Shortly after Jaime Vogel joined Australian Finance Group as CIO four years ago, he determined that the company’s IT model was in need of an overhaul to ensure it could meet the growth and competitive opportunities ahead. Digitally adept financial technology startups already were nibbling at the home-mortgage and other businesses of AFG’s nationwide network of brokers, now at about 2,600 members, while the company was expanding into new markets, including commercial finance, insurance, and securities. It was time for bold changes.
About a year into the job, Vogel went to AFG’s board with a plan: Progressively migrate all of the company’s IT applications and infrastructure to the cloud. The broader goal: Redirect IT spending that had gone mostly to system maintenance and support to customer-facing and revenue-generating projects. Start innovating more, treading water less. Vogel floated an eye-popping stretch goal: Allocate 75% of IT spending to innovation, instead of the habitual 20%.
“We could see that next generation of fintechs coming through, and we saw that space as an opportunity,” says Vogel, who notes AFG’s new partnership with US-based Biz2Credit to bring its small business online lending marketplace to Australia. “Now we consider ourselves to be a sort of established fintech, but there’s also a threat there to our business model, so we needed to ensure that whatever we’re spending on IT was giving us the best bang for our buck. The belief was that, if we’re continuously innovating and offering our customers and brokers the best tools to successfully run their businesses, then they’ll keep partnering with us.”
Application Heavy Lifting
Vogel and his team started by moving AFG’s Microsoft Exchange and SharePoint applications to the cloud, as well as a handful of other “easy” platforms with minimal impact on the company’s customer base. Then came the company’s core platforms, including its Oracle enterprise resource planning, business intelligence, incentive compensation, planning, and document management applications.
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In all, AFG moved about 80 applications to the cloud, allowing the company in May 2016 to shut down its two data centers, which had been underutilized. (The preliminary objective was to move only one of those data centers to the cloud, but six months into the transition the management team decided to go all-in.)
Vogel estimates that the shutdown saves the company about AU$500,000 (US$385,000) a year in operational costs, while the new cloud services bring a modern feature set, as well as modern APIs that improve integration and automation.
But the total benefit is much greater, as the cloud transition has freed up money for Vogel to expand his team, as well as shift some people to more productive work. For example, the team’s former IT operations manager is now in a continuous improvement role, responsible for evaluating current business processes with an eye toward boosting efficiency, reducing costs, and upping the quality of customer service. Meantime, Vogel has grown his team from 22 people four years ago to 36 today—on a relatively flat IT budget. Those 14 additional people are all developers, “purely focused on creating new products for our brokers,” he says.
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Using Oracle Business Intelligence Cloud Service, for example, AFG now analyzes the propensity of customers to want to refinance their mortgages, factoring in a number of parameters, such as lender, loan-to-valuation ratio, and loan conditions. For those customers deemed likely to refinance based on a certain threshold, AFG emails them on behalf of the broker, encouraging them to reach out for a phone chat. At the same time, AFG emails the corresponding brokers, suggesting the same.
AFG sets up similar, though automated, email campaigns for car loans, a relatively new business for AFG and its brokers, based on data analyses showing that about 30% of Australians end up buying a new car within the first three months of moving into a new home. Those emails also let customers choose whether they would like to be contacted again in 3, 6, or 12 months, which triggers an additional campaign later on.
Vogel’s team has developed an online form, with AFG’s and the broker’s branding, that makes it easy for customers to apply for a loan directly. “So the brokers don’t have to really get involved in that process, but they’re seen as being part of the entirety of the process,” he says. “So that trust that consumers have with their broker is still there.”
Another IT innovation involved AFG’s integration of Oracle Financials Cloud and Oracle Fusion Incentive Compensation Cloud Service with the company’s Siebel CRM application, which now runs on a high-performance infrastructure-as-a-service platform that Vogel’s team can scale up for broker activity during the day and down for the night. The integrated systems automatically collect data on daily mortgage-sales transactions and commissions from lenders, calculating the required broker payments.
As a result, AFG can now process its 600,000 monthly commission payments five times faster than it could before—in 2 hours instead of 10. And the system is flexible enough to split payments for referrals from other brokers.
“It came at an opportune time because our payment cycles were getting so large that if we continued on that path for another 12 to 24 months, it was going to take us a full day to run through the entire payment cycle,” Vogel says. “Now we’ve got a significant amount of headroom. If there’s one thing I’ve learned in my four years with AFG, you always want to ensure that you pay your brokers on time.”
Stretch Goal
Today, he says, AFG spends about 60% of its IT budget on new, innovative projects (as opposed to support and enhancements), compared with 20% when he joined the company. Vogel and team are well on their way to that stretch IT goal he put before the board three years ago: Spend 75% on innovation.
It hasn’t been all peaches and cream. Several times during the transition Vogel’s team determined that the cloud products they were deploying lacked functionality in certain areas, but the beauty of the cloud model is that the needed improvements tended to show up in a new release three months later, Vogel says.
“Nothing really was a huge challenge for us apart from time and resources to get everything done,” he says. “From where we were, it’s a massive transition. The fact that we’re very, very close to that point today is a credit to the business and the IT team.”
