Leave Yourself A New Legacy

Technology has become such a strategic advantage that retailers sometimes think they need to manage the research, development, upgrades, and maintenance of their software systems internally. This IT tactic may appear as though retailers are securing their secrets to success, but sometimes outsourcing certain systems can allow companies to redirect their focus to other areas. But before reaching a decision to outsource software, retailers need to review and understand their core competencies.

John Deere Credit (Johnston, IA), the finance arm of Deere & Company, provides financing solutions for more than 1,500 John Deere dealers in the United States and thousands of others throughout the world. The company's revolving credit facility in Madison, WI, offers its customers revolving credit programs (lines of credit with a specified limit), depending on the equipment and products purchased. With 25 years of revolving credit experience, John Deere Credit-Madison believed that its revolving credit processing system was not keeping pace. "We had an in-house legacy system called Revolving Credit System (RCS) that we fully supported ourselves for 25 years," said Charlie O'Brien, director of operations at John Deere Credit-Madison. "We continued to modify and customize it to meet our needs, but eventually the limitations of the system could not keep up with our future goals and growth." The Madison office saw the marketplace changing rapidly, so it decided that whatever solution was going to replace RCS, it wasn't going to be another legacy solution.

Untangling 25 Years Of Legacy Software
A common extension for companies that offer financing, such as John Deere Credit-Madison, is to manage sales finance options for other companies. Once a car dealer, furniture company, or appliance retailer establishes their sales finance systems, related third parties often look to them to provide the backbone for branded incentive programs. Agricultural product manufacturers, such as chemical companies or seed manufacturers, began to ask John Deere Credit-Madison what it could offer in terms of sales finance products. The agricultural companies were looking for the Madison office to differentiate their products in the marketplace. "We saw this as an important business extension. Companies wanted to form an alliance with us based on our expertise with farmers," O'Brien said. The company saw it as a way to root itself even deeper within the agriculture industry.

With its old system, John Deere Credit-Madison could provide its potential alliances with sales finance, allowing a company to offer special incentive packages to its customers, but the system was limited in terms of program branding. The alliance would inevitably want to promote and collect the offer through its own marketing department under its own name. "Our old system made it difficult to separate ourselves from the other company's private label in terms of billing and management," O'Brien said.

In 2001, John Deere Credit-Madison chose Fiserv's PLUS System and PaySys International as its new payment and information processing software, but instead of installing the solution in-house, the company chose to work with Fiserv as an ASP (application service provider). As it considered its options, revolving credit branch decided that information processing was not its core competency and that it wanted its IT staff to concentrate more on its role as a finance company. "We wanted to become more efficient in our operations over time, and one way of doing that was to take advantage of ongoing software upgrades through an outsourced software provider," O'Brien said.

John Deere Credit-Madison, in conjunction with Fiserv, wrote 40 interfaces between the ASP software and its internal systems to connect such systems as POS (point of sale) authorization, accounting, and data collection. "One of our biggest challenges was untangling 25 years of customized interfaces while still ensuring that the ASP could replicate the previous system's functionality," O'Brien said.

Expand Business Growth And Development
John Deere Credit-Madison completed its software conversion in the fourth quarter of 2002 and expects to achieve payback on its investment in 3.8 years. It will measure its return on investment based on increased business opportunities resulting in a wider array of program offerings, as well as the decrease of resources required to maintain an in-house system. "We were able to redistribute employees within the business as a result of not having to support the system in-house," O'Brien said. "Our employee resources were then free to concentrate on other growth initiatives that became available because of the new system's product functionality." Fiserv provides the software and processing, and sales finance office accesses the databases that the software generates, giving the revolving credit finance arm of John Deere Credit the freedom to focus on what it does best.