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KEY CONCEPTS
Enterprise approach to MIS. Organisation structuring principles. Life cycle model of system development. Modeling of different views of business. Business analysis and strategy. MIS goal supporting business goal. MIS strategy supporting business strategy. User driven information system. Shift to just-in-time information. Integration of business rules in the system. Use of business growth cycle. MIS focus on decision-making, access and availability of information. MIS focus on critical success factors and mission critical applications. Choice of technology and architecture to suit business operations and business management. Meeting needs of statutory information, decision support information and just-in-time information simultaneously. Business knowledge, rules and policies, process knowledge readily available on database.
CASE INDEX
1. Introduction 2. Business Infrastructure 3. Business
* Information stated here is true at a point of time when collected for presenting as live case for analysis and understanding of a business scenario. The contents would undergo change as the time goes by. The purpose is to use the case as a learning medium and the author has no intention to commercial or give suggestion on the companys business operations. Author is grateful to the management of Tata Home Finance (THF) for giving information to build this case.
4. THF organisation : THF Enterprise Model : THF Business Model 5. Current System and Technology 6. MIS Reports Currently in use 7. Guidelines for Customer 8. Key Features, Rules and Control Points 9. Processing a Loan Proposal 10. Moving THF to Information Driven Organisation 10.1 Business Analysis and Strategy 10.2 Effectiveness of Business Strategies 10.3 Information Management Strategy (IMS) 10.4 Information System Architecture Models THF Business Function Architecture Relation Model Core Business Model 10.5 Technology Platform for IMS Strategy 10.6 Application Systems Architecture 11. Management Information System: A Model
1. INTRODUCTION
Tata Home Finance Ltd. (THF) is located at Shivajinagar, Pune-411 004, India. THF was established in the year 1999 to serve the home market need of funds for buying a new house or to improve the existing house. In addition to head ofce in Pune, THF has branches at Mumbai, New Delhi, Bangalore, Ahmedabad, Hyderabad and Chennai. THFs well-trained personnel assist the customer in offering a Total Home Solution that is right from funding to helping the customer to build a dream home. The personnel are trained to answer all kinds of questions, doubts across the table. The total funds disbursed since inception are Rs.500 million against the total number of over 1000 accounts. Total Employee strength is a little over hundred today and is planned to grow to 200 in next two or three years. THF right now is in home nance products business but has plans to diversify into other products and services in Insurance, Deposits, Credit Cards, Mutual Funds, Customer Durables, and Property Advisory Services. It is estimated the total housing shortage in urban Indian is to the tune of 6.6 millions. The housing nance market is Rs. 250 million and is expected to grow at 10 to 12% per annum. Because of Government initiatives on a number of fronts such as modication of rent control act, increase in the interest exemption to Rs. 150000, 40% tax depreciation on housing investments by corporate and many more; the market for housing is expected grow at the rate of 30% annually.
THF therefore feels strongly that there is perceptible shift towards formal funding sources and THF could be an additional player in the Home Finance Market. The competitors of THF are HDFC, ICICI, LIC housing, and all banks. These organisation are already established and they enjoy brand image and loyalty from their existing customers. The present Home Finance Market is a buyers market, therefore the competition is well placed in this market and THF has a challenge to become successful in a short duration. The challenge is accepted on the strategy of leveraging on TATA strong brand equity reecting Trust, Stability, and Integrity, the values home owner respects most. The business in % by product is given in Table 1.1. The Mission Statement of THF is To be the rst choice in fullling the needs for a home, by providing nancial and other value added services through personalised and world class service at competitive rates.
Table 1.1 Product and Percentage of Business
Percentage of business 90 2 2 6
Product name Individual home loans Home improvements/Extension Loan against home LOC thru corporate loans Land nance (Plot) Project nance Loan take-over IHL undertaken by CO with DAS Step up/Down repayment plan Loan against lease rentals All products
100
2. BUSINESS INFRASTRUCTURE
The business infrastructure is small today but is planned to grow rapidly in next one year. The Infrastructure Business Model is given in Fig. 1.1. The infrastructure scope is so determined that customer can get all services at single window for building a dream home. The structure is designed to reach anybody any where also caters to all kinds of customers, namely Corporates, Group Housing, Family and Individuals, who wish to go for Housing Complex, Apartments, Flats, Plots and bungalows. THF has its own infrastructure of alliances and partners working in building and construction industry to meet multi dimensional needs of the customers, spreads across the society.
3. BUSINESS
THF, besides offering initial services to build condence in the customer, has several innovative products carefully built for all types and kinds of customers. The products currently offered and their business in percentage is given in Table 1.1.
Head Office
Regional Offices
Builder
Franchisee
The business is obtained through several channels. Each branch deals with Walk-in customers and helps them to run through a process of request for loan, starting from Assessment, Requirement, Application submitting, Sizing and Costing, Technical and Legal guidance, Facilitation, Processing and Disbursement. Next important business sourcing is through Builders and Real Estate Developers through Project Tie-ups. The personal approach to customers is through DSAs. DSA visits prospects and solicits business. The corporate business is brought through Sales Manager who interacts with CEO and MD of the organisation. The break up of business by channels is shown in Table 1.2.
Table 1.2 Breakup of Business by Channels
Channels Branch Builders DSAs Sales Mangers Total Percentage of business 80 5 15 100
4. THE ORGANISATION
THF Enterprise Model
THF organisation structure is at, built over ve levels (Figs 1.2 and 1.3). The structuring principles are single window service concept, Dual approval, segregation of competencies, select jobs multi-skilled. The formal communication channels are
COO
Ex. VP
CMO Marketing
GM Credit Collections
GM Legal and CS GM HR
NM A/C
GM Resources
Board
Tech Officer
A/Cs Officer
Collection Officer
Branch to Region to Head ofce. Functional reporting as per levels within the branch and dual reporting to Regional and Head ofce functionaries.
Legal and Corporate Affairs Contracting and Documentation HR MIS Systems and IT Credit Appraisal Risk Assessment and Management
Capital market
Relation Management
NHB Refinance
Finance Management
Accounting Software: Tally for Financial Accounting An Integrated Software for Loan Management and Accounting with interface to back end Financial Accounting Software THF has realised the need of a better system to overcome the problems faced due to current software application systems. Besides non availability of on-line real time information for operations and decision making, following difculties are encountered in the information management. Open separate set of books for each branch. Make accounting entries separately for each branch. Consolidate manually the accounts for each branch and then at head ofce. To overcome these problems the information management strategy is evolved. It has components. ERP Systems. For centralised accounting for branches and head ofce. Loan Management System. Front End Customer Interaction System. For handling queries, assisting customers in proposal building, proposal Application Processing and decision making. As a step towards implementation of this strategy, THF evaluated number of ERP packages most suited for Finance/management industry and have signed for ORACLE-Financials. It is also working with a local software company to build integrated loan management system for front end interaction and back end integration with provision to go on web a year later.
Table 1.3
No. Report 1.
MIS Reports
Frequency Daily Orgainator and Responsibility Branch Accounts Ofcer Branch Accounts ofcer Branch Manager Recipient Central Accounts Contents Purpose Accounting entry Accounting entiry
2.
Daily
3. 4.
Rolling Weekly Every Friday Branch Manager Disbursement Weekly Corporate on DSA Weekly report on DSA 10 Day Performance Expenses Statement Every Monday Every Monday Every 10th 15 days Branch Manager
5.
6. 7. 8.
Branch Manager Branch Manager Branch Accounts Ofcer AO, Central Acounts AO,Central Accounts Branch Manager
9.
Every 11th Day On 5th day of month First Working day of month
Details of disbursements made during a day Central Accounts Details of bank depositions at branch CMO Business of Branch for the day Central Resources Disbursement Dept. forcast of next year CMO Status on delinquent cases CMP Perfornance of operations CMO Overall review of operations Central Accounts Expenses incurred by the branch in cash Sr. Vice Presidents Performance of the Company Sr. Vice Presidents Financial Data for the month and YTD Central Collection Status on Department delinquent cases
Assess performance Funding arrangements Deciding course of action on delinquent cases Assess performance Perfornnce Reporting to Board Accounting entry and cash imprest replenishment Reporting to the Sr. Manag ement Reporting to the Board Deciding courses of action on delinquent cases
THF gives general guidelines through a brochure to the prospect in Question-Answer form. A prospect interaction begins with this brochure and discussion an additional queries is handled on front desk. The guidelines not only answer FAQs but state business rules and policies to be used in application processing. The few typical rules as illustration are as mentioned. Applicant age should be greater than 21 years. Maximum loan possible Rs.10 million. Maximum loan amount is 85% of cost of property.
Maximum repayment period is 15 years but not extending beyond age 65. Loan against home is 50% of market value of the property. And other. For all categories of product offers, THF has prepared checklists to ensure, ascertain and conrm number of key aspects fo the proposal. The checklists are part of the new proposed MIS. This ensures impersonal scrutiny, objective assessment, no processing error and no human error in viewing and decision making. Following is the list of FAQs for variety of products offered by THF.
HOME LOAN Can I apply a home loan from Tata Home Finance?
Yes, you can. If you are at least 21 years of age and are employed or self employed with a regular income. You can apply for a home loan even before you have identied your home.
HOME EXTENSION LOAN How does a home extension loan from Tata Home Finance help me?
A home extension loan is just one of the means by which your dream of extending your existing home can come true. You can use it for the following. Add a room. Have an additional or bigger bathroom/toilet. Construct an extra room on the terrace.
How does a home improvement loan from Tata Home Finance help me?
A home improvement loan is just one of the means by which your dream of adding life and value to your existing home can come true. You can use if for:
Internal and External repairs Tiling and ooring Roong Grills and aluminium windows Bore-well Paving of compound wall.
Internal and external painting Water proong on terrace Plumbing Enclosing an open balcony Construction of water tank
LOAN AGAINST HOME How does a loan against home from Tata Home Finance help me?
A loan against home is just one of the means by which you can encash your investment in your existing home without having to dispose it off. You can use the loan amount for different purposes for instance, to: Finance higher studies of your children. Meet the wedding expenses of your daughter. Invest in business. Even to buy a second home. The loan amount can be used for any purpose, other than speculative or illegal purpose.
Loan disbursement
Loan disbursement
Maximum 15 years not exceeding of age 65 years First mortgage against home with conditions or Individual guarantor or Assignment of Life Policy Selection and submission of legal and property documents and Initial payment of your own contribution Payment of processing fees Payment of administrative charges
Loan disbursement
Loan disbursement
First mortgage against home with conditions or Individual guarantor or Assignment of Life Policy Selection and submission of legal and property documents and Initial payment of your own contribution Payment of processing fees Payment of administrative charges
Repayment Choices
Post dated cheques Deduction from salary
9.1
THF faces competition from established organisation such as HDFC, ICICI, LIC Housing and some leading banks. Since, all players are attacking the same market segments; the prospective customer can be win over only through creation of broad image of a trusted fund provider with the difference. The Strategy is to attract the prospects to THF by providing broad band of services at competitive rates. THF is now riding the growth phase in Sigmoid or S curve after just coming out from the phase of Introduction. It would therefore need business strategies that will accelerate the pace of growth in next year or two. To build business strategy for rapid growth THF has focused on customer and customer services that would bring rapid growth and attain a position of strength in the Home nance market. The strategy is built on the following four factors.
Products to meet most sought requirements of customer Cost benet ratio attractive to the customer. Service excellence through effective response. Total solution assistance to build a dream home. THF has 11 different home nance products meeting the needs of individuals, groups and corporates for new home, home improvements, plots and bungalow. The products are so designed that they can be customised to specic requirements of the customer. The product design is such that if information is complete and correct, the funds can be sanctioned and disbursed in less than 48 hours. THF product and service strategy is such, that the benets the customer gets are signicant compared to cost of loan servicing. The strategy is backed by wide range of techno-commercial information support for quick and better decision making. THF has taken care for providing excellent service across all stages of home nance servicing. It has a information rich web site giving information on products, facilities and answers to frequently asked questions. It has a four tier organisation infrastructure where customer can nd a service provider of his choice. The service and interaction is possible through web site, direct sales agents (DSA), branch ofces, regional ofces, builder partners, franchisees and will snit network or reputed manufactures, traders, specialists and consultants in home making industry. This kind of support base creates condence and comfort in the mind of customer to come under the umbrella of THF. All this support provides reach, knowledge, funds and assistance at every stage of home building. The fourth strategy is to provide total solution to the customer, through offer of funds at the least cost, technical and legal assistance to complete the home fast, beyond home construction and offer services through THF partners at attractive discounts to make a beautiful home. THF has now competed strategy build up and they are operative in most of the regions of the country.
9.2
All the four strategies and critical resource management, that is funds, empowered, people, products, Business partners, systems and solutions. While THF has good resource management skills, it is necessary to manage them cost effectively to achieve dual objective of performance excellence and highest customer satisfaction. This is possible through continuous monitoring and mending of strategies and evaluating the business performance against these strategies; THF recognises that this can be achieved through information support to customer as well as to THF personnel at any level, when needed anywhere. THF therefore has gone into detail requirement study of information needs required to manage the following Customer servicing Customer performance monitoring THF performance evaluation Cost control; Finance and operations Credit appraisal Risk assessment
Adherence to service standards, evaluation and monitoring Proposal processing: entry to disbursement to collection and recovery THF has identied following business processes as mission critical applications. Loan application processing system Credit risk appraisal system Customer relations management system Funds management system All other functional systems such as Accounting, HR, Purchase etc. are important but do not have direct impact on the business of THF. All such systems will be either integrated or interfaced with mainly the business system mentioned above through suitable system architecture.
9.3
Objective
9.4
Relationship Model
The business model is executed through relations management between major partners in home nancing business. THF considers home nancing as a people to people business where trust, integrity and service are held in high esteem. Relationship Model is shown in Fig. 1.6. The core business functions model is given in Fig. 1.7. This business functions is fundamental of THF business operation.
9.6
Four-pronged business strategy is supported by state of the art technology based information Management solution. the solution is designed for THF enterprise as a business solution supporting information needs for Operations management, Business Management and Strategic Management of Resource and Product. The solution is designed for supporting the following. Continuous Innovative Product Management. Fastest Service delivery.
Customer Relation Management Customer Interaction, Proposal Building Loan Application Process Property Appraisal
Disbursement Management
Loan Management System Emi Collection System Monitoring and Default Handling Loan Disbursement System Debt Management System
Documentation Systems for Contract Document Verification and Validity Checking Business Rules Condition and Constraints Approvals and Recommendation Contract Implementation
Sales and Advertisement Sales Force Management Business Partners Management Marketing Operations
Training Relation Management Resources Management Investment Portfolio Management Fixed Deposits Management Forecasting of Disbursement, Collection and Recovery Relation Management Investor Banker Tata Finance Funding Agencies Customer Partners Agencies; Bankers, Investments Communication E-learning Basics of Finance, Banking, Commerce Statutory Compliance THF Product Credit Appraisal Risk Appraisal
Resource Managements
Funds Management
Funds Disbursement Mnagement Front Officer DSA SM Dream Home Service Management Loan Translation Management Finance and Accounts Support Service Management Franchisee Builders Home Service Providing Consultant Individuals Corporates Groups
Solicit Business to Business Customer Submits Proposal Disburse Funds Resources Funds Repays Funds Repays Funds THF Finance Accounts Credit
Fig. 1.7
Cost control, Collection and Recovery Measures, and Resource Management. The solution is expected to build THF towards First choice of customer for all home nance requirements and offer value added services. World class services provider at competitive rates. The solution is made of 17 different applications systems, comprising ERP system, Legacy systems; Groupware Applications, CRM and data warehousing systems. Figure 1.9 shows application systems architecture Each applications is designed with following characteristic. No data redundancy. Business policy, rules and guidelines embedded in the application. Layered approval systems with technology application of work group and work ow.
Local ISP
Proxy Server
Clients Regions
Clients Branches
Clients Builders
Clients Dsa
Access to information processing to meet just in time need of decision making. Capable of information processing analysis and decision making as a support for all personnel across the organisation.
Credit Approval System Loan Proposal Processing and Approval System Techno-commercial Evaluation Legal Verification System Debt Management System Risk Assessment System Collection System Disbursement System Marketing Sales Product Management System
Data Warehouse / Data Mart / Data Mining Applications for Strategic Management of Resource Products, Market, Customers Past/present
3. Turn Around Time Report 4. Demographic Details Report 5. Renance Claim Report 6. Rural Housing Loans Disbursed 7. Repayment Reports New MIS will strengthen decision making and is expected to improve management of the following.
Resource Risk Recovery This will also enable effective control on the following Cost Credit Customer choice All this will result into a truly world class service company offering a basket of products through single window creating a THF brand loyalty conrming trust, stability and integrity in Tata Home Finance.
Questions
1. Examine whether new MIS will succeed in giving the following to THF: (a) Competitive advantage (b) Better customer relations (c) Control on nancial resource 2. Prepare a reporting format for following reports stated in Table 1.3. (a) 10- day performance report (b) Monthly delinquency report (c) Expense statement 3. Study Business Function Systems Architecture (Fig. 1.5) and Technology Solution Architecture (Fig 1.8) and explain to what extent following objectives will be achieved and why? (a) Faster service delivery (b) Better control on collection & recovery 4. Identify from Business Functions Systems Architecture, Critical Information Systems which have strategic importance and offers competitive advantage to THF. Explain why the systems are critical? 5. Which are the DSSs in the THF system suite? Which decisions these systems are empowered to take? 6. You have learnt about CRM package and know its scope, standard features and modular structure. Compare THF Customer Relation Management Scope with this identify the gaps, if any. Suggest a conceptual model of CRM for THF. 7. What is e-learning solution catering to HR of THF? What is the advantage of e-learning process? 8. THF Data Warehouse (DWH) is an information repository. Identify DWH information entities and sources from where they will be pulled in DWH. 9. Explain the use of rewall and proxy servers in THF information system solution? What security threats THF is perceiving and from which sources? 10. Suggest ten standard queries in following areas of business function:
(a) Loan Proposals. (b) Recovery Status. (c) Default Customers. (d) Customer by THF Products. (e) Customers by Loan Amount Disbursed. (f) Customers Demographics and Segments. 11. THF has a website tata home nance with standard website features, like home page, products, services, ready reconers for EMI computations for varying loan amount and period, highlights about nancial status of THF; Members of the THF board and News. THF wants to improve the utility of this site by offering information support on various aspects of home before and after the construction. Suggest which new web pages and links should be added so that customer nds THF website a single window source of information.