Banking specialty firms continue to be affected three years following the mega-merger of banking vendors BoMan and FiJack. Amid rampant fears of monopolistic behavior by vendor monolith BoJack, significant revenue decreases are being reported by Cornerstone Advisors, IBM and Unisys.
Cornerstone partner Carl Faulkner announced closure of Cornerstone’s vendor contract negotiation and vendor selection services. “Our clients have only one choice, there is nothing to select or negotiate,” reported Faulkner in a recent interview at the company’s Scottsdale world headquarters. Reduced hardware sales have been reported for the IBM iSeries and Unisys ClearPath computers. The real winners seem to be Microsoft and Intel, whose Wintel combination is the only technology required to operate BoJack’s WhizBank 3000 Integrated Banking System.
The pace of consolidation increased in April 2004 with the acquisition of Kirchman by Brown Deer, Wis.-based Metavante Corporation creating the new firm MetaMan. Metavante CEO Frank Martire indicated the purchase provides Metavante with an in-house alternative. Other firms, sensing the need to “bulk up” to compete, rapidly hired investment bankers, put up their Phaser Shields and pushed the throttles to warp speed.
In quick succession, Fiserv and Fidelity Information Services joined to create the mega competitor, FI2. Not to be outdone, BISYS turned its minority interest in Open Solutions Inc. into 100%, naming the new firm BOSI, often referred to as “Bossy” in the industry. Jack Henry, based in the small town of Monett, Mo., pulled out the checkbook and purchased the banking unit of Harland and renamed the new company Jack Harland.
Elimination of multiple banking systems quickly became the path to improving the bottom line. Each of the firms announced cessation of support for all but a single product with plans to migrate all customers from their current platform to the one target system. Ancillary product vendors quickly aligned themselves with each of the four vendors as they fought for their survival.
Shortly thereafter, four became two. MetaMan, sensing the need to ditch its aging mainframe technology, merged with BOSI, creating the BoMan Companies. Significant monopoly concerns were expressed by the administration but lobbyists from the vendor community were able to push approval through the regulatory process. FI2’s only counter to this parry was to write a big check and acquire the smaller Jack Harland, forming FiJack Affiliates. Soon after, FiJack announced the end of support for the Jack Harland product and plans to move its entire customer base to the FI2 platform. Once again, ancillary vendors clamored to gain the favor of the two remaining vendors. Failure to affiliate signed the death warrant for many well known and respected product suppliers.
Fair Trade and SEC officials were stunned when approached by FiJack and BoMan to discuss their proposed merger. “Impossible” was the most heard sentiment from Capitol Hill. But deep pockets and top-notch legal talent with a cooperative White House made the impossible possible. Almost immediately after approval, the merger of equals created the remaining powerhouse, BoJack Companies. Within a year, the few remaining ancillary product firms were snapped up by BoJack. And then there was one!
Growing concerns of future system viability caused BoJack to pre-announce plans to halt support of the BoMan platform. Migration to the Windows-based WhizBank 3000 platform was scheduled to be completed within 24 months. Angry bankers wanted assurance their needs would be met in the future and demanded an audience with BoJack executives, known as the Presiding Council of Elders, or the “Old Ones.” Unfortunately, Council members were unable to work the request into their busy schedules.
We were granted a brief telephone interview with the Council and permitted to put forth a few pre-screened questions. The complete interview follows:
GB: You’ve frequently said that the WhizBank family of products decreases bank costs yet you have announced price increases as frequently as twice a year. Can you explain?
Council: First, let us address the issue of decreased cost. Approximately every five to ten years banks have historically reviewed their system options and in many cases converted to a new system. Now there is no need for those pesky system selection processes or to run the risk of a botched system conversion. System changes often cost a bank millions in license fees, conversion costs and integration expense. Conversions are history, integration is history, middleware is history! Now about the price increases, our shareholders demand a healthy return at a time when our internal costs continue to rise. The only rational way to accomplish both is by increasing our prices. Next question please.
GB: Since all development was outsourced to programmers in India, your customers have frequently complained of continued product shortcomings. Can you explain?
Council: Well of course we put development offshore, replacing $50-per-hour developers with $20-per-day developers. Who wouldn’t? This move has put millions in the pockets of our shareholders. Our Offshore Interface Group works hard to minimize the problems of communication and it does a great job! Sure, we miss a few things here and there, but they get repaired in the next release or two. Next question please.
GB: Cornerstone Advisors Partner Carl Faulkner has frequently denounced the wisdom of “too much consolidation.” Can you comment?
Council: Obviously we believe that there is no such thing as too much consolidation. In fact, we are delighted to have put an end to Cornerstone’s contract negotiation business. They will never take money out of our pockets again! We have time for one final question.
GB: BoJack’s annual user conference in Las Vegas is now the largest event of its kind in the world. Since this is the only venue for your customers to make enhancement requests, your customers are complaining about their ability to compete.
Council: This is about whiney customers and has nothing to do with the annual conference. Even when our companies were independent, our customers complained about us not being proactive, slow to market with enhancements, etc. Our Product Enhancement Team (PET) knows more about our customers’ banking needs than any of our own bank customers. At least 25 percent of our banks give us good marks on enhancement in each release. Geez, you can’t satisfy all of them all of the time. We are sorry, but your time is up.
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Editor’s Note: Well GonzoBankers, this could happen. A vibrant community of vendors with great products in nose-to-nose, tough competition will always give the industry better products at a fair price. Microsoft has shown us how lack of choice can impact our business. Let’s continue to have many choices for banking system solutions.
And by the way, since BoJack and the Council of Elders do not exist yet and you still have a choice, let Cornerstone help you find the right solution at the best price for your bank.