Innovationless Cores a Real Bummer

Crickets. Too often, after the vendor demos are over at a client, I hear crickets when I pose these questions: “OK, so which of the systems you saw over the past two weeks make you excited to convert to them? Which one is just dripping with the innovation you need to sell a conversion to the Board and energize the staff to undergo a massive project?” With the average client’s thermostat set to about 75, I’m used to about 142 CPM. Crickets and the wooly sound of banker butts adjusting in their chairs. I’m pretty sure I can hear the sound of eyes shifting downward to the floor at this point.

I hate to be a big neg-bomb, but the utter dearth of new innovations coming out of the core players is really bringing my clients down, dude. Seriously. Fifteen years ago the whole industry was abuzz. We had OSI, EastPoint and Phoenix emerging with new architecture and an updated look/feel, and we all thought the market was about to explode with Raw Coolness. “But nooooo!!!”

• EastPoint sold to M&I in 1996. In 2001 M&I sold the product to a group of EastPoint clients who in turn sold the product to OSI in 2004. And EastPoint was pretty well never heard from again.
• Phoenix went through financial problems and a wild, online finger-pointing drama and sold in 2001 to London Bridge. London Bridge did its best to make sure no one heard a word about Phoenix until it sold to Fair Isaac in 2004, and Fair Isaac also did its best to pretend Phoenix didn’t exist. Harland finally bought the product in 2006 and has stabilized it and brought back some market momentum. But no one would accuse the Phoenix product of showing off any substantive innovation in recent memory.
• Open Solutions is, of course, still around and probably the most innovative core player out there right now in terms of what it is doing with the CIF and reporting. Problem is, OSI is so mired in earnings struggles and ownership change rumors that even existing BISYS and DNA clients are wary of the company, and new signings are becoming fewer and farther between.

So 15 or 20 years later, we have maybe one innovative product in the market, and even that is debatable. Sure, we have Acumen emerging in the credit union market with some newer technology. But despite some impressive signings, Acumen can’t finish a meaningful conversion to save its life and is getting sued along the way.

Who knows how long Fiserv will tolerate that? We also have Corelation, boasting several execs and a chief developer who all used to walk the halls at Symitar, bringing a credible new product to credit unions, but it looks and feels so much like Symitar that it might be reckless to refer to Corelation as innovative.

So, why is the innovation level at our core vendors stuck on empty? Well for one thing, what many of us used to call core vendors are now in some cases really payments companies. Take a look at this table depicting segment performance for the first nine months of 2012 at our two largest vendors, FIS and Fiserv. If you wonder why we’ve lost that innovative feeling in the core groups, look at where the money is.

	Fiserv	FIS
Payments Revenue/Financial Services Revenue	122%	107%
Payments Operating Income/Financial Services Operating Income	102%	126%
Source: SEC 10-Q filings via EDGAR Online

Looking at the most innovate products at the major vendors now, we’ll notice a pattern:

Vendor	Most Innovative Product	Self-Developed?
FIS	Bill Pay	No, acquired
Fiserv	Mobiliti (mobile) or CashEdge (payments)	No, acquired in either case
Harland	CreditQuest (commercial LOS)	No, acquired
Jack Henry	Yellowhammer (risk)	No, acquired
Open Solutions	Core suite	Yes

Case law and money are both against the vendors getting anything but a D+ now or in the future when it comes to really getting innovative on their own. That’s not really criticism. Core innovation simply is not a high priority for them right now. So, we can keep complaining, whining and ranting, or we can get realistic. The path bankers need to take to get anything innovative done with their core processors means being realistic in their expectations.

I submit that GonzoBankers demand the following list of realistic innovations from their core providers:

• Integration – Rather than beating the drum on developing innovative core functionality or ancillaries, bankers should insist that their core providers spend some real effort on integrating the third party systems that will inevitably be needed as they grow. Some serious banging on the table (maybe with a shoe) is going to be required to make this happen from an “in practice” perspective. Plenty of cores have the technology to make integration work, but there is pretty much not a vendor alive that doesn’t use cost, delays, filibustering, or general pissing and moaning to discourage their customers from using third parties.
• Data Management – Core providers, through their data warehouse products, are uniquely poised to help their clients solve the age-old data management and reporting woes. The core guys could, if they really wanted to, spend a lot of time and money in integrating and normalizing third party data into the warehouse, and in doing so – simplifying reporting. This would be a combined innovation involving software and hotshot professional services people. Push like hell for them to do this, GonzoBankers.
• Sales and Contact Management – Core providers are again in a unique position to truly make a practical, friendly sales management product that the front line will actually USE. No matter what the core or point solutions vendors tell you, there is no integration tight enough between a core and sales system that is good enough that the front line will use it. The core guys could solve this.

I’m sure my loyal readers could point to a hundred other innovation targets for the core providers, but let’s keep focused on a few that could have some seriously high ROI. I see this new approach to core vendor innovation demands as sadly necessary. We can whine about the lack of innovation from the vendors, or we can roll up our sleeves and get a few items (probably three out of the top four items our clients request in every RFP we write) requiring heavy core vendor lifting off of our To-Do lists.

-Hodgins  

 

 

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