Browser-Based Technology & The Origins of Risk
By Gary L. Kruse For Fall 2001 The ABA's Journal of Agricultural Lending

It all started with the rolling of some bones. Two semi-straight bones carved with markings that came to rest deciding the fate of the first-known gamblers. Those bones evolved into a game using cards in 16th-century China. Then a Persian innovation gave the world its first look at a game that looked a lot like "poker." This style of gaming swept like wildfire across the globe, eventually weaving its way into the fabric of the American West. How could a game be so prominent in so many cultures? The popular opinion is that it satisfied a basic human desire; to engage in risk. (Something ag lenders certainly know a thing or two about).

When I first discovered these origins of risk it made me think of all the old poker expressions like "Read 'em and weep"..."Ace in the Hole"..."One-eyed Jacks" and even the dreaded "Dead Man's Hand (Aces and Eights)" made famous by Wild Bill Hickok. Then I remembered the poker expression that brought everything I'm about to tell you full circle. That expression is "Cut 'em thin and you win."

This prophetic quip describes something ag lenders like you do all the time: a process (cutting the cards) that attempts to minimize the player's risk (thin) in order to enhance the player's success (winning the hand). Yes, it's the ag loan process but this analogy is even more relevant today because of an emerging Information Technology (IT) standard known as Independent Computing Architecture (ICA) or "thin-client" computing.

In its simplest form, thin-client technology or ICA allows for a small computing device (a Web browser like Microsoft Internet Explorer) to connect to a server (a big computer) via a network (LAN, WAN, Intranet, Extranet, the Internet). It's the server that does all the work to process applications, access files, print, and perform other services. Most of you may know this to be the process of a "mainframe" however you may not know that it is also the technology inside Web browsers and that runs the Internet and World Wide Web.

The same technology that runs the Internet economy can also help you realize lower technology costs, more reliable computing, ease-of-use, lower maintenance costs, and secure data storage for all your core processes including credit analysis and portfolio mining. Your use of this technology will enable you to provide cost-effective delivery of your services to your customers, making it easier for them to do business with you.

You may think it's risky betting on anything Internet-related but no less than what you are doing today -- playing a high-stakes game of poker where it's you against the other players (your competitors). Putting that thin-client technology to work for you is your "ace in the hole."

An excellent example of thin-client technology in action is the popularity of outsourced services called Application Service Providers (ASP). An ASP is a company that supplies their clients access to software applications and other related services over an Internet-based network. ASP's are growing in popularity because a lot of small organizations -- including community banks -- can't get the same best-of-breed programs used by larger organizations any other way. And with tight tech budgets due to the poor economy, ASP's can be a lower-cost option to bootstrapping alternatives.

ASP's host applications remotely at data centers for their clients, removing the techno-hassles inherent in managing IT programs. Core applications like credit analysis are centrally managed and upgraded at the data center then pushed out to client browsers over whatever network is in place. With ASPs, the IT headaches become somebody else's problem. Your data is still your own, it is simply managed for you. And it's as safe as if it was in your own location.

ASP's become more valuable in times of recession because it costs more to go out and get a new customer than to generate more business from existing ones. It's very difficult for small community lenders using spreadsheets to compete with larger competitors armed with easy access databases and portfolio mining programs that make servicing and upselling existing customers a breeze in comparison.

Many lenders today are at the crossroads where the origins of risk intersect with successfully competing in the 21st century. Here at ECI we have spent the last 16 years responding to your IT needs and today we have your thin-client solutions. It is a fact that adopters of this technology will have the upper hand over those that ignore it. Incidentally, I began with only half of that "thin" poker expression. The whole thing goes, "Cut 'em thin and you win. Cut 'em deep and you sleep in the street."

Gary Kruse is Chairman/CEO of ECI, developer of Equity Manager financial analysis and decisioning software for lenders. If you have any questions about this story you can contact ECI at 1-800-264-0787 ext. 200, emailing them at inquire@eci-equity.com or by visiting their Web site at www.eci-equity.com.

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