Technology Selection Steps (Part 1 of 3)

[Laila Q. Deles]

by Sumit Bagchi, PinoyME

Technology offers various options. In order to make a considered decision, MFIs must evaluate different technology options in terms of costs vs. benefits, before selecting one over the others.

MFI, especially those that are just beginning to get into the technology selection process, must therefore subject themselves to a series of logical, step-by-step decision points to arrive at the best-option technology, given their current needs and strategic growth plans.

STEP 1: TO AUTOMATE OR REMAIN MANUAL

IT-enabled MIS systems have many benefits. The right-choice technology can offer the following benefits to a MFI:

• Real-time and accurate branch-Head Office and inter-branch information flow
• Improved productivity in transaction recording/processing
• Faster and more accurate report generation
• Generate relevant social impact information pertaining to clients

The above benefits in turn help the MFI improve its bottom-line and support its growth and expansion plans by:

• Lowering costs of data capture and transaction processing
• Enabling better control, supervision and strategic decision-making
• Removing impediments to growth and outreach.
However, any technology involves costs and there are MFIs that have proven to be extremely successful on the strength of a purely manual MIS system (without even the use of excel spreadsheets). So the first decision point is: “to automate at all or remain manual”?

STEP 2: MAKE VS BUY

If the decision is to automate, the next decision point is whether to get the software developed in-house or to buy it. In-house development may not be a viable and sustainable proposition because:

• The hired technical resources may leave mid-way if they get better job opportunities. This applies specially to provincial MFIs. The lure of Metro Manila (and beyond) may prove too much for ambitious IT guys.
• Such hired technical personnel may not have the required domain expertise in microfinance
• Very often, they do not undertake sufficient documentation of the coding work that they do
• In-house development may appear cost-effective, but if all expenses incurred in getting the software developed in-house over a lengthy period of time are properly documented and costed, (remember those crashed databases, those virus attacks, those calculation errors!) the reality may be quite different.

Buying software from a reputed, proven vendor could be advantageous because:

• The vendor already has a product that is tested and tried at other MFI locations. Thus, deployment is normally done much faster
• The vendor is a technology company, having the required manpower and resources to customize, deploy and maintain the system
• Upgrades and enhancements are periodically provided, usually as part of the maintenance contract
• The approximate cost and the timeframe for acquiring and using the system over time is known upfront

However, in spite of apparent advantages, MFIs are often motivated to go in for the MAKE decision to have access to source codes and the freedom to develop/modify the software as per user-specific requirements, instead of having to rely on vendor-provided features and expensive customizations/updates. Also, the lack of credible local vendors offering quality products and reliable implementation and post implementation services convince many MFIs to take the ‘make’ decision.

A viable compromise between MAKE and BUY is something that MFIs can now consider with the availability of open source software like MIFOS (visit www.mifos.org for details). Such open source options remove vendor-related constraints, since the MFI has access to the source codes and can customize/modify at will, based on internal requirements.

To be continued...

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(Excerpt from "Getting IT Right." This document identifies the critical decision points and the pros and cons at each step in the process of ‘getting IT right’.

PART A outlines the Technology Selection Steps that a MFI would logically expect to undergo and PART B examines the Total Cost of Use (TCU) framework that could be used to evaluate various technology options.)

image taken from www.goldcoast.com.au/lifestyle/technology.html