system does not provide SBF with the functionality it needs to effectively manage its transaction pipeline and monitor its operating efficiency – both of which are key to SBF achieving its objectives. To achieve some level of integration, the new system should interface with existing systems to facilitate a single point of entry for all data wherever possible.

Peller Financial is examining software applications, systems and services for its Small Business Finance business group. The Request for Proposal (RFP) is being sent to selected vendors to invite creative proposals to help meet our functional needs in the areas described in this RFP. We expect each selected vendor to recommend a complete solution, including all the hardware, software and services required for implementation. Peller will procure any required hardware.

The following risk factors and concerns have been taken into account before deciding to outsource:

Potential risks with the probability of occurrences7
  • Cost Analysis: Is the New System worth the Investment?
  • Opportunity Lost: Learning curve – It may take awhile for the staff to get comfortable with the new system
  • Vendor Management: Buying Smart – The vendor that we are choosing will fulfill all the requirements
  • Political Risk: Downsizing - This new system will reduce staff

Risk Factors:

  • Investment size: How large is the proposed technology investment, especially in comparison with the overall IT budget?
  • Project Longevity: Do projects adopt a modular approach that combines controlled systems development with rapid prototyping techniques? Are projects as narrow in scope and as brief as possible in duration?
  • Technical Risks: How will proposed technology be integrated into existing systems? Will proposed investment take advantage of commercial, off-the-shelf software and systems? How will the complexity of the systems architecture and software design affect the development of the project?

References:

1. Internet site for Peller Financial, Inc.

2. Intranet for Peller Financial, Inc.

3. IS 483 Lecture # 5, Dr. Norma Sutcliffe, DePaul University, Loop Campus Autumn, 2000.

4. IS 483 Lecture # 6, Dr. Norma Sutcliffe, DePaul University, Loop Campus Autumn, 2000.

5. Neil Plotnick, The IT Professional's Guide to Managing Systems, Vendors & End Users, Osboorne/McGraw-Hill, Berkeley CA. 2000. ISBN 0-07-212051-7.

6. Hildebrand, Carol " A Road Map for Risk," CIO, 4/15/96

7. Radosevich, Lynda and Cheryl Dahle, "Risk Management: Taking Your Changes," CIO 4/15/96,

8. Fabris, Peter, "Risky Business," CIO 5/15/95