MBA Conference in San Diego…Have we turned the corner?

Hello everyone,

I am writing this blog fresh out of the 96^th Annual MBA Conference held in my hometown of San Diego, California. What a beautiful city and even more exciting was level of "buzz" at the actual conference itself. Last year's conference was more of a "wake" for the chaos going on in the industry, but this conference was different. Although attendance was still down compared to years past, it was refreshing to see a large number of C-level executives proactively seeking solutions to reduce costs and grow their businesses

Does this positive atmosphere mean the woes of the industry are over? Not by a long shot, but I do think that we have turned a corner which is good news for those of us that have been in the mortgage industry awhile and also for Joe and Jane consumer. It will be interesting to see what the new mortgage landscape will look like. Based upon conversation topics and the increase in the number of vendors in attendance over last year, one area that will continue to have an increased presence in the new world of lending will be outsourcing.

Why do I think this? The obvious answer is that of cost. According to an analysis of 24 case studies by the Everest Group1, the majority of companies can anticipate a cost reduction of 30-39%. This is great, but there are other driver's that ensure outsourcing is becoming a long-term strategic play as opposed to a short-term savings "fad".

One recent driver is the staffing capacity issue that the industry is facing. The last refi-boom that occurred this summer had lenders scrambling as they did not have the staff in place and were hesitant to hire for a temporary spike. By building in "flex-capacity", a lender can turn staffing counts up or down based upon projected volume. This type of rapid flexibility is difficult to attain internally, but a good relationship with an outsource fulfillment provider can make this objective easy to accomplish.

Another driver is the availability of expanded service hours for both your borrowers as well as your internal clients such as loan officers or processing teams that may be limited in due to the local time zone of a centralized fulfillment center. An outsourced or offshore center can provide coverage with staggered hours or actually work 24/7 in a single location as opposed to incurring the cost of multiple centers which is a big benefit of a global workforce over the traditional model.

Globalization of the modern workforce is definitely here to stay in the mortgage industry and will make the industry stronger and more economically viable in the long-term. The key to success however, is managing expectations and objectives and integrating solutions that work for your specific organization and also taking a partnership approach with an outsourcing vendor that can deliver.

1. Dunn, S., Fernandes, J., & Jog, S., (2004, November). Harnessing the full power of offshore outsourcing: what range of cost savings should a company expect?. Everest Group. Retrieved from http://www.outsourcing-journal.com/nov2004-offshore.html

Outsource or not to Outsource, that is the question...

To paraphrase Shakespeare’s Hamlet; to outsource or not to outsource, that is the question. Based upon the number of proposal requests in the sourcing industry lately, the banking industry is showing the signs of a thaw from a strategic growth perspective. The good news is that lenders are listening to their past critics and are seeking ways to improve cost efficiency and loan quality and as a result are becoming more open to the idea of outsourcing as part of the strategy. There are a number of positives to outsourcing but also some misunderstood “myths” of which I will discuss the top two today.



Myth #1: Outsourcing will cause a loss of jobs: Let’s kabosh that myth right now. Outsourcing does not cause a loss of jobs; running operations with a P&L statement in the red does. If left unchecked, it can cause a loss of not just a few jobs but everyone’s job in the company. The fact is, if done properly, outsourcing can streamline costs and processes enabling a lender to grow while maintaining a seasoned staff and increase revenue more rapidly than the associated costs.



Myth #2: Our work can’t be done by an outsourcer: This is another myth that comes up. Loan fulfillment is a step-by-step process filled with multiple “if, then” scenarios. I have had the opportunity to see several lenders’ processes and they are basically the same with a few nuances and varying check points along the way. In my opinion, the real issue here is a perceived loss of control or quality with the loan pipeline. This is where a detailed Statement of Work (SOW) and Governance document come into play. A lender should never begin an outsourcing project without a clear step-by-step process and ownership/responsibility plan which is detailed in the SOW. The Governance plan outlines the “rules” of the engagement with respect to expectations, communication process on performance, issues and production reporting to minimize any surprises.



Hopefully this has helped in a small way to emphasize that with a solid plan, lenders can take advantage of outsourcing to increase efficiency and revenue while lowering cost and maintaining control over the fulfillment process. If you have a comment or question, please drop me a note at thesourcingpro@gmail.com.

Outsourcing Basics

The credit industry has undergone numerous changes in the recent past as the mortgage crisis has worked its way through all lending channels. Banks are faced with a number of challenges to overcome: streamlining lending processes, managing risk, increased compliance and reduction in operational expenses. As a result, more lenders are looking to outsourcing providers as a part of their strategy. Understanding the basics of business process outsourcing (BPO) can help you design a successful plan that can not only reduce your operational costs, but also create a more efficient production process as well as enhancing your customer's overall experience.

There are three basic strategies to outsourcing each with their own set of benefits (B) and challenges (C):

• On-shoring: using a services provider within your same country to perform the work
  
  • B: Higher level of industry knowledge and verbal communication skills
    
  • C: Higher cost solution
    
• Near-shoring: using a provider within similar time zones and close travel distance
  
  • B: Specific language skills at a lower cost; i.e. Mexico for Spanish
    
  • C: Language and cultural challenges in establishing a project
    
• Off-shoring: using a provider that is based overseas
  
  • B: Well educated staff, highly trainable and a lowest cost solution
    
  • C: Time zone, distance and remote management challenges
    

My personal preference is a hybrid option or what I like to refer to as "Rightsourcing". Rightsourcing is a combined approach using internal staff, an on-shore vendor provider in conjunction with an off-shore team to maximize benefits to an organization; increasing efficiency, a positive customer experience and lowering costs. The good news is that outsourcing is not a new concept and the challenges can easily be overcome with a well designed plan. Just like buying a car or building a home, a reputable vendor will be able to design a "rightsourcing" strategy with you to meet your specific business objectives.

Introduction to the Sourcing Professional

Hello everyone,

I wanted to take the opportunity on this first entry to share a little bit about myself, my professional background and also what I hope to accomplish with the Sourcing Professional blog.

I am currently the Vice President, Business Practice Head for a global sourcing company that provides origination process services and technology solutions to banks and credit unions in the United States and Australia. I personally have over 16 years of experience in consumer lending and mortgage banking with the last four years spent in design and implementation of outsourcing solutions both globally and domestically. My background is in sales and operations management which provides the ability to develop "win-win" solutions from a strategic perspective for both sides of the company equation.

I have had the opportunity to work with both large and small lenders on developing sourcing strategies and implementation of the actual solutions. As a result, I have been exposed to many industry "best practices" and some "not-so-good" practices when it comes to sourcing strategies. The turmoil that has been experienced in the banking community and the expansion of services in the sourcing industry has created an environment where mid-tier banks are now seeking sourcing solutions that were once reserved for large national lenders. This is due to a variety of reasons such as staffing challenges, cost reduction, process efficiencies, etc.

The goal of this blog is to provide a quasi-informal forum to share new or additional insight into the world of outsourcing to bank executives that are considering a sourcing strategy for their organization. We will discuss multiple sourcing topics on best-practices, worst-practice and all of those in between. I also plan on having contributions from other experts in the industry on various topics and will always welcome business related questions and comments from you. If you are interested in learning more on this topic, please click the "follow" link and feel free to forward a link on to other banking professionals that you feel may benefit from information coming from this site. Thank you!