OVERVIEW

While Asset Based Lending (ABL) survived without computers for almost 45+ years, the new year offers the choices and challenges of finding the right combination of hardware, software and report format to satisfy the quality requirements of management.  This "White Paper" is written as an overview of the general hardware and operating systems available and then focuses on the software choices available to field examiner's.

NOTE:  Things have Changed and this white paper was started in 1996.  Software is more than the ABL field exam report because that now includes data analysis from client electronic reports.  Please note that a complete solution includes both field examination software and data analysis software.  Integration of the two is even better.  This White Paper has been split into different white papers for Hardware and Software due to the expanded data software section.

Since the CPA's have a hard time calling field examinations "audits," we will refer to these things as reports or field examinations in this "white paper."

HARDWARE (in brief)

RAM:
Go with at least 2 Gig if you run several applications at once, but 4GB is so inexpensive that it is fairly normal now.  The prices are low and the speed stays good all day long.  Less spooling to disk is nice if you run multiple applications.  Windows loads more of itself into RAM based on what you have available.

Screens:
The newest systems have screens of at least 1440 X 900 and the old standard of 1024 X 768 has clearly been surpassed by these new (wider) screens.  The problem these days is wide screen at 16:9 instead of the old 4:3 ratio.  The 1024 X 768 (4:3) size was a great leap forward putting 786,432 dots on the entire screen.  If you move up from a 14" screen to a 15.5" screen, the same 1024 X 768 (786,432) dots are still there, but they are bigger due to the physical size.  Now along comes wide-screen TV at 16:9 and we can watch DVD movies on our laptops in 16:9 resolution.  But business people (like the ones reading this) need to see what's on the screen.  The 16:9 resolution cuts the view to 1280 X 800 or 1440 X 900 or 1600 X 900 and that squashes the fonts to make them short and hard to read. 

Want to make a BIG MISTAKE? Order a 14" screen at 1280 X 800 or 1440 X 900 and you may just go blind. You will likely hear complaints from the staff about the tiny font sizes being displayed. It is a complete mismatch to go up in resolution and then down in screen size. Wide screen laptops at 16:9 are a mistake at less than 17" and that becomes a luggable, but not airplane friendly machine. Try this before you buy and avoid ALL widescreen laptops that are under 15.5" on the diagonal measurement.  The native resolutions are important to consider because many of the available screen resolutions in the Windows screen properties look terrible, thus making a switch to a lower resolution somewhat problematic.  As an example, our old IBMT60 laptop with a 14" screen runs fine at 1,400 X 1050, but 1024 X 768 seems to be overly large and grainy on the same screen.  Our 22" monitors runs at 1600 X 1200 and looks great.  Other resolutions on that screen are out of focus and fonts tend to look squashed and distorted.  Again, smaller wide-screen displays are not designed for business use, but they are indeed becoming more common.  The future may require larger screens to compensate for this widescreen (anti-business user) madness.

Here are some of the common screen sizes:

If the ultimate portable is what you seek then you'll be squinting at the higher resolutions.  14" screens are a minimum since the resolutions have gone up.  A 15" screen is a bit crisper at the higher resolutions and portable. 17" models look great but are tougher to lug around and not useful on an airplane, but most of us are at a desk with these so bigger is just better for the majority of time that you use it.

NOTE:  Cheaper machines have shared graphics memory.  This takes some conventional RAM (that 2GB to 4GB of main RAM) and uses it for video RAM.  Not a good idea and these machines can be painfully slow.  If you have one of these, then get more RAM (at least 4 Gig) and you'll see the speed pickup about 25%.  Things are improving as the chip designs for laptop computers are optimizing the integrated graphics processors on the motherboard with much higher performance.  Still, a dedicated graphics processor (discreet graphics) will provide less crashes and higher performance.

If you fly often, the 15" and larger screens will get jammed into your body when the forward passenger reclines, but you'll be better off when you are at a desk, which is much more of the time.  Use the Ergonomics Act as an excuse to get a better screen.  More pixels on the screen can increase both screen content displayed and eye strain on the smaller notebook displays. Our advice, stick with at least 1024 X 768 display settings if your screen is 14" or less diagonal and scale up as screen size, graphics card resolution and your deteriorating eyesight allows.  Windows (particularly Win7) also offers some larger font options for icons and web browsers.

Processors:
Speed was an issue until the Pentium 166-233 machines became available around 1998.  Most business applications run very fast on anything these days so lets just say that the new machines are FAST!  Since we're talking about field examinations, we're talking about notebook computers for this White Paper.  We still have a cash flow model that has 500+ rows and it used to calculate in under 30 seconds on an old 286 speed Toshiba T-1000LE.   That same spreadsheet on a modern machine recalculates in a blink.  In essence, past the curve for the needs of general business applications.  New stuff is just gravy and when machines wear out, you get a speed demon with even the low-end stuff.  We process data electronically and the faster machines offer an edge that was not seen in the past.  Electronic aging calculations, data parsing and related analysis is all faster with the better machines.  The Intel dual or quad core, i3, i5 and i7 chips are rockets and the AMD based machines over $500.00 are also in the rocket class and perhaps a bit better of a value buy.

Most of the new chips are duel core or better and this lets your virus scan run in on one processor while you work on the other.  Six core machines are here and eight core machines will be here soon enough.  The competition between AMD and Intel has indeed made these all speed demons.  You'll see better utilization of the multiple cores in the software released after 2011 due to Microsoft's .NET compiler enhancements and some 64 bit processing changes.

Hard Drives - The biggest cost?:
They are all big now.  We have a 180GB drive that is only 70% filled and that includes all of our family pictures, music library, 80 programs, 20 years of business letters and related forms and some family videos too.  The issue is not size on a business laptop used for audit, the issue is reliability.  We have seen this for many years and the rate of failure or re-image needs is about 1 in 10 over the course of the first year on a new machine and almost 50% over 3 years.  BACKUPS ARE KEY, but that is not the only answer.  Users should treat their laptop like handling glass and problems will subside, but the airport security shuffle, overhead compartments, in and out of cars and constant setups can take their toll.

We recently switched to solid state drives (SSD) because they are almost 50% faster, run cool and they have no moving parts.  They are 100% Flash memory, just like those USB-key drives.  While SSD technology prices are dropping, they are still 3X what a normal 2.5" drive costs, but they are worth the price because they don't crash and fail as often as spinning hard drives do.  This up-front cost will be recouped from the cost savings of a replacement drive (although it may be covered by warranty) plus the lost hours at the staff level plus the IT cost to reimage the drive and then restore the data.  In fact, this could reduce the IT needs considerably over the life of the laptop without the reimaging expenses that will occur all too frequently with spinning drives.  We use 160GB-225GB SSD drives, but 128GB is more than enough for field exam business use.  Our research noted that these SSD drives are good for about 20 years of use before they wear out and you do NOT defragment them because the data is spread out (leveled) on purpose to let the drive controller recoup bad bits of data into nearby memory addresses (cool!).

Partitions?
Drive partitions?  We recommend partitioning drives into C:\ and D:\ to segregate the data and ease the backup process.  Examiners will then put their data on D:\ and that makes it faster to backup the drive and you just need a good image for drive C:\  There is a lot of software to do this and some is free (look at the free http://www.easeus.com Partition Master or of course the low cost Partition Magic).  It is fairly east to partition a drive -- run the program, reduce the size of the primary partition to about 50GB-100GB to make room for the next partition.  Then set the size of the second partition (extended partition) drive D:\ to be based on the remaining space left from the resized primary partition.  Most factory drives use some of the space as a raw and restorable image (glad your data was on D and not C for that restore right?).  Select the option to run or process the pending tasks and it will ask you to reboot.  The process usually takes 10-30 minutes on the reboot).  If you have a drive image setup this way (IT departments do that), then this is simply a re-image process during the new machine or rebuild drive setup, but different sized hard drives may require the reallocation of unused space for drive D:\.

See security section below for comments on encryption for the hard drive.

Keyboards:
Keyboards are another area of Love and Hate with Examiners.  Toshiba started the revolution when the quality T1000 was made available.  With the PgUp, PdDn, End and Home keys on the right, this has become a spreadsheet users choice.  IBM (now Lenovo) has had the best quality keyboard and it has been copied in style (not feel) by Dell.  Unfortunately, as screen sizes have grown, so has the keyboard and the IBM format of putting the PgUp, PdDn, End and Home keys in the upper right has become a stretch for spreadsheet users who often use these keys.  The Toshiba standard format makes each typing key 1.5mm narrower.  In case you're wondering, we're IBM / Lenovo users here.

Ports:
You need a USB key and perhaps a CD Reader to get client data.  Most of the newer laptops come with 2-3 USB ports.  The USB Memory Key (thumb-drive) has essentially replaced the floppy and displaced the CD.  The newer USB 3.0 standard is here and it is many times faster than the common USB 2.0.  If you have a USB 3.0 port and backup drive to match, then backups will be very fast.  CD Drives are generally included with the laptop purchase and software is seldom installed with floppy disks anymore.  These USB Key drives are fast and hold plenty for data transfers and the important backups that are needed on the road (you do back up your data don't you!).  Clients can transfer data to the USB Key in seconds or email the data to your examiners.  This can save time in many areas and it is convenient to provide the Borrower with the test items from the Billing Test, Credit Memos, Cost Test, etc.

Port Replicators and Docking stations have evolved into smaller port replicators.  Toshiba uses one replicator across the entire line of computers and other are following that model (IBM has a similar "standard" replicator for many models such as the entire T-Series).  Yes, you can plug in your mouse, your printer, your Ethernet cable and your power cord when you get into the office, but the replicators are easier to deal with on a recurring basis.

Data Security:
Most of us know about locking our computers up, backing up and such so this section will focus on data security.  With the OCC audits now scrutinizing customer data security, recent reports about lawless leaks of data on WikiLeaks website and even the value of the brand name of your institution, the need to secure data is real.  Passwords MUST be used to login to the computer.  Hard drives should be encrypted with software because that prevents someone from taking out the hard drive and simply accessing the data with a cheap hard-drive docking station (no operating system at all, just copy the data).  Encryption prevents the data on the disk from being read without decryption (real login activates the decryption).  Thumb drives (USB-Key drives) should be encrypted.  Employees should be background checked and they should sign statements of personal liability and obligations for civil damages if they violate Company data integrity policies.  Of course you need a Company data integrity and non disclosure policy and a signed document that the employees have read and understand it.  If possible use RSS encryption keys (a wireless key that has a pass-code posted every 30 seconds).   If employees are fired, the key is deactivated before they are told and then they are locked down.  Be diligent here, it advises employees, it heightens professionalism and it could prevent problems.

Windows-7 Ultimate and Enterprise versions (the expensive versions) includes BitLocker encryption so that you can secure the entire drive and folders, including USB Thumb-Drives.  Third party add-ons can do the same.  The BitLocker type of technology prevents someone from hacking into any of the data on the drive, even if the boot from another operating system.  This adds some cost to the Windows installation and it can be a bit of a hassle for examiners that MUST get data files from clients via e-mail or USB-Thumb drives.

Your IT Department:
Your IT department will have some ideas and some limitations (manufacturers), but you should require a minimum of 15" screens to be kind to your examiner's eyes and it just makes sense.  Rollout is a support issue and a headache.  If you are buying more than a few notebooks, someone needs to install the software, network adapters, assign IP addresses, etc.  Having the same machine across the enterprise has it merits, particularly for setting up video cards, screen displays, sound cards, etc.  A large number of institutions have gone to laptops only and the desktop machines are gone.  But watch out, because laptop theft is all too easy and better security measures are needed.  Will future desks have a lockable storage drawer?

Software installations are relatively easy and the headache of finding good drivers is virtually gone with since Windows 2000 came out.  Most machines are running well out of the box and prior setup hassles are largely gone. 

On The Cheap for the Self Employed (or for the really cheap)
I have just one word...ebay.  We were able to find a dealer advertising on ebay that sells Lenovo ThinkPads.  Go with an IBM T60, T61 and you won't be disappointed.  Make sure it has the operating system installed and look for pre-installed MS-Office if possible.  Expect similar savings with pre-owned machines from Dell, Toshiba and others.  Extended service plans are available from GE and others. 

In regard to speed, unless you develop software, routinely perform video editing or animated graphics, the speed issue for business has flattened out.  Expect few benefits with super chips for business applications. Data analysis is another consideration, because more speed will make file analysis faster.  If you develop software, download and parse lots of data like us, then faster is always better and the new i5 and i7 chips are a bit faster than the old stuff.

What Should You Buy?
The answer depends on your operating system (see below) and software needs (also see below).  With MS Office  versions of Word and Excel taking 7.5 Megs - 15 Megs of RAM to load (each), plus Windows itself, then 1 gig is a bare minimum per application to run Windows for Asset Based Lending purposes.  RAM is so cheap that 4 Gig is the way to go (Get more RAM if you run several applications at once).  The screen size is a choice of thinking to the future and dealing with budget constraints, but wide screen displays present visual problems for business use if they are 14" or smaller in size. 

Our advice is:

Buy the fastest machine, with the most RAM that you can afford.  Second, give-up brand loyalty in favor of more RAM and a better display screen (we recommend 15" or larger screens) and don't get stuck on the idea of a laptop being too wide for airplane use, you'll be in the field or a hotel most of the time.  Avoid wide screen displays unless you are getting at least a 15.5" diagonal screen.  Spend the money on the SSD hard drive for speed gains, better battery life and much higher reliability without the hard drive crashes.  Consider keyboard layouts if you are accustomed to a particular style.  Lenovo, Sony and Toshiba and Dell have figured out that direct sales over the web and direct mail are widely accepted.  Lenovo's newest machines and most Dell, Toshiba and Sony models are available for $500 to $1,700 loaded; while less well known brands may cost still hundreds less.  Also consider if Windows and Microsoft Office are included.

OPERATING  SYSTEMS 101

Windows XP or VISTA or Windows-7?
New operating systems typically require a "seasoning" period for the MIS professionals to get excited about the new features and reliability.  Virtually every major vendor and Windows based programming house has switched to Windows-XP development tools and programs as a target.  Vista arrived 01/2007 and it will require a new machine with PCI-e graphics and lots of RAM.  The software installation hassles associated with Vista put many people on hold and we can talk your ear off about Windows Vista support issues with installations and locked-down directory structures.  Vista runs great once you have things installed and configured.

Windows XP is the revised Windows-2000 operating system.  Unfortunately XP-Home edition is included on most laptops, but it is maimed from a lack of networking support features (peer-to-peer support only).  Pay @ $50.00-$100.00 for the upgrade to XP Professional.  Windows XP operating systems just run and run.

Vista looks great and it is fairly stable too, but it drives people crazy with security limitations imposed on the user.  You'll need good graphics like PCI-express to make it fly.  The biggest problem has been with applications that want to store data to C:\Program Files\ProgramName\..  This directory does not allow writes, it is read-only and it has caused many problems for software vendors.  Service packs have not improved on the compatibility issues and software vendors need to make changes to make the software run out of the box on a Vista machine.

Windows-7 looks great and runs great.  This is what is installed on new machines now.  Skip Vista and go with Windows-7.  It is spreading rapidly and the reviews are positive.  There is  wide adoption starting in 2010.  We think Windows 7 (32bit or 64 bit) are faster and more stable than any prior Windows system.

The 64 Bit Question:
For those that don't remember what the differences are between 32 bit and 64 bit operating systems, the concept is about how many bits of data you can move at one time (in one cycle).  Think of a bricklayer carrying 32 bricks as compared to one carrying 64 bricks with each pass from a pile to the job-site.  You get more done faster with the 64 bit load per cycle.  The question for the users has been "Will it run my 32 bit applications?"  Yes it will.  Questions about speed, reliability and other concerns seem to be largely unfounded.  Note that as of today (12/31/2011), Adobe was still struggling with a 64 bit Flash Player for 64 bit Windows, yet Adobe has the most advanced multi-core 64 bit enabled software in the form of Photoshop and Premiere for video editing.  It was a great year for 64 bit computing in 2011.  Everything is in place now and most of the laptops are coming with Windows-7/64 installed. 

Macintosh
What about the Macintosh?  The Macintosh is OK if your shop is all Mac.  But how many Mac shops are there in the ABL profession?... probably under five.  In 2009, Apple announced that they have an emulator for Windows to run on a Mac, but why pay the premium price for the Mac and then slow it down with an emulator?  Great and "sexy" machines for sure, but is that important?  The newer Macs will dual boot to Windows or OSX, but you pay a premium price.  Compatibility issues?  We have seen that the Microsoft files need to be in a Microsoft data structure and you may have problems with copy and paste form the Macintosh side to the Windows side (just run all Windows applications if you are doing business PC applications on a Macintosh).  They are indeed very nice machines.

Virus Paranoia
YES, you need virus software to be running all of the time

YES, you need to subscribe to the automatic updates

YES, you need a software firewall such as Norton Internet Suite or McAfee Internet Suite or Zone Alarm

YES, you need to run spyware software checks from Lavasoft and SpyBot to keep the junk out

YES, malware is also out there.  Try to run Malwarebytes at least weekly.

YES, you need to password protect your computers and remove all Guest Accounts

YES, you need to turn off file sharing if you are on a WiFi network or hotel network or your borrower's network so that they cannot get your files.

YES, you need to password protect your virus software so that a virus (or an auditor) cannot turn off the virus software

Decisions Decisions
Our advice, if you have the hardware, run Windows XP-Pro (service Pack 3) or Windows-7 and skip Vista.  With these systems, there are few bugs and no operating system crashes.  Windows updates are installed with a web update and reliability is very good.  We recommend the XP-Professional version (network enabled edition) or Windows-7 in 32 bit or 64 bit flavors.  And of course, we recommend that everyone learn about virus threats and how to prevent them.  If you get Vista, just be patient to learn about it and get the latest software patches for your favorite programs.

SPEED = SIMPLICITY VERSUS OVERHEAD

This is a hardware and operating system question, but again, we have some frank answers.  If you use only spreadsheets, speed is generally not a problem.  Spreadsheets are all written in "C" (not C++) and the applications are fast.

But what if we link the spreadsheet into the word processor with OLE links or DDE?   Word takes 3-5 Megs for the executable program and Excel Takes 3.5-5 Megs for the executable program, plus all of the DLL's for Excel and Word, plus the OLE layers and you have a need far in excess of 32 Megs!  This Ram and processor cram is often called "Overhead" and it slows down the system.  The power of Excel and Word are deep, they just require lots of RAM.  For speed, keep it simple, lose speed with linking (and gain all the maintenance chores) or find a better way.

THE GREAT HARDWARE AND SOFTWARE LIES

Do you believe that hardware will make your examiners faster?  Do you believe that spending almost $1,500 on a new Dell or Lenovo ThinkPad, with a life expectancy of 3 years will get your examinations done faster?  Do you believe that the new Microsoft Office 2007 / 2010 will allow you to complete examinations faster?  The Spin Doctors at Microsoft and Intel are having a hard time getting word processors and small spreadsheets to run faster (ok maybe it's 3/1000th of a second faster on the recalculation -- BIG DEAL!).

Lies, lies, lies.  We see virtually no speed difference in our 486 versus our Pentiums when it comes to spreadsheet speed. It scrolls a bit faster, it shows graphs a bit faster, it plays games a lot faster (by the way, that's from the video card improvements).  There is some improvement if you link to word processors (e.g., glue Word and Excel together).  In short, the productivity advantage of the "big-expensive" machine is under 10% with a 0% improvement in the quality of reports.  Many people are getting newer machines due to super cheap prices and improved reliability of the hardware and Windows-XP.  Our 1.6 Ghz Duo Core machines with 2Gig of Ram are so fast on spreadsheets and word processing that there is no speed improvement seen and out i7 super-PC's show little improvement over that with a spreadsheet.  There are two exception, noted in the next section below.

Lies, lies, lies. We see virtually no speed improvement with Office-2000/XP/2003/2007/2010.  Office is code bloated and packed with features to play with.  Productivity will likely decline from using Office-2000/XP/2003/2007 as users build frustration and use time reading help files, trying to find and use all of the features.  The truth is that spreadsheet features have been relatively consistent for over 25 years.  Office 2007/2010 includes a new menu structure to confuse people even more.  The spreadsheet has slowly evolved with better formatting, better graphs, better preview screens, Etc., but the basics developed by VisiCalc (circa 1981) are the same.  In short, the productivity advantage of Office-2000/XP/2003/2007/2010 is 0% (possibly a loss) with no improvement in results-based quality.  Office 2000/XP/2003/2007/2010 will require those that switch to learn a few new tricks to get back the speed that they once had.  Office 2007 / 2010 will destroy macros that use menu commands and some older pre-Office-2007 functions, so now you need to start your automation all over again.

The lies continue to be perpetrated by Intel, AMD and Microsoft who want shareholder results.   What kind of results do you want? Custom tailored and highly integrated software is the best way to improve the speed and quality of field examinations. Just look at accounting software, factoring software or back-office software used in the ABL business...or are you still using spreadsheets? We cover the customization choices below.

WHEN FAST HARDWARE MATTERS

Our company, FinSoft, produces several products and one is a fast data analysis package that is specifically targeted to analyzing ABL data.  Faster machines process data faster because in the case of data analysis, there are millions of calculations being done.  Our faster machines can reage a receivable report, refoot it and calculate all ineligibles from a 40,000 invoice report in about 12 seconds on a dual core i7 system .  Yes, the hardware does matter and in our case the software uses very advanced logic to make all of the calculations so fast.

Windows VISTA and Windows-7 are using advanced graphics display technology that makes some of the screens look like a glossy photograph.  This requires very fast graphics processing and a new machine is going to have that.

Back to data analysis.  This is a software solution.  We have cut the time on some field exams in half with our data analysis product.  We've found plenty of fraud cases and probably prevented others with detailed analysis and mathematical proofs.  Why would you want to do your fieldwork and back office calculations slower?  Why would you want extra staff?  Why would you hire an outsource firm that can't get things done with data analysis?  Why would you avoid software that was written specifically for ABL to save time and money in the manner mentioned above?  A possible "avoidance" answer (excuse) could be that you are paid by the hour (possible), you like to work too hard (unlikely) or you haven't seen what we've got (hard to believe)  Great software deserves your attention, but most of the hardware is about the same and it has never been more affordable.