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

New York State Now Offers Free College Tuition: The Potential Beginning of a Major Nationwide Trend

April 27, 2017

The Department of Education contract for debt collection services is one of the most lucrative and sought after contracts today by ARM companies. However, state-level legislation like The Excelsior Scholarship could have profound effects on the student loan market.....

» see this post    » all posts


Non-Employment Index: An Alternative Employment Stat

April 26, 2017

The U.S. unemployment rate is a popular measure for looking at the health of the U.S. economy, but alternative measures like the non-employment index may provide even greater insight. In this blog, Kaulkin Ginsberg's analysts examine the strength of the U.S. economy using this alternative measure and its relation to the ARM industry.....

» see this post    » all posts


Healthcare: The Ever-Growing Industry

April 25, 2017

The healthcare industry is one of the most widely analyzed industries in the US due to its seemingly never ending growth. As such, it's no surprise the ARM industry is so focused on the potential impact of a repeal and replace bill for the ACA. ....

» see this post    » all posts


RECENT ANNOUNCEMENTS

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




ACA of Texas Publishes "M&A Trends in the U.S. ARM Industry" in its Winter 2017 Magazine

March 15, 2017

The ACA of Texas Publishe "M&A Trends in the U.S. ARM Industry" an article by Kaulkin Ginsberg in its Winter 2017 Magazine. This article examines the key trends and developments driving M&A activity in the U.S. ARM industry by market segment.....

» see more




Mike Ginsberg Leading Panel Discussion at DBA International 20th Anniversary Conference

February 1, 2017

Mike Ginsberg, President and CEO of Kaulkin Ginsberg, will be speaking in a panel discussion on Trends in Debt Buying on Wednesday, February 8th at the DBA International 20th Anniversary Conference in Las Vegas, Nevada....

» see more