The customer is king

Fineos's chief executive Michael Kelly has always been ahead of the game. The techno-prophet realised customer was king long before customer relationship management (CRM) became a catchy buzzword in management circles. Then he turned what he knew into a hugely successful business, supplying CRM systems to finance and insurance companies. Along the way, he picked up Ernst & Young's Entrepreneur of the Year award in 2000. He is also a recognised author and speaker on financial services technology issues.

It would be easy to resent the 40-year-old's success if it wasn't obvious that he truly believes in what he does and is ready to share his know-ledge with an evangelical fervour.

Kelly brought his Dublin-based company to the top in only seven years with a series of gutsy moves. He had already spent ten years in the financial services software industry, including six years with Paxus Corporation in Europe, now part of the Computer Science Corporation (CSC), when he realised the market needed new ideas.

"In 1993, I was working as a business development director in Europe and it seemed there were few choices except this one big vendor, CSC, because it had consolidated the market through acquisition," he says.

"Many of the policy admininstration systems were old-fashioned and it seemed a great opportunity to introduce new technology to the industry. I wanted to build enterprise systems that were much more
than a back-office system."

At the time, CRM was not a well known concept, but it was obvious to Kelly that the finance industry's emphasis on products had to change to an emphasis on customers.

"Banks and insurers were realising that supermarkets and people like Richard Branson were coming into their space and selling products, along with excellent customer service," he says.

"The customer, not the product, was becoming king, and they were demanding service and moving their business if they didn't get it."

Kelly says this was felt particularly in the UK, Ireland and Holland. "People were reading in the papers that insurance companies were making a lot of money and realising they weren't seeing it in the service they got," he says.

Kelly says the growth of the internet as a sales channel also meant companies needed to "get their houses in order", because technology-savvy customers would not tolerate inefficiency of systems or information.

Determined to create a new system, Kelly left CSC in 1993 and set up a UK-based consultancy called Managed Solutions Corporation. Within two years, he had 30 consultants working for him on sites from Madrid to Tokyo.

"All the time, we were picking up knowledge of what our clients wanted," he says. "After two years, we moved from the UK to Ireland and set up a software development centre in Dublin."

Kelly started hiring his current management and software development team and kicked off product development in 1995. By the end of the year, the team had come up with the first version of a system that was very different to the inflexible legacy systems used at the time by most finance and insurance companies. They called it an "operational customer information system". It allowed firms to view each customer through every channel - an important step in ensuring good CRM.

"CRM has been conceived as a mechanism for improving customer satisfaction by co-ordinating customer service and sales strategies across various channels," Kelly says. "This sounds straightforward enough, but effective CRM projects involve blood, sweat, tears and a lot of complex technical integration."

This means tying together agents, brokers, customers, service and administration centres, plus all the devices they use to communicate, within a single information network.

Next, Kelly started looking for a company willing to take a risk on his new system.

"I was canvassing all the time, looking for companies that had a similar vision," he says

"I found Britannia in the UK, which was looking at its CRM problems. It had spent two years internally researching how to get a single view of its customers across all channels."

It was a perfect partnership and the system went live at Britannia in 1997, with three million customers on it and 2,000 users across a number of sites. "In the first three years they used it, they increased from an average of 1.3 products per customer to 1.8 - a 40% increase," Kelly says.

Britannia's operations director John Suffolk agrees Fineos appeared at the right time for his company, which already had a strong CRM focus. "We're a mutual, so members matter," he says. "What one customer wants is not what the other customer wants - the way to best understand their needs is through good CRM practices."

He says Fineos is different to its competitors because it decides what it wants to do CRM-wise then designs a system to carry it out, rather than forcing changes in business methods to fit the computer system. Last year, when Britannia decided the original system bought from Fineos in 1997 needed upgrading, Fineos won the contract again on "functionality, technical design and price", says Suffolk. He predicts continued success for the technology company and its products.

"They're growing fast and clients like Britannia push them to the limit, making them think and adapt to our demands," he says.

Soon after the original link-up with Britannia, the Fineos team started adding work-flow operations to the system, so information could be moved in the way the client dictated.

The next step was to develop a flexible policy administration solution for operations, so back-office work could be done at the front-end. Fineos started building the policy administration system for the life, pensions and investment management, because Kelly saw there were few systems available to those industries. He says the company plans to develop non-life policy administration systems and back-end banking solutions.

This piece-by-piece development work was also the key to Fineos's financial success. For the past three years, the company has had a 100% per annum growth rate, which it expects to replicate this year.

"We spent 350 `man-years' developing our product, with a small number of customers and kept the revenue coming in by selling pieces as we developed them, in partnership with the customer," Kelly says.

"We put in a huge investment in the early days, so we're now selling products that are already built and the company can grow exponentially."

Kelly says the industry had good reason to be sceptical of Fineos in the early stages.

"People would have said the business and technology ideas were good but the risk was high, because developing a new business system is a huge task," he says.

"We had to find someone to take a small chunk, and then deliver and prove ourselves."

Since then, further big-name companies have bought the theory. Canada Life UK and Ireland, Legal & General, Northern Rock, Britannia, ABN AMRO Bank, SNS Reaal, The Derbyshire, Friends First and Royal Nederland Leven, among others, now use Fineos systems.

Royal Nederland Leven's life business has gone live with the entire system - CRM, work flow and policy administration. The project manager for the system implementation, Bas de Way, says Royal Nederland chose Fineos because its system design was "universal and modern".

"The design of the competitors originated about ten years ago so the design is based on traditional life practices. Fineos was completely new," de Way says.

He says the new system took two years to develop with daily contact between the two companies, but paid off because, as the first customer to buy the entire system, Royal Nederland was able to have it moulded slightly to fit its specifications.

Now, de Way says, the company is preparing for the huge implementation process, particularly as it will be combined with a new product range for the Dutch market.

"We've had quite an intensive education programme and produced a book, working procedures, new acceptance criteria and pricing," he says. "The whole company will be dependent on the system. It's the backbone of an insurance company."

Kelly's next aim is to make Fineos a major international supplier of systems to the insurance and banking industry, expand its capital base and work towards making an initial public offering. "The hardest parts are out of the way," he says.

"Now I think the challenge for me is to spend more time evangelising this stuff and not get as involved in the day-to-day running of the business."

However, the man who made the computer systems companies wanted well before they knew they wanted them, says he doesn't spend too much time looking far ahead.

"At the moment, my `window' only goes five years into the future," Kelly says.