First American Revisits Web Strategy to Increase Margins

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First American Revisits Web Strategy to Increase Margins

By RAJIV VYAS

Orange County Business Journal

First American Corp. is betting more than $50 million and its future growth, profitability and market share on a new software system that it calls the biggest initiative in its recent history.

Earlier this year, First American’s title insurance arm began rolling out a Web-based software system dubbed the FAST Transaction System. The Santa Ana-based company wants the system, which automates title searches, policy production and escrow closings, to transform operations over the next three years.

Parker Kennedy, First American’s president, calls it “the most strategic initiative we have taken since we started expansion out of Orange County back in the 1950s.”

The title insurer has spent five years developing and rolling out the system across the company. By early July, FAST was in 668 First American Title Insurance Co. offices.

The goal for the third quarter is to have the system up and running in 800 of the title insurer’s 1,000 offices. The rollout is slated to be done by year’s end or early 2003.

FAST, short for First American Software Technology, sits on company servers nationwide, from Santa Ana to Atlanta. The software centralizes title processing and escrow closings, the main lines of business for First American.

The system allows workers do title searches and process paperwork using a Web browser instead of 50-some different applications they now use.

Later this year, real estate agents are expected to start using the system to do title searches via First American’s Web site. They’ll also be able to check the status of their orders with First American online.

“The key of cutting cost is how you route your order with as few hands touching it as possible,” said Chris Buonafede, an analyst at Fox-Pitt, Kelton Inc., an investment bank that tracks the financial services industry.

In First American’s second quarter conference call, Parker said the company expects to start seeing productivity gains from FAST early next year. Rollout and training costs running at about $10 million a quarter are expected to start declining by year’s end.

A key goal behind the software overhaul: gaining market share. The company is betting higher productivity and better service will steer more business First American’s way.

For years, First American held the largest share of the title insurance business until Irvine-based rival Fidelity National Financial Inc. bought Chicago Title Corp. in 2000. Today, Fidelity holds 30 percent of the title market, vs. First American’s 23 percent.

Kennedy and other senior managers came up with the idea of centralizing data processing in 1997. They decided to move information to a main bank of servers and link the database to as many counties as possible.

FAST culls together different types of software used by First American. Bringing them together cuts down on the work hours needed to process insurance and escrow closings, said John Hollenbeck, executive vice president of technology at First American.

Searching title on just one property takes a worker an hour now, Hollenbeck said. With FAST, virtually no manual labor is needed for a search, he said. FAST searches First American’s database in about six minutes.

The added efficiency is projected to cut costs and double title operating margins in the next three years. Last year, First American’s operating margins were 6 percent in its title business.

“It will enable them to reduce their expenses per order, improve their service and hopefully reduce their work force,” Buonafede said. “You won’t see that happening tomorrow, or next quarter. It is going to be a five-year process.”

First American’s software makeover has had its hitches. The initial run at developing the system flopped, officials said, and was scrapped in 1999 after two years of work and millions of dollars in development costs.

“We threw it away the first time we built it,” Hollenback said. “We did not have the right people in the company. We hired the wrong vendor.”

First American has crossed most major hurdles as far as software development, analysts said. The challenge now lies in installing the system in all of its title offices and getting it up to speed. As with any big tech project, refinements are likely, officials said.

“We are changing the pistons on the motor as we are driving down the highway,” Hollenback said. “We have all the stability issues behind us. Now we have to add features that people want bells and whistles.”




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