When IT Hits the Fan: Lessons from the Tech Outage

Mitch: Welcome to today's episode of Lending Made Easy. As always, I'm joined by Bryan Peckinpaugh, but we've got a special guest with us today. Joe Pavlik. He's our head of product management here at Baker Hill. So Joe, welcome to the show,

Joe: Mitch, Bryan, thank you guys for having me. It's a pleasure to be here today.

Mitch: Joe, just to kind of kick things off. Can you tell our listeners a little bit about your background and how you got into product management?

Joe: I started at the bank as a frontline employee and worked my way up into operations, both on the branch and retail side, into commercial and cash management. And after a while, I was afforded a couple of opportunities where I was blurring the lines between operations and the business side product management and just jumped at it.

I took to it. It's one of those things where it's a discipline that you get to wear multiple hats and have your fingers in multiple pies to make the entire organization successful. Just taken to it from that financial institution, I moved to a FinTech that I was with for five plus years and then moved on to a much larger FinTech and system integrator organization prior to joining Baker Hill. So it's been a fun journey, but I've enjoyed the discipline tremendously. So excited to be with Baker Hill and happy to be here today.

Mitch: Thanks for that in that context, Joe. And I think it's going to really speak to our topic today. You know, we're going to be talking about something that might bring up a few nightmares for you, your counterparts, anyone in the IT space, banking space from a few weeks ago, the global IT outage with Crowd Strike, but really want to focus more on what we can learn from that, right? That global IT outage. I think there's a lot to unpack as a financial institution, as a technology consumer as well. So Joe, just thinking back to a few weeks ago, what's something that you personally learned from the IT outage?

Joe: There's a couple of things first and foremost, it's the way in which you rely on and manage your vendors is absolutely critical. And it's not just a technology decision. It's an operational decision. And I think oftentimes and in my past roles, they were heavily focused on transformation. And technology does what it's supposed to do until it doesn't, right?

It's a great thing, but you have to make sure fundamentally at the heart of financial services is people and it's the operations, right? So making sure that you have the plans and the resiliency protocols in place to be able to manage something like that. The other thing that I learned is and sort of took away from, I saw a couple of posts on LinkedIn. We're all humans, right? So your service partners within your walls, they're going through some of the roughest times at that point, like when there's a system outage, it's not like they woke up and said, Hey, I'm going to ruin the operations teams lives today. So they're fighting through it. Remember that you're all firefighting at that point, and you're all trying to, for a lack of better turn of phrase, you're all pulling on the same rope. It's just the ropes on fire. So you have to be a true partner with your technologists because they're battling and working with the actual technology. So, those would be my three biggest things, the way in which you manage your partners and quite frankly, your dependency upon them and mitigate that risk with your policies, your operational resiliency plans, and then just treating your colleagues with respect and dignity because they're going through it too.

Bryan: No, the human element, right, is a key component of that. Joe, and it's also remembering that we're not the only constituents there with this outage in particular, working in the FinTech and having some impact to us and what our organizations were able to do from a lending perspective. I've got a good friend who's the CIO of a city and they were out completely including services like 911.

And It starts to put it into perspective of the impact that these things can have and trying to remember that even though we want to be up first and we want to serve our clients, that being knowledgeable and paying attention to what those other impacts are and saying, well, you know what, go ahead and try to figure out that 9 1 1 thing first and get those up, we kind of jokingly talk about it on the sales side here from time to time where it's like, even on our worst day, nobody's dying. Nobody's at risk of dying, right? We're not neurosurgeons where one slip is catastrophic. What we do is important, getting money back into the communities through our technology and our partnership with financial institutions. Don't get me wrong, but there's levels and, you know, bringing that human element to bear, bringing that foresight and then using it, like you said, to learn, right, to take the findings and feed that back through those same human loops of, okay, now that we've recovered, now that we've taken a breather, let's take a beat and let's debrief, let's take a look at what can we do to be more resilient? Because I think that's one of the biggest learnings coming out of what happened is. We all get excited about best in class, right? We get super into, wow, these guys have got the best mousetrap and it's really tempting to all race towards that, but that puts a fulcrum into the mix on one provider thinking about it just again, from our perspective in the LOS space, I think it would be bad for the industry.

If everybody ran Baker Hill, because now it's all the same, there's no differentiation anymore, aside from what you can do within the box, right? There are solutions that are a fit for everybody. There's, there's value in disparity. There's indifference between what people do to solve specific problems so that we can, as a global economy work our way through these things and have folks that aren't impacted. So we can have that focus when we're trying to get that rope off fire.

Joe: One of the things that you just mentioned that really resonated with me just from the product standpoint is that it's the innovation led by competition, quite frankly, instead of all the eggs in one basket or everybody using a single provider, it forces me and us to think differently about how we solve problems and how we drive towards it.

So I think to that point, when you're evaluating your partner ecosystem and whom you use for what that becomes very important to look at too is how they're innovating and how they're looking at competition so that you are able to hedge your bets is not the right term, but it's probably more hedging risks, quite frankly, right?

Like, how do I mitigate that and spread the risk is as optimally as possible. So I think that's a great point, right?

Mitch: Yeah, I think too, something that I'm hearing, right? Is this idea of a strategy behind all of these decisions. We've talked a lot about people on the show before, right? People are such an important part of banking. But I think too, when it comes to technology and partnerships, it is easy to say, Hey, I want to find just one person that can do everything for me. So I have fewer vendors to manage. It's easier for my teams to learn. But then again, there's this also this mindset of. I need to have a technology strategy. I don't need just to go by technology to buy it to have. I need to have a strategy of what am I trying to really accomplish here? And I think that that kind of plays in here a little bit, right?

Because if we start thinking about, gosh, we have these single points of failure within a technology ecosystem, potentially, right? How do I build out an ecosystem where I am going to have some resiliency? Granted, there's a time and place for everything, right? But how do you as a financial institution build out an ecosystem and a plan to purchase the right technology to provide some of that resiliency and kind of eliminate maybe some of these fires in the long run?

Joe: What's interesting with that Mitch is it goes back to the operational processes and understanding what you need to accomplish and then understanding the strategic objectives that you have for those, right? And we could go as simple as underwrite more loans, close and book more loans, right? Okay. So what does that process look like?

And actually understanding that there's somebody in a swivel chair going from Excel to a system to another system. But if you don't understand and map that it doesn't matter what the technology is you can't apply it properly. So my recommendation in that would be first and foremost, understand the operational processes that you want to affect to reach your strategic objectives, right? Like it's going to be revenue growth or some financial target, quite frankly, or it's an operational efficiency play. How and what do you do to meet those objectives, understanding what that process is allows you to apply the technology and find the right partners to apply it to certain parts of that process.

Bryan: Good strategies, good fundamentals to remember, right. As, as you're going through those exercises, it begs the question to add more, variables isn't the right word, but like dimensions to your evaluation matrix that solve for these things. There was a push towards kind of consolidation, buying everything from my core provider, leaning in on some of the integration that's there that I've seen start to shift where people are starting to break that apart. Partially for some of these reasons that if, if my core provider has an issue, now I've got issues across lots of things as opposed to just one particular component. So it seems to be a more shift back to best in class. But even within that, making sure that you understand the exposure.

What are the integration points for a particular piece of software? So like in, in the lending space, For what we do, it's critical to understand what are the integration points off of your LOS? What happens if I'm not able to pull bureaus on a given day because of issues that the bureau provider might have, what's my plan, what am I doing if the software is all of a sudden available, even in our personal lives, right? We we've gotten so accustomed quick anecdote was just out in Denver. My boys qualified for a soccer tournament and we've got our extended soccer family, if you will, going on different excursions and including, we went and drove up to the top of Mount Blue Sky and wanted to make sure we all got there at the same time so the boys could get pictures and hang out. Guess what happens when you start to get up in elevation? Cell phones don't work anymore. Good luck coordinating if you've got five or six cars in a caravan and somebody gets separated or what have you. So it's interesting and as we're coming down the mountain, and of course I got the lucky car full of seven teenage boys trying to figure out how we navigated to the restaurant when we can't pick up a cell phone signal and can't search on Google and can't get the maps to work that reliance is there. And if you don't have a plan, you can end up stuck with seven teenagers in a car who are hungry and cranky and fighting like brothers while you're trying to keep your sanity in the driver's seat.

Joe: That is the absolute truth. Well, congratulations! Ha

Bryan: I made it. I survived.

Mitch: Well, you know, I think that that might be a great way to wrap up today's episode. You know, just thinking about coming down off a mountain, hungry, getting some food. But I think really some great takeaways. I think the way that we think about technology is always evolving, right? I think we've brought that up right there's this best in class. There's the all in one. There are a lot of different ways to think about it. So the important thing that I'm taking away that I think anyone out there listening today, is really sitting down and thinking through what's my strategy. What's my end result that I want to achieve and know that it could be a moving target as well and things could shift and change.

So Bryan, Joe, thank you guys for sharing your thoughts today and thanks everyone out there for listening to today's episode of Lending Made Easy.