Expert RoundTable: Technology Purchases

October 1st, 2005

By Patrick Lunsford
Editor, insideARM.com

Our Expert RoundTable on collection technologies brought together owners and managers of large and mid-sized agencies to discuss how they use technology in their operations. The discussion revealed that to successfully upgrade to new technology, one must focus as much on how the purchase is made as on what actually gets bought. Successful purchases generally follow a five-part process that involves planning, budgeting, executing, implementing, and measuring return on investment (ROI).

Planning

  • Let your long-term business strategy define your technology needs: what solution will enable execution of that strategy?
  • Choose technology vendors who will be good long-term business partners.
  • Understand the timing of technology purchases:
    • Days or weeks: web-based technologies
    • 2 – 4 months: collection technologies that require some infrastructure, such as predictive dialers
    • 1 – 2 Years: enterprise systems & software

Budgeting

  • Transaction-oriented technologies such as skiptracing and payment processing tend to be treated as ongoing operational expenses.
  • Enterprise systems generally involve capital expenditures and are depreciated over time.
  • Technology investments can comprise up to 80 percent of a company’s capital expenditure budget and amount to 4 or 5 percent of revenue annually.
  • Maintenance on technology amounts to roughly 2 percent of annual revenues.

Executing

  • Create investment committees to review and evaluate opportunities.
  • Set benchmarks for technology investments, such as only reviewing those that will lead to 5-10 times ROI.
  • Integration is critical for higher ROI – new technologies should meld with existing systems.
  • Negotiate beyond price: vendors have demonstrated a great deal of flexibility on terms other than price, including service levels and training hours.
  • Negotiate for mutual benefit: keep in mind that your vendor will be a long-term partner.

Implementing

  • Successful implementation goes beyond installing hardware and software – it requires managing business processes.
  • Take the opportunity to reevaluate the business processes that you are currently using.
  • Use internal training teams to promote use of the new systems and to promote consistency on the collection floor.

Measuring ROI
Generally, technology purchases are evaluated the same as other investments. Financial metrics include:
o Revenue growth
o EBITDA growth
o Revenue per FTE
o Per-hour collections rate

Comments are closed.

LATEST BLOGS

Suggestions for my High School Graduate

June 20, 2017

High school graduation is a time of excitement for many as they head off to college. Today, I thought I'd share some of the advice I gave my youngest son in case anyone else has a child preparing to go off to school sometime soon. ....

» see this post    » all posts


ARM Industry Merger and Acquisition Trends

June 14, 2017

Do M&A trends within the ARM industry defy traditional business and economic theories? Today's KG Prime sponsored blog examines industry performance from 2007-present, and the effect changes in operating conditions had on consolidation trends. ....

» see this post    » all posts


The Department of Education Contract: A Candid Discussion between Industry Experts Mike Ginsberg and Randy Kamm

June 13, 2017

The Department of Education unrestricted debt collection contract procurement process seemingly has no end in sight. Industry experts Mike Ginsberg and Randy Kamm examine the current situation, and the decisions that brought us to where we are today. ....

» see this post    » all posts


RECENT ANNOUNCEMENTS

Kaulkin Ginsberg Moves Its Market Intelligence Online

June 8, 2017

Kaulkin Ginsberg is changing the way busy owners, executives, and senior leaders access strategic market intelligence with the launch of KG Prime. KG Prime is a comprehensive and easy to use web-based service that provides users with economic, market segment, and other forms of strategic research.....

» see more




AXIAL FORUM - Publishes "Succession Planning - A Critical Missing Element in Many Family-Owned Businesses"

June 7, 2017

AXIAL FORUM, a web-based strategic mediator for the M&A industry, recently published an article succession planning by Topline Valuation Group. This article was co-authored by members of the Topline Valuation Group and Kaulkin Ginsberg team....

» see more




ACA of Texas Publishes "Three Critical Healthcare Industry Trends for Outsourced Business Services" in its Winter 2017 Magazine

March 16, 2017

The ACA of Texas Publishes "Three Critical Healthcare Industry Trends for Outsourced Business Services" by Kaulkin Ginsberg in its Winter 2017 Magazine. Kaulkin Ginsberg details its belief that the growth in patient lending and financing programs, clinical integration networks, and physician quality reporting systems for the Centers for Medicare and Medicaid Services (CMS) could have profound effects on companies focused on servicing healthcare providers in 2017 and beyond.....

» see more