As competition for mortgage loans increases, the mortgage industry is focused on finding better and more efficient ways to operate. Collaboration between multiple parties, streamlining loan processing and decreasing operation costs are high priorities. To that end, the industry has made great strides with the introduction of many software-based initiatives. However, most technology solutions have been deployed using traditional means, and involve lengthy and costly implementation cycles for a single application. These pains are why some professionals in the mortgage industry have yet to fully embrace the latest trends.
During the last few years, Internet technology (IT) environments from many industries have been selecting an on-demand delivery model, also referred to as the software-as-a-service (SaaS) model, for mission critical applications. On-demand applications charge per usage, not per user. Typically, an Internet connection and secure authentication privileges are all anyone needs in the on-demand model to access the application anytime, anywhere.
So far, so good
How far along has the industry progressed in the use of the on-demand model? Businesses far and wide are embracing on-demand solutions, and while it is not a new method of delivery, it is one of the great innovations of the late '90s dot.com era. The earliest on-demand solutions came with the rise of e-mail, customer relationship management and human resource applications, to name a few. They have since matured to where on-demand has truly come of age.
Most familiar to the general public are on-demand applications that are used daily for personal e-mail, such as Hotmail, Yahoo! or Gmail by Google. All of these allow access from any Internet connection. InformationWeek recently released the results of the SaaS survey of business technology professionals. The study revealed that 84 percent of respondents currently using an on-demand model said the technology either met or exceeded their expectations. According to the survey, customer service applications, sales force automation and human resources top the list of applications used today. Others, like payroll, corporate e-mail and desktop applications, are still gaining in popularity. So, what's the difference between traditional software and an on-demand application?
What you should know about on-demand
When comparing a traditional software environment, which is typically installed within a corporate IT infrastructure, to the on-demand model, the former has several differences. First, a hardware infrastructure must be assembled to support the server or Web-based application. Next, the application and database software must be installed, configured and tuned. Additionally, the application may need to be installed on each individual user's desktop. Finally, the application needs to be updated and maintained on a routine basis. The time and personnel required to implement this model can prove to be quite costly to any size organization.
In contrast, an on-demand model uses a technology infrastructure that is already deployed, tuned and running. Many on-demand applications only require minor application configuration to provide corporate users with a unique branded experience. On-demand application service providers use state-of-the-art data centers that provide tremendous capabilities for throughput and redundancy. The use of this type of service provides a corporation with technology that is leveraged across numerous organizations, enabling faster deployment and lower costs.
As companies bypass the costs associated with implementation, management and application maintenance, overhead is reduced. In addition, on-demand models do not lock companies into long perpetual license agreements, as the application costs are typically based on usage.
In the traditional software environment, if a change or upgrade was needed for the application, a patch would be sent to the IT department or individual users who would then have to personally make the change. There is no guarantee that every user has applied the necessary patches to ensure application stability. In an on-demand environment, the change is automatic, alleviating the need for user or IT intervention.
According to the SaaS survey, the majority of business technology professionals (69 percent) said they were adopting an on-demand solution because of the ease of deployment, while others stated the technologys flexibility (52 percent) and the cost-savings (43 percent).
The mortgage industry has a highly fluctuating business cycle, which is based on numerous macroeconomic factors. For these reasons, it makes sense for the industry to take a hard look at the benefits of an on-demand solution. For starters, an industry with boom and bust cycles requires easy, accurate and quick deployment. Secondly, paying via a usage model aligns extremely well with the industry's unpredictable cycles and allows a mortgage company to align its cost structure with its volume.
Flexibility is another reason to deploy an on-demand solution in the mortgage industry. Because of the number of disconnected and disparate parties in the mortgage industry, collaboration is vital to close a loan. On a single loan, six or seven remote parties like the originator, processor, underwriter, due diligence provider, quality control professional or investor must work together to complete the process. On-demand technology unites these parties, allowing them to collaborate easily from a single point of access via the Web. With on-demand technology, the loan and all of its processes are visible and available to the authorized parties.
And because the mortgage industry is in constant flux with new policies, regulations and products that come and go, the industry needs technology that can rapidly adapt. The on-demand model provides the ability to configure solutions and deploy changes quickly and, in most cases, automatically. As an added benefit, it is now very common to see on-demand applications connect to legacy or in-house applications using Web services. This further improves the ability for an organization to fit an on-demand application to its specific workflow.
The perception of the downsides
With all the advantages of on-demand, you may be asking yourself, "Why not?" There are a few negative perceptions that on-demand has yet to overcome, including that on-demand is less secure, less reliable and there is a loss of control with data not being stored in-house. However, these perceptions are not reality.
Because there are multiple parties accessing the system in an on-demand environment, security is of the utmost priority. Media coverage of stolen data reveals that security breaches typically do not occur on the system itself but through the loss of a physical media -- such as, a hard drive or a stolen laptop. When we do read stories about data being stolen by a hacker from an online system, there is almost always help from someone on the inside, not through the use of an on-demand application.
All of these concerns put security under the microscope. To avoid these scenarios, most companies encrypt data in storage and also in transit over the Internet to thwart would-be hackers. It is extremely difficult for a hacker to decipher encrypted data. There are also security audits such as SAS 70 and ISO 17799 and certifications like VeriSign that ensure rigorous security levels for on-demand technology.
Reliability and uptime are also concerns with little merit. Internet technology has advanced to the point where databases, servers and systems are far more dependable today than they were 10 years ago. The best on-demand service providers ensure uptime with detailed business continuity planning and highly redundant infrastructures. Usually, on-demand environments have two or three remote sites, creating a greater level of redundancy than in-house or corporate systems. And while most companies have policies in place to back up data, an on-demand solution not only regularly backs up your data, but may give you the opportunity to download your data and do your own backups at will. For system maintenance, users are given advance notice of a scheduled outage, and those outages rarely occur during business operating hours.
Time to ride
On-demand applications bring many benefits to the mortgage industry, including cost savings, secure service, reliable data and the ability to collaborate on multiple levels. Sometimes, though difficult to measure, the most important benefit is the anytime, anywhere access. Imagine being on a family trip and a crisis strikes with a loan that needs immediate attention and you don't have your personal computer. With on-demand solutions, you simply walk into a wireless cafe and all the necessary information is at your fingertips. With on-demand applications offering all of the benefits mentioned and that level of service, isn't it time for the mortgage industry to climb aboard?