LOS: Build Vs. Buy

This is one of those blogs that’s been kicking around in my brain for a while, and it just decided to finish writing itself today on the way into work.

Temenos – Company

This is one of those blogs that’s been kicking around in my brain for a while, and it just decided to finish writing itself today on the way into work. Allow me to once again climb up on my soapbox.

There have been a number of great articles I’ve been collecting (references included) written on two related topics:

For most of our customers, our advanced LOS functionality meets and exceeds your business and technical needs in all areas. That’s a great thing, and there’s no need to read further. Have a great day!

A Better LOS: Buy Some, Build Some

But for some of you out there, Akcelerant customer or not, your needs are more extensive and, dare I say, unique. That’s okay as well. I’m suggesting that you don’t need to start with 12 developers and an equal number of pizzas in a room with a whiteboard. While I’m not ostentatious enough to believe that I alone have the only new thoughts on this topic, I am here to suggest that these are not separate and distinct discussions. We tend to take a black or white view of this discussion. We speak with customers who come with one of two mentalities:
A. I will find a loan origination solution with all the features I need
B. I will build it from the ground up myself so I can have my differentiating functionality

Indeed, pro’s and con’s do abound, but I think that the truth and the right answer lies precisely in the middle of these two:
A/B. Find the loan origination solution with the fundamental features you need, and create your differentiating functionality.

It’s true that much of what an LOS does is common across all providers, although some of us do it better than others ;-). Table Stakes: All LOS providers should do the following:

  • Support compliance
  • Manage a variety of loan products
  • Present work queues and transactional reports
  • Provide a flexible workspace
  • Have a robust decision engine
  • Produce documents and eDocuments
  • Surface underwriting information
  • Provide access to all channels and platforms
  • Include account originating interfaces
  • Offer connectivity to a variety of third parties
  • And so on…

“Built-in Tweaks: The great majority of mid-grade and better LOS packages are highly configurable. This is different from being customizable.”

(Getting an LOS you love)

Raising the Table Stakes

Where the table stakes are raised is when you need to be a unique provider of your loan origination services in your market. Your provider should provide open interfaces using imports, exports, API’s, Web Services, etc. to fulfill a variety of advanced needs. I want to note that you can use your staff to develop this functionality or use that of a third-party or even your LOS provider. Differentiating technology allows you to excel with (or by):

  • An open architecture
  • Truly integrated omni-channel origination with your messaging
  • Published API’s and methods, and a web service-based architecture
  • Push notifications based on LBS
  • Interfaces or standard functionality for CRM, demand generation, pre-approvals
  • New lending spaces (Merchant and Lifestyle, Payday, etc.)
  • Deep, deep cross-sell
  • Event-driven methodology
  • Again, your online presence

There are likely a thousand other sub-bullets under the Raising the Table Stakes section. I won’t list them all here. Those of you who know us can speak to them, and those of you who don’t are welcome to join this dialogue with us.

A Closing Set of Arguments

I think there are a few closing questions that I’d present for consideration

What business are you in?

There is a fundamental question: Are you a technology company that wants to develop and market an LOS, or a financial institution that uses an LOS as a tool to support your business? The “Getting an LOS you love” article said it best: “Some people have big programming staffs and want to write their own software. I know credit unions that do not buy software from other people; they just write what they need. But we don’t see that as a core competency for us.”

How tough can it be, really?

It is tempting to say that developing an origination solution is easy. We at Akcelerant may have even fallen prey to that trap. We can tell you from experience that it is not. We also know of credit unions that have been building an LOS for many years who continue to increase funding without a deliverable. It’s not impossible, for sure, but it is difficult. Further, like every LOS Vendor (and I have worked as a product manager for three of them) this is a never-ending process, and there are always changes, new functional improvements, regulatory impacts and, unfortunately, defects that need to be corrected. It goes without saying, but I shall nonetheless: time to market is absolutely key. The economy is doing well today. But were there an extended LOS delivery (say during development), the market may change. There is indeed an opportunity cost associated with not only missing the current market, but also with continuing your current processes as-is.

Can I do it on my own?

Finally, I’d like to reference back to a blog I wrote, “The Company You Keep“. There is a benefit to being part of a community of LOS users with a cooperative vendor. User groups provide excellent feedback and out-of-the-box ideas. The roadmap is not just shaped by one person or organization. Many others are driving toward a multi-faceted future. As a group, many customers can influence the roadmap in positive ways as well as through funded development. Other institutions with similar needs can affect the direction of a system in the same way.

In Summary

The point is that we encourage you to find a solid platform upon which you can build. For your own sanity, don’t re-invent the wheel. Use a platform like ours as the starting point to handle all of the basic and advanced functionality, then use your staff to add the really exciting functionality that makes you different. Okay… I am stepping down from my soap-box.

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Temenos – Company