System modernization enables business strategy at Fannie Mae

Read the article and learn about:

• Catalysts for replacing aging systems at Fannie Mae
• Business benefits experienced from reducing complexity and risk
• Technology’s impact on employee satisfaction and retention

Jason Birmingham
Head of Capital Markets and Finance Technology, Fannie Mae
Connect with Jason on LinkedIn

About the interviewee:

As the Head of Capital Markets and Finance Technology, Jason Birmingham has spent the last decade putting technology at the heart of Fannie Mae’s business. Jason has been a major force behind re-envisioning how software development and new product development practices can become competitive advantages for the business, championing Agile, Dev Ops, Automation, Design Thinking and Lean Product Development practices within the firm. Jason also drove the introduction of modern systems architecture into the firm’s trading, treasury, and operations businesses as a means to reduce risk and cost of ownership while improving on Fannie Mae’s ability to meet customers’ needs.

Jason Birmingham, Head of Capital Markets and Finance Technology recently sat down with SimCorp North America’s Front Office Specialist, Terry Flynn, to discuss the profound impact that system modernization and consolidation have had on Fannie Mae’s business from a technology and organizational perspective.

Terry: Could you tell us a little about Fannie Mae’s business?

Jason: At its heart, Fannie Mae’s core function is to provide liquidity to the mortgage market. Every day we are buying mortgages from over 1,400 lending institutions around the country, helping to ensure that sustainable home ownership and affordable rental housing is a reality for millions of Americans.

Terry: What were some of your drivers for system modernization and consolidation?

Jason: One of the key drivers for transformation was to ensure that our platform could support the ongoing innovation that is core to our business. Like many financial institutions, we faced a bit of a burning platform issue, prompting the start of our transformation project in 2015. Our technology was aging. Parts of the infrastructure were 15-20 years old and at a point where it was difficult to support our business in a safe and sound manner. Decreased stability was one of the major issues that we were facing. We were having outages, sometimes daily, which were tremendously disruptive. This situation forced us to move our focus away from innovation, which is what drives our business, and more toward just keeping the lights on.

Second, growing limitations on our core business were certainly impacting our ability to win and compete in the marketplace. Making important changes and taking new products to market were just taking too long and we were missing out on opportunities because our systems and processes could not keep up. It was impeding our day-to-day business and that just wasn’t acceptable.

Third, we wanted to increase efficiency, which we realized was going to require a more integrated and less siloed architecture. For example, it was taking us up to two weeks out of every month to close the books. So, by the time the decision makers were able to see the financial results, the market had already moved. We knew that we would be able to make more informed decisions, if we were able to accelerate the close and get data into the decision makers’ hands more efficiently.
 

 
Finally, when we looked at the amount of change that we were going to have to digest going forward, we could see that it just wasn’t going to be doable with the legacy, siloed infrastructure. For example, incorporating pending and future regulations would have required changes to be made across multiple systems, with considerable allocation of testing resources and budget. We needed to be able to respond much more effectively and nimbly, as changes came at us from external sources.

Terry: Besides the business and drivers, can you elaborate on the organizational perspective?

Jason: Yes, it was equally important to us to drive team satisfaction, productivity and retention by giving our employees the best possible systems to do their jobs. For many members of our team, maintaining legacy platforms, and working on technology that was around before they were born, did not align with their career aspirations. The tech labor market is highly competitive right now and as legacy technologies have gotten older, the skills required are becoming more specialized, more expensive, and harder to find.

Frustration with the level of manual processing and workarounds required to compensate for the gaps in our legacy infrastructure was causing employees to leave the company, taking with them vital knowledge and skills that were very difficult to replace with new talent. We saw both the need and desire for innovation and modernizing our technology platform was a critical step to evolve our business.

For many members of our team, maintaining legacy platforms, and working on technology that was around before they were born, did not align with their career aspirations. Jason Birmingham, Head of Capital Markets and Finance Technology, Fannie Mae

Terry: How did you balance the risks vs. the rewards of this kind of transformational change?

Jason: These sorts of transformation projects often have a bit of a stigma attached, for being long and expensive because they are typically rooted in old ways of working. However, we were able to take an agile approach by starting small and showing business value early. For example, when we started implementing our new platform, SimCorp Dimension, we focused on just getting the simplest transaction, for the plainest vanilla product up and running in three months. Agile solves many key problems compared to the traditional ‘Big Bang’ approach. I think by embracing the agile approach, we have been able to mitigate the usual challenges organizations face with these large transformational projects. Additionally, starting small and showing value immediately created greater acceptance of the project throughout the organization, particularly with the key stakeholders and that was an integral element.

Agile solves many key problems compared to the traditional ‘Big Bang’ approach. I think by embracing the agile approach, we have been able to mitigate the usual challenges organizations face with these large transformational projects.Jason Birmingham, Head of Capital Markets and Finance Technology, Fannie Mae

Terry: What were you able to achieve as a result of modernizing systems – from a business and a people perspective?

Jason: This transformation program is one of Fannie Mae’s biggest successes. When we think about what we set out to do, which was to reduce our system footprint, reduce our technical complexity, reduce our stability issues and reduce our time to market, not only did we meet the objectives of our business case, we exceeded them dramatically.

Our system footprint has been reduced by 60%. Fourteen different accounting systems for our fixed income securities have been cut down to six with plans for further consolidation. Our interfaces have been reduced by 50%, but that metric probably doesn’t even do justice to what was achieved. We eliminated hundreds of interfaces from our footprint. This is huge in terms of minimizing technical complexity as well as latency in accessing data.

Manual processes have been reduced by 80%. We’ve significantly minimized our reliance on spreadsheets for accounting functions, data management and reconciliations. By eliminating those manual processes, we were able to reduce a significant amount of our operational risk.

Release duration is a time to market metric that we look at very closely here and we’ve brought that down by 66%. We’re able to move new products through in three to five months now, which is a pace that enables us to pursue the business we want to pursue.

The most important thing is what these changes have meant for our staff. We’ve been able to move 50% of our employees to higher value work like specialized accounting, technology builds and value-added analytics. I think there’s the obvious benefits of system modernization and consolidation from a complexity and risk reduction perspective, but the impact on team morale has been very profound.

Terry: What’s the upside of a project like this on tech, ops and the other members of the team? Why would you recommend someone in the C-suite of asset management to take this leap?

Jason: We’re tremendously pleased with how our staff have responded. Three years on, we still get fantastic feedback about what it’s like to operate on the platform and how they are enjoying working with the latest technology. People are our most important asset, and our success hinges largely on their commitment and productivity.

The relationship between business units has improved substantially since we consolidated these systems. People have really come together – they’re in meetings, they’re co-creating and developing products and solutions together. It’s satisfying to see that the teams have come together because some of the obstacles and roadblocks have been removed. I think this convergence of technology and talent is certainly aspirational for the top management of any business challenged by legacy technology.