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Main / BS&T Contributors Weblog

If you think that I'm not qualified to dish out advice about selling because I am only a technology consultant, think again. My very first business venture at age 10 went through a rude awakening that I was able to overcome for one simple reason: I learned how to sell.

Any marketing consultant will tell you that one of the best ways to increase sales is to market to existing clients. They already have a relationship with you and - presumably - trust you. Consequently, they should be easy targets for cross-selling or up-selling. Call it low-hanging fruit. Financial marketers even have a fancy (if somewhat dull) name for it: increasing share of wallet.

First, how about if I define the players:

David is ACI Worldwide at $348 million per year in revenue.

Goliath is IBM at $91 billion per year.

The sub-Goliaths are CheckFree at $973 million and Metavante at $1.5 billion.

Celent Roundtable covers the latest trends, main drivers, and the challenges of core replacement.

By Nancy Feig

By Art Gillis

There are hundreds of checks and balances I use in the selection of the best core apps solution for a client. The price of a vendor’s stock is not one of them. And what I know about the stock market is like what a pharmacist knows about brain surgery. “Whadya got for a headache?” “Let me open your skull to see what’s wrong.”

But I confess to keeping track of bank tech stocks in my report "Automation in Banking." Prices are tracked from April to April. Having noticed the Dow Jones news item last week about an all-time high, I looked at the performance since April 2006 of 17 public companies in the report whose revenue is almost entirely from bank technology. Only three companies had stock price increases. They were Open Solutions Inc., Fiserv and TSYS. OPEN scored a 31% gain during the period thanks to a private investor takeover. FISV made a gain of 19% doing just what comes naturally for this giant. And TSS got back on a recovery track with a 19% gain. The rest of the list of public companies is not breaking stock market records either because the companies have leveled off, they are a small part of a public company and thus not a factor in the price of the stock, and some are marking time while looking for acquirers. If there’s one thing the stock market and I agree on, it’s the content of my blog posted at www.banktech.com/blog on August 21, 2006 - “This is a Pretty Dull Time for Bank Technology.” Maybe I should add, “except for M&A activity.”
Disclaimer: Art Gillis relies on his bank for investment advice and portfolio management.

By Art Gillis

I am pleased to offer banktech.com/blog readers my 11 picks, along with the following explanations:

• I'd have to retrieve the work papers for the 300 client assignments in order to provide the reasons each winner scored the strongest relative to the criteria that were most important at each bank. That's not a task I want to spend months on right now.
• The 11 picks were winners the day I delivered my recommendations and they are still proving it today at those banks, unless of course, the bank was acquired.
• Some of the 11 were recommended more than once.
• I don't think I ever had a client that wanted a politically correct answer. They wanted recommendations that were backed by substance. Several bankers had their own choices before the official selection process occurred that they had to give up. They all understood why. Emotional reasons are never good reasons when making technology decisions.

That's enough consultant hedging. Here are the picks in no particular order:

1. ITI Premier in-house and outsource
2. Jack Henry CIF 20/20 in-house
3. Metavante IBS outsource
4. Computer Services, Inc. homegrown system outsource
5. Precision Computer Systems BAIS in-house
6. Metavante Bankway in-house
7. Jack Henry SilverLake in-house
8. Fiserv CBS in-house
9. Harland Financial Solutions SPARAK in-house
10. Fiserv SourceOne outsource
11. Fidelity Systematics outsource

By Art Gillis

I’ve often been asked by typically those who have a bias or are uninformed, “Why don’t you just save bankers from a time-consuming evaluation process and declare the best system for core processing?” I politely explain that every bank has its unique characteristics and, therefore, there’s no such thing as one best system for all. It’s sort of like different patterns of behavior when people are caught in a downtown traffic jam. We’re trying to get out of a mess, but we handle it differently.

Recently, I was stuck in downtown Boston traffic at Kneeland Street and Atlantic Avenue heading for the financial district. I looked over to my right and saw a lady doing her needlepoint. That’s Boston. In a similar scene in Dallas, a young lady was doing her eye makeup while the guy in the pickup behind her was blasting his horn. That’s Dallas. If you think I’m being unfair to women drivers, I will only say I tell true stories. If it had been men doing their needlepoint and putting on their eye makeup, I would have said “guys.”

I am so glad that we are not one homogeneous society created from one cookie cutter. Probably the best thing any bank has going for it today is its self-created culture in an industry that is so regulated that it produces commodity-like products and services. It is a bank’s unique culture that I try to preserve in order to find the tech solution that will be the best fit, not the neutralizer.

If you didn’t like my traffic jam analogy, here’s a closer one. Recently, I visited several Web sites of the top 120 banks. I had a specific business purpose and I wasn’t on a witch hunt. I believe I could describe my experience with each bank’s Web site to any seasoned observer of banks, and that person could identify the bank. You won’t believe that, so here are just two tests. (1) I submitted my inquiry to one giant bank and explained my purpose. Within 22 minutes (Wow! that’s fast technology), I got this answer, “The information you are requesting is not publicly disclosed by .....” I didn’t believe the response so I ordered their annual report. My answer is clearly disclosed on page 117, and I couldn’t resist telling the bank that annual reports are indeed public and they were wrong not to provide the information I requested. The next day, FedEx delivered another annual report from this bank, but I don’t know why since I already had mine. It might have been to wipe out their guilt. (2) The second bank was entirely different. It sounded more like my mother. “Are you sure you want....” After five e-mails and an ID number to make sure my request wouldn’t be ignored, I got what I wanted and I felt as though I made a friend. The kindness demonstrated by this bank was infectious. Even I picked up on it and thanked her. Her last e-mail said, “You are very welcome! Please let us know if we can assist you.” I was so glad she didn’t say, “And have a nice day.” Do I have to tell you this large bank is in the South?

One of these days I expect the regulators to issue some type of guidance to banks that says, “Know Thyself.” It has been the first task of my client projects. Once I know my client, then finding the right solution is a game of matching constants - my bank’s needs and vendor offerings that are a little bit like spinach. Some of it ain’t good for you.

By Art Gillis

In a survey I conducted last year, 74 bankers were asked to complete a questionnaire. In addition to answering specific questions, I asked them to volunteer their own words describing how they felt about technology. Fifteen words kept popping up consistently among the group’s responses. Integration was one of them. But I’m not sure everyone had the same thing in mind when they referred to the word.

As with a lot of technology, one has to remove the marketing spin to get right down to the truth. When the word first appeared in the mid '80s, it was customary for vendors to pick up on the buzzword appeal, so every sales brochure described bank systems as integrated. They were not. But two decades later, it’s a safe bet that the top dozen or so core applications systems are in many ways integrated. Here is just one man’s opinion of the purest form of integration:

• Every application feeds the general ledger and the customer database automatically without human intervention.
• Every application follows a design concept that was created by one architect.
• What used to be called silos is now a universal Relational DataBase Management System.
• Tran codes follow a consistent pattern across all applications.
• Screen designs have a common look throughout.
• No duplication of data entry.
• Navigation is as clear as finding the bank’s vault.
• Prompts provide audit alerts as well as cross-selling opportunities without irritating the customer.
• Multitasking occurs smoothly without having to log off and on.
• All channels, real time or not, deliver data so that account status is the same.
• Foreign (other than the core vendor) ancillary applications lose their identity and become part of the core system, as opposed to “butted” to a portal of the core system.
• Being able to “Know the Customer” completely, not just for regulatory requirements but for the Business Development people in the bank.

Smarter technicians than me (I’m not a technician) can certainly add to my list of pure qualifications, but I’m comfortable in saying that any banker who has issues with integration today is living in a cave. Integration is available from several good vendors right now, just for the paying - paying for the system and paying for the pain of a conversion.

By Art Gillis

In recent years, I’ve been saying that my insights about core processing come from two sources: 1) assignments I have completed for 300 banks. And 2) from the annual compilation of Automation in Banking. But last week a highly respected listener said, “Wow!” when he heard the 300 bank projects I had completed. I wasn’t sure if he meant skepticism or true admiration. In any event, it triggered my neurosis, so I counted the clients referenced in my 33-page c.v. and, uh oh, I came up with only 180 names.

What happened to the other 120? It’s called “industry consolidation.” But did my recommendations cause the banks to sell out? Or was it just a natural phenomenon of the industry. In the 30 plus years that I have been working for banks, the number of commercial banks shrank from 10,850 to 5,274, according to my buddy, David Soto (dsoto@highlinedata.com), the guru of bank stats. That’s a reduction rate of 49% . The reduction rate in my client base was 40%.

Then may I relax and say my clients are just representative of the industry norm? What I do know is that the 180 that still exist are using the same system I originally recommended even if it was 30 years ago. And this is why I begin the orientation meeting at each new client assignment with this remark - “We are going to select a new core system for your bank, and this will be the last conversion you will make even if you live to be a hundred.” Everyone cheers, and Excedrin sales drop in that city. As I see it, there are about 3,712 financial institutions that need to get over the denial phase and take a good look at their core system. Sooner or later, they are going to have to switch to something better. Last year, 755 bit the bullet and switched. At that rate, the entire population will be in good shape in five more years, except for the core vendors who will have to find other things to sell. That’s OK, most of them have dozens of other things to sell.

By Art Gillis

I’m not a fan of “Top xxx Lists,” except for the American Banker list of the top 25 computer consultants. This week I reviewed the Top 500 Innovators list published by InformationWeek. I wasn’t sure what the criteria were until I read the back page where the editor-in-chief made certain these weren’t just pedestrian outfits that get the “plenty hard work” done. The publication was “particularly picky about applying the innovator moniker.” Following are the names of the 25 banks (including near banks) and 9 tech vendors that serve the banking industry.

Banks:
AmSouth
Bank of America
CapitalOne
Citigroup
Countrywide
Discover
Fifth Third Bank
First Horizon
JP Morgan Chase
M&T Bank
Mellon
National City Mortgage
Navy Federal Credit Union
Northern Trust
PNC Financial Services
Regions Financial
Scotiabank
State Street Corp.
Synovus
TD Banknorth
Union Bank of California
U.S. Bancorp
Visa USA
Wachovia
Washington Mutual

Tech Vendors included in Automation in Banking that made the IW 500 cut:
ACS
CheckFree
EDS
Fidelity National Information Services
First Data Corp.
SAP America
SunGard Data Systems
TSYS
Unisys

I could have a lot of fun with the list, but one contradiction begs explanation. Northern Trust and Synovus outsource their technology to Metavante. Northern Trust and Synovus were recognized, but Metavante was not. It’s a safe bet that Metavante does M&I Bank’s work also, but M&I Bank didn’t make the cut. Will someone please explain what “innovation” really means?

By Art Gillis

In the early '80s, the banking industry got a wake up call. Lloyds of London was underwriting a new rider to their blanket bond coverage - computer crime insurance. To justify paying the huge premiums, bankers wanted to know if they were at risk. So I went to work and developed a program called “39 Steps to Better Security.” The process was simple. I acted out the role of the perpetrator and the bank CIO (and his team) presented installed mechanisms that would block the threat. If they blocked it, they won. If they couldn’t block it, the perpetrator won. That’s how we measured the risk so we could deliver a score card to the CEO. The process was published in several banking trade journals (they love things having to do with crime), including what was then known as Bank Systems & Equipment in November 1981 on page 103.

Exposure in the trade press created a lot of feedback, even from an inmate at the Federal Prison Camp in Lompoc, California (I still have his letter). This man had successfully stolen $10.2 million (using a terminal in the bank) from a West Coast bank (since acquired by a very large U.S. Bank). He got caught only because his envious buddy ratted on him. The bank never had a clue as to what happened, but the public announcement was something to the effect that the amount wasn’t large enough to be noticed. The perpetrator used the $10.2 million heist to buy diamonds in Switzerland, but by the time the case was solved and the bank recovered the diamonds, the booty had lost some of its value, presumably because unlike a repossessed Corvette, banks aren’t in the business of selling 115,000 Russian diamonds. And remember, there wasn’t an eBay in those days.

Back to my 39 threats, I often worried about the 40th threat that I had not anticipated, and no one tried to one-upmanship me, not even the inmate who succeeded in overcoming one of my 39 threats. The 39-step program in computer crime prevention occurred long before the Internet. It also occurred prior to the now popular concept of distributed processing where responsible CIOs abandoned sound security policies and released data files to almost any legitimate bank employee who had a need to know. This release of files was also known as “user friendly,” which bestowed to the CIO the honor of being one heckuva good guy.

Today, bankers should worry about hundreds of steps to better security not just my '80s-styled 39, and the scary part is they’ll never get to the end of the what-if list. In some banks, there’s a lot of skepticism regarding threats, as was clear to me on my first 39-step assignment in New Orleans where the culture is Laissez les bons temps rouler. The conventional wisdom at that bank was, “It’s good in theory, but it won’t happen in the real world.”

After 9/11, I went back to my 39 steps to see if I had included a suicide attack using a commercial airliner to destroy a physical structure. In 1981, I hadn’t even heard of the name al-Qaeda, or the threat of terrorists. So it wasn’t on the list as such, but the following threats seemed awfully close to what happened:

#17 Explosion caused by a bomb (can a fuel-filled jumbo jet be considered a bomb?)
#27 Explosion caused by a misguided projectile (these “projectiles” were definitely guided)
#35 Structural cave-in (where are the Twin Towers now?)

What you should know is that back in the “safe ol’ days” my 39 threats produced chuckles from many bankers, mostly CIOs, who considered the precautions absurd. I’m not blaming them. The CIA, FBI and DOD might have chuckled also even though they are in the business of snooping on potential enemies, the business of crime, and the horrors of war, rather than loans, deposits and payments.

Be careful, it’s a battlefield out there and it’s getting worse because we don’t know where the next hit will come from - Could it be grandma’s wrinkle-free lotion while flying home from a visit with the grandkids?

By Art Gillis

Recently I enjoyed the honor of working for the #1 consulting firm in the world. I won’t embarrass them by naming them, and they certainly don’t need the publicity. A comment from the partner-in-charge of their financial services practice got my attention. “Some of the most complex issues can be resolved with simple answers.”

I’m learning things from smart people every day, so here are some simple answers. After 503 pages of knowledge in the 2006 Edition of my report, 66 blogs at banktech.com/blog, 114 published articles, and 91 presentations to sleepy audiences, here’s what every bank in the world needs in order to be at its peak performance - simply stated:

1. First and foremost, a core system that satisfies users in the conduct of their daily activities.
2. A good Platform Automation System where “good” means a lot more than a new account or loan origination module.
3. An integrated Imaging System that includes checks, documents and almost anything that was ever on a piece of paper.
4. A Customer Database that leaves the clutter behind and looks at value, history, potential, loyalty and willingness to go to bat for the bank. When I worked for a large consulting firm, we loved all our clients, but within each organization, we had a “marine.” We could always count on him to get things done. And in the sixties it was a “him.” Women were not there yet.
5. A Housekeeping System. That’s my term. It includes all the ancillary apps that operate the bank.
6. A Business Intelligence System. Think of it as the engineering department of the bank, not the factory.
7. A portal to the world, but not like our U.S. borders. Let legal interests in, send legitimate data and answers out, track and audit the activity, and protect interested parties.

I just did the simple task. Now you’ve got the tough job of finding the 169 resources that constitute the seven major pieces of the technology pie. And don’t be discouraged if you have to work with five to seven vendors to get the right solutions for your bank. If one vendor claims they are the one-stop vendor, it just means they have one very slick salesman.

Enjoy your Labor Day with labor, the cerebral kind. I’ll be at my beach, now that all the tourists are gone.

By Art Gillis

Just two days after I posted last week’s blog here, Mitch Betts, Executive Editor at Computerworld, performed a cerebral correlation and concluded that another article sounded familiar. In her recent story, a CW reporter called banking IT “boring.” I had called it “dull.” Did someone commit plagiarism? Did we collaborate? I couldn’t even tell you the reporter’s name. And unlike reporters covering Iraq where there is one main event, technology has at least thousands of events to cover. So just maybe there is some truth in our view that banking technology is perhaps leveling off.

If you work in IT for a bank, maybe this is a good time to plan your sabbatical. You earned a break, but you better come back with some new ideas. It’s un-American to think that there are no new technologies in the pipeline. Eventually the Indians are going to feel insulted that they are the cheap alternative. Maybe they’ve got better technologies than Fiserv, FNIS, Metavante, Jack Henry, Open Solutions, Harland Financial Solutions and 22 other companies.

If you’re a vendor of bank tech solutions, you’re ready for rehab. When you come out, you’ll feel like you’re 30, you’re hungry, you want a net worth that will go from zero million to 60 million in five years and you think the year is 2011.

My sympathies are with the vendors. In truth, technology is not over. Tech vendors just don’t know where the gold is and instead of pick and shovel, they’re carrying a sack full of products that by now are really stale. The new game in town is how to make the folks at the workstations of banks more effective. You figure out the rest while you’re away.

By Art Gillis
There’s nothing really new, hot, or compelling enough for bankers to jump into the tech marketplace and engage in shopping sprees. Here are some milestones of previous good times in order to provide a basis for comparison with today. We’re now in a decade of single-digit annual budget increases (7%), and this for the first time in four decades. I hope Yogi was right when he said it ain’t over till it’s over.

'70s

• ATMs, MasterCard, BankAmericard and EFT Networks
  
• Mini computers that provided the reason for software companies such as ITI (now Fiserv), Jack Henry (still Jack Henry), Precision (now Fiserv), Horizon (now Fidelity), and Kirchman (now Metavante) to develop turnkey systems so bankers could exercise their control and operate their own backroom support, without a meter ticking.
  
• CIF - Central Information File (a.k.a. Customer Information File).
  
• Interfaces - A necessary evil. Sorta like, if ya wanna get on the plane, ya gotta go thru security.
  
• COBOL - a programming language that was supposed to be as easy as writing sentences in English. Later to become a Y2K hurdle because experienced COBOL programmers were either drawing pensions or pushing up daisies, while legacy systems had discovered the Fountain of Youth.
  
• Mainframe software - a reel of tape and thousands of programmers if you want it to work.
  

'80s

• The PC. In 1985, my book, Micros in Banking, profiled 21 new companies that created applications software that could run on a $5,000 computer. Every bank bought a PC, even though the shrink wrap hadn’t come off right away. Wouldn’t Dell love that kind of carefree buying attitude right about now.
  
• Continued implementation of in-house turnkey systems - 1984 and 1985 had peak sales of turnkey systems, never to be reached again - 1,000 per year, and that didn’t include the tech-weak credit unions who were more interested in the price of kielbasa than the license fee for a core system.
  
• A reawakening of service bureau vendors who noticed the threat of newbies with better solutions. Enter the IBM/Kodak deal creating legitimacy with a new word - outsourcing.
  
• Online banking (not the Internet type) which replaced some batch processing and day- delay postings. A very few were even real time.
  
• Telecommunications systems. Goodbye courier excuses like my van broke down, what traffic, the snow drifts were eight feet high. When Check 21 arrived, it put another nail in the airborne courier’s coffin as well as new excuses - The fog was thicker than pea soup.
  
• Document imaging to replace hardcopy and microfiche.
  
• An early attempt at the idea of integration, mostly in sales brochures.
  

'90s

• Y2K
  
• Intelligence-based workstations (a.k.a. PCs) to replace dumb CRT terminals.
  
• Branch Automation (a.k.a. Platform Automation)
  
• Internet banking
  
• A first attempt at check imaging that proved to be too expensive because it wasn’t scalable.
  
• Anything with the word “mortgage” in it.
  
• Relational DataBase Management Systems that were supposed to do marketing and mining, but they were too generic and too difficult to structure into banking apps.
  

Early '00s

• Check imaging becomes ubiquitous. Image exchange - we’ll get to it one of these years
  
• Customer Relationship Management - It sounds great, but try to implement it.
  
• Attention to all kinds of “what if” situations associated with bank technology (terrorism, natural disasters, smart kids, scam artists, the Congress, regulatory agencies). Wow! Two- password authentication is like Willie Sutton handing two notes to a teller.
  
• Slow gear-up for electronic presentment and payments, once called eCommerce.
  
• Treasury services (a.k.a. cash management), but this time using the Internet.
  
• India, Philippines, China, Eastern Europe and places cheap. Any way to save a buck.
  

Today

• Additional Check 21 implementation.
  
• A historically low level of new core system implementations (4.2% of all FIs).
  
• Maintenance, tweaking, fine tuning, cost cutting. Nothing here for vendors.
  
• Using the Web to offer a pseudo open architecture, but with virtual results.
  
• Electronic payments continue at a snail’s pace and will forever.
  

In my opinion, until new solutions appear, buying sprees will occur when tech companies buy tech companies. The only organic thing these companies will see is what’s in a Whole Foods store. This negative outlook might change if solutions providers could figure out how to make their customers more competitive than another vendor’s customers. They’re all selling commodities that after 40 years have become a bit stale. Can I interest you in a bushel of Grade AAA corn (a.k.a. my DDA system)?

By Art Gillis

This is the third blog in a series of things bankers should know as they search for a new core system. The following events occurred in the '80s and '90s when a slick-Willie salesman could convince a banker that a dead pigeon under a mixing bowl was really pheasant under glass. The good news is that most snake oil salesmen and scam vendors are gone now. Pay attention to the word “most.”

1. A core system startup had two good things going for it. It’s name, USA, and its location, Orlando. The thing it didn’t have was software. But it still got bankers to sign contracts. Reality and shock set in very quickly. Software development and implementation should not occur simultaneously. Twenty-three bankers gave new meaning to the horrors of a conversion.

2. A bankruptcy court in Colorado held an auction to get some money from a defunct bank software company. A tech company in Charlotte liked what it saw and was delighted when its bid of a cool $1 million won the contest. The demo screens were impressive enough to convince six Georgia banks to sign contracts. The only problem was there was no coding behind the screens. Except for a few red faces, and some red ink, the situation ended peacefully. The Charlotte company returned all deposits with apologies and returned to its Trust Accounting business, having gained an entirely new understanding of the word “trust.”

3. Houston must be the capital for CPA firm irregularities as was observed in the Enron failure. Another Big Eight firm’s experience in their Houston office was not so global and disastrous. They were recommending the same core software company to all their bank clients, but realized they were leaving a lot of revenue on the table after their “selection study” was completed. So they acquired the software company and continued to recommend it while looking forward to picking up license and implementation fees. But implementing software required a whole set of different talents that the CPA firm didn’t have. The firm quietly closed the operation, “sold” the software company back to its original owner, and went back to counting beans.

4. A startup software company made its first appearance in all the bank trade journals with full-page ads. The exposure worked. Soon everyone was talking about the company. I had trouble figuring out what ducks on a pond had to do with bank software, but ads don’t do much for me anyway. The company’s sales approach was to bash the then mid-range-based hardware systems by promising one PC was all that a bank needed to process its work. The company failed, but a prominent systems integration company acquired the product as their entry into banking. That failed and they dumped the system onto a small bank service bureau. That didn’t work either. If at first you don’t succeed.........

5. Systems from Nigeria probably won’t play in Peoria and a few other heartland locations where the bulk of independent banks reside. But one very popular banking company decided to pour millions into the americanization of a client/server system only to find out, after five years, it didn’t work.

6, 7 & 8. Motives play an important part in failures. Three startups entered the bank core marketplace, not because they had a better “mousetrap,” which I believe is the most noble reason to start a business, but because they had selfish reasons. One company owned a relational database management system and wanted to sell it to banks. It dug up a core system, “glued” it to the RDBMS and tried to sell it. But bankers don’t buy database systems to process banking transactions, and they don’t buy dead banking systems. Another company entered the business by way of chest-beating and press releases. It was the shortest lived company ever - six months. A third company wanted to be different. In the Banking Club of America, different is like missing three loan payments in a row. The company failed twice. Once when the vendor bellied up, and second, when the customers, who took over the company and did their own thing for a while, abandoned it.

Be careful, folks. It’s safer these days, but the challenge is to select the “most right system” for your bank and second choice will come back to haunt you sometime within eighteen months after the conversion.

By Art Gillis

Trying to find the best system is indeed a mistake. Best system according to whom? Is the best system for Citibank the best system for a de novo? Is the best system in California the best system in Maine? Don’t be too quick to answer that one. The answer may be yes. Is the system with the largest number of users the best system? Every bank deserves the best fit, not the best system. And the process begins with what I call, “Know thyself.”

There are 71 marketable core solutions available in the U.S. marketplace. The list consists of solutions for commercial banks, thrifts and credit unions. Some solutions operate as in-house mode only, outsource mode only, and both-ways mode. A few operate in the large banks arena only, and many operate very well for small and mid-tier banks (de novo to banks with a few billion dollars in assets). Some solutions are so good that the competitors of the solution’s creator use it to drive their own business. Some solutions are not so great, but other vendors want to drive them for banks that outsource. A license to run the Hogan System is like having first draft picks on Ted Williams, should he ever come alive from his cryogenic state. Some solutions are used by thousands of banks; others are used by less than 50. Some vendors own as many as 18 core solutions; others own just one. Some solutions are locked into one hardware platform; others will run on several.

It’s like the auto industry. There’s a right car for everyone, and it’s not the Bentley. Take the time to examine the bank and maybe a dozen of the 71. When you come up with the right FIT, then you’ll know you made the right choice. In-the-lab assessments of the “best” system can be left to marketing departments, salesmen and research firms.

By Art Gillis

First, here are some general rules:
1. Good systems (in-house or outsourced) have been available for the past 30 years. If you chose one of them, you probably don’t need to switch now.
2. Good vendors have kept their systems up to date, so even if the system is 30 years old, it most likely is working as if it were a 2006 system. No system works like a 2007 system, but the good ones will when we get there.
3. Culture of the current vendor is extremely important. If you chose the right system but your vendor has been acquired three or four times and now is interested in maximizing earnings, you may
be ready for a switch.
4. The best system is only as good as its vendor. If one or the other goes sour, start shopping.
5. Listen to your fingers-on employees. They are the only ones who know how your system is performing. And they are very honest, as long as you don’t intimidate them. Pay attention to phrases such as, “It sucks,” “I can do it faster manually,” “It’s too complicated,” “I’m constantly logging in and out to complete an episode,” “I have to call 1-800 twice a day,” “The user manual and the system are about five years apart,” “We still can’t put together a complete customer relationship,” “The guy who designed the loan system must have come from a deposit background. Everything is backwards,” “The interfaces are like strangers who don’t understand each other.”
6. Brand name is helpful in determining performance - sometimes. But some banks can destroy even the best system. In those cases “conversion” means fire everyone and start over, but this time upgrade your pay scale.
7. Don’t fall for the vendor expression, “Easy to use.” If it’s too easy to use, it’s not comprehensive and sophisticated. The best systems require the best employees, and lots of them. And remember, what’s easy for a guy who built the system may be enormously difficult for a high school graduate who uses the system.
8. If your last formal training session was your first formal training session, don’t blame the system or the vendor. Spend the money and train your people.
9. Don’t pay attention to what other bankers are doing. After I conducted a seminar for the BAI several years ago, I was approached by two CEOs, one from SC, the other from NC. They were obviously buddies. They asked, “How much will you charge us if we both hire you?” I got sucked in and gave them a discount thinking one job would work for both. Their closeness didn’t mean a thing when it came to making the choices. My 36 tools pointed one to ITI and the other to Jack Henry. Over the years, they became very successful, while sharing a great friendship but making independent choices.
10. Most important is to stay ahead of your vendor. When he sends you a letter with the word “sunset” in it, then you took too long to decide if you needed to switch.

Take a break. I’ll have more to say on this subject in my next blog.

By Art Gillis

The following list came from my regular reading of eight trade journals back in 1999. These were considered fresh and hot things on the bank tech menu. In order to give some flavor to the list, I spiced it up with one man’s opinion of how each technology evolved in seven years.

1. Migrating to client/server technology -- Everyone didn’t do it and it wasn’t the revolution most people expected.
2. Database marketing -- Lots of noise, little implementation, mostly because bankers wanted to know “Which function key do I hit to do some marketing?” It’s a lot harder than that.
3. The Internet as a medium for banking -- Not overnight, but growing at the bankers’ pace, which, like ATMs, took 12 years to mature.
4. Image technology (checks and docs) -- A home run with one man on base (faster Check 21 implementation would have made it a grand slam).
5. Profitability systems -- Like a good diet and exercise regimen. Everyone talks about it, but few
do it. Vendor offerings are probably the best at it. It’s bankers who are the problem.
6. The future of branches -- Some said it was dead, and the herd listened, but the opposite happened. Banking is still a people business even though the Internet was supposed to make banking people-less.
7. The implementation and management of LANs and WANs -- Implementation occurred for good reason, but management of them became an added burden.
8. Home banking -- It’s not called that anymore because it’s now called In-your-car banking or office banking or waiting-in-line banking, anywhere else but home where we just want to have fun.
9. Reengineering the bank -- A good title for a book, but platform automation vendors and imaging vendors did more to change workflow than any industrial engineer. If tech vendors didn’t exist, I’d love to own a feather-plucking franchise to produce quill pens for 17,823 banks.
10. Video conferencing kiosks -- A dud.
11. Converting to Asynchronous Transfer Mode network technology -- Any improvement in network technology will be a good thing for systems users.
12. Object technology -- Did anyone notice? Most bankers were buying “subject” technology.
13. Shifting routine human teller transactions to ATMs -- Let’s face it, the ATM is still a cash machine and that’s OK.
14. Increased automation support in the lending functions -- Some vendors did more than others,
and in my opinion, there can’t be too much additional work in this area.
15. Customer retention through comprehensive database activity -- A myth. Saying “Have a nice day” is just as effective.
16. Electronic Data Interchange and eCommerce -- Slow to develop enough steam to undo old systems because these are not plug-in technologies. The environment has to change first.
17. Integration of customer databases -- When reporters stop using the word “silos,” then you’ll know it happened. Or maybe I have a personal bias. The bank that has my 13 accounts still doesn’t recognize my largest account. Duh!
18. Electronic check presentment -- A great idea, but wimpy volumes. Even in the fifties, computers were screaming, “Give me your volumes, your tedious work, your brainless processing.”
19. Smart cards -- Dumb ideas. When a piece of plastic does a great job, (debit/credit) take it to the next level of uselessness.
20. Increasing technology’s ability to displace people-based activities -- Where do I start? The high volume people-reducer technologies have already done their job. Now new technologies will replace a small number of clerical people, but the technologies will need expensive support people to keep them working.
The fantasy equation: 2 hi-tech people minus 6 clerical people = 0 savings.
21. Data warehousing -- A good technology that is used only by banks who have smart people.
22. Call centers -- It worked so well in the underemployed communities of the U.S. that it is now offshored to Tom Friedman’s flat world.

I’m making my list for 2006. See ya in 2013.

By Art Gillis

There are 30 stories in the 2006 Edition of Automation in Banking, in addition to 473 pages of stats and facts. Sixteen stories are from the mouths of bankers. Fourteen are from the keystrokes of prominent tech vendors. I served as the humble messenger.
The primary value of the stories, in my opinion, lies in the fact that the subjects were their choices.
Here are the topics they chose:

Bankers:
Core Systems as an in-house mode of processing 38%
Core Systems an an outsource mode of processing 13%
Internet banking 13%
Wire transfer 6%
Platform automation 6%
Overdraft protection 6%
Remote branch capture 6%
Integrating platform systems with core 6%
Fraud detection 6%

Tech Vendors:
Integration
Risk Management
Straight-Through Commercial Lending Workflow
Check 21 and Remote Deposit Capture
Straight-Through Processing
Extended Financial Enterprise
Shifting the Focus from the System to the Customer
Attract and Retain Deposits
Capitalizing on Electronic Payments
Investing in Your Future Technology
Disaster Recovery
Shopping for a Core Banking System
Straight-Trough Processing - Front and Back Offices pulling Together for the Customer
The Next Level of CRM

Are these the right topics? Who’s to say. They ARE the topics.

By Art Gillis

The brevity of this message is backed by about 450 pages of details about what’s going on in the world of bank technology. Here’s just one glimpse.

This year, there are 84 companies in the report. That’s 17% fewer than last year, and the reason is a common one - mergers and acquisitions. Some of the M&A activity happens faster than the time it takes for an invesment banker to lace up his wing tips. Cyota was acquired by RSA Security this year and EMC just acquired RSA. A handful of failures (all Internet-related) accounted for a small part of the decline also.

But the number of solutions increased by 11% to 246. Most of the new solutions were in the payments arena and the compliance and security business.

By Art Gillis

The numbers are in, and even though in-house is still a preferred method for community banks, outsourcing has gained in popularity. In 2005, new buy decisions among banks, thrifts and credit unions were as follows:

In-house 56%
Outsource 44%

In the years before 2005, outsourcing ran at about 23%. The reasons most bankers give for this turnaround is attributed to the increased complexity of maintaining a fully compliant and secure system. Another reason is the expansion and power of present-day systems.
Here’s my take. “When the goin’ gets tough, bankers rely on strong third parties.”

By Art Gillis

That’s what bankers are saying, and I can’t blame them because the world is turning into a real-time environment. Everyone is living in an instant time cycle. If you think there’s a solution to a problem, you want to see it right away. But I see something else. There are two parts to how long something takes.
1. Transactions occur in nanoseconds.
2. Personnel-based work efforts take forever.

It’s the second category that gets all the gripes. For example, when has Microsoft delivered a new product on the original scheduled date? When has a major (or your own kitchen renovation) construction project been completed on the promised date? When has a war ended before people started to squawk? When did the Wright Amendment Repeal allow you to fly non-stop on a Southwest Airlines flight to San Francisco? Some things just take forever. And the culprit is people. What technology does in nanoseconds, people have to conform to Gantt charts that are plotted in years or even decades.

So relax. Back in the seventies, we knew it was unwise to burn a lot of gas. So we took to SUV’s in the nineties to burn more gas. Now we want gas for a buck a gallon and 50 miles to the gallon. It’s a long way off. The answer is: Use wisely what you already have.

By Art Gillis

One of the first banking applications to find its way onto a PC in the mid-seventies was Asset/Liability Management. And it was a perfect marriage because ALM was about modeling. “Try this and see what you get.” In the days of manual grunt work, “try this” meant only one, two or three what-ifs because it required a lot of tedious work, and bankers were too busy pushing paper from one station to another.

When I asked bankers what they liked about the PC-based solutions, they all answered - “power.” They could do hundreds of what-ifs by changing a variable, then pressing the execute key and examining the results to select the best option. Some of them enjoyed the gaming aspect of this new tool. They could roll the dice without risking the bank. And for once, they could tell an “employee” to do something and get instant completion without a gripe or a lot of attitude. Out of hundreds of what-if solutions, a banker could opt for the best one even if it just had the benefit of a few basis points. In a large bank, a few basis points means millions.

In the world of core solutions, bankers can choose from 76 vendor-supplied possibilities. But they can’t afford to examine all 76, and that’s not a problem. Getting to 12 sensible choices is relatively easy. Getting to one best fit is very difficult unless an evaluator uses 36 tools. My 36 tools are computer-based, but they need a facilitator wearing an expensive suit, aka consultant. The 36 tools always find the most-right solution, even if the second choice is 95% right. Just ask the banks that used them. Those banks are still using the system recommended by the tools, and the comfort of never having to do another conversion. I believe that signifies happiness. A nice byproduct of the process is the consultant is not worn out and still going strong, thanks to the elimination of pencils, erasers, ruled pads and calculators.

By Art Gillis

Do you think you’re going to influence a business customer or consumer to do their banking your way? Even in the remotest small communities, people read a lot and they want to believe they can get what the money center banks offer their customers. Any bank that wants to compete today will need all 14 delivery channels, every account type, any product and service offering, every payment mode, and be willing to adopt whatever is coming next. I haven’t heard the term “boutique bank” for several years, but I have heard “Internet-only bank” in recent years. Neither type survived. This is the Wal-Mart era of banking and Wal-Mart is coming to banking.

Specialization doesn’t cut it with bank customers because even though the world may be flat, it is also complex, multifaceted, networked and works in real time. That concept was evident as I viewed bank technology from the side of a very strong provider of technology. As part of an annual program I call “Makin’ the Rounds,” I walked into a presentation room at Metavante where 13 solutions experts were ready to show me the latest version of this long-established company.

When I say there were only two people in the crowd that I didn’t recognize, it’s not an attempt to demonstrate my popularity. Instead it shows how the bank tech business is changing to include shifts in consumer and business habits. One new person covered the expanding arena of payments systems and the other new person handled the broad area of business strategy, product management and lending competencies - topics that are very crisp in my mind as ways banks can enhance their capabilities and make more money. And please remember, banks are not altruistic organizations. The first thing on every bank CEOs mind every morning is how next quarter’s earnings report will look.

Having started as what we all commonly referred to as a “service bureau,” Metavante has in the past three years put together the “engine” to drive any bank toward a completeness in being able to handle the “any” of financial processing. Banks are financial super markets, and one needs only to take a look at the supply chain that serves as the source of that completeness to realize it’s here and deliverable today. The next time a bank tech salesperson calls on your bank, you should begin by telling him/her to show you ALL the company’s offerings.

By Art Gillis

I have a feeling that I am not the only customer whose accounts my bank chose not to integrate into my customer portfolio. After all, I have been a careful and responsible customer for 10 years. And with 13 accounts assembled from personal, family members and business, it’s certainly no systems challenge (using any one of my 10 favorite core vendors) to put all accounts together.

Vendor systems claim they can handle up to 99 relationships. But here’s the rub. Only one of my accounts distinguishes me as a member of the 1% Club, and that’s my retirement plan. The other 12 are working accounts that do the job every day, but don’t do much for my bank’s P&L. So what’s the problem? They can’t connect my big account to my customer portfolio. So if ever an employee wants to see who Art Gillis is, they see only the cats and dogs.

A couple of years ago, I made a phone call to see if I could connect the big guy, and after several prompts, I finally reached Bangalore. There was a bit of a problem using the word “integration.” Apparently, in India, the word has greater significance than just the systems definition. So I gave up and prepared myself for a visit to the branch where I had opened most of the accounts. I usually get a nose bleed whenever I enter a branch, but it was OK this time. I asked for Cindy, who had opened my accounts 10 years ago, and I got the familiar blank look as if I had asked for Marilyn Monroe. Finally, when I was introduced to a man who was wearing a tie, I knew I was in good hands. When I mentioned the big account, he related instantly with, “Oh that’s out in Plano, we can’t do that.” That in itself didn’t bother me because I hardly ever go to Plano also. But when you think of a global bank, certainly 7.5 miles from Dallas shouldn’t present a serious hurdle.

Tom Friedman makes a very good case about how flat the world is now. But if Tip O’Neill were around he could have written his version of how local some things are since he was credited with the saying, “All politics is local.” I never got my big account connected, but when I last made a deposit at a drive-up teller, the tube sent back a little white tin container with several jelly beans in it. I ate them all. That’s when I knew I was in good hands at my bank. And Tom, you guessed it, the tin container was made in China. Account relationships are like the family kind. They’re very important, and if you ignore one, they’ll let you know about it, with a lot of attitude.

By Art Gillis

In 1987, the Wall Street Journal published a study that evaluated technology in nine industries. Banking got the lowest grade, C-. Nineteen years and about 152 bank tech conventions later, technology is better. We now have GUI front ends. But the back end is still based on '60s technology. What never appeared in the evolution of bank technology was the proverbial clean sheet of paper. No one ever asked, “Why the hell are we even talking about automating this process, when we should be reinventing the process?” R&D in bank technology today is a matter of writing COBOL modifications to existing code. That’s called maintenance, not innovation.

There’s not enough room on this blog to convince everyone that we are still suffering from antiquated architecture, so I’ll refer to one chance observation that makes the point for me. There was an employment ad in a recent issue of the American Banker for an application development manager. That was the first hint that someone should be fired at that bank. Any bank that is building its own software (that’s what application development means) these days is like a bank that is still making loans on waterfront property in Arizona. The next clue listed the experience required. People over the age of 50 will recognize these: COBOL, CICS, DB2, VSAM, and who knows why JAVA.

There’s something wrong with bank technology, folks, and I’ll begin with my profession. 1) Consultants should be disturbing the status quo. 2) Bank examiners should be sending up red flags telling bankers we can’t stand another Y2K. 3) CIOs should be taking a sabbatical in India. 4) At least four vendors that I know should put 200 banks (let’s begin with the big guys) on their priority list called, “How Not to Act Like FEMA,” and 5) Bank CEOs should begin their next management meeting with, “What are we doing to get out of the '60s?” And don’t mention technology. If technology is in the '60s, the whole bank is in the '60s.

Don’t panic, folks. I just thought you might want to get started soon because the trip will take 10 years. And in defense of any possible accusations of hypocrisy, I should tell you I am not an advocate of reckless spending, thanks to my frugal, New England upbringing. I keep my cars for 14 years. I still have the same wife. My suits last forever because I don’t get a chance to wear them much and I bought Brooks Brothers everlasting style. I never pay banking fees because I know how to beat the system (sorry fee income advocates). But every three years, I throw away my technology only because a tickler file tells me to. And I do mean “throw away.” When I tried to donate my discarded PC to my favorite charity, the Dallas Children’s Advocacy Center, the lady asked how old it was and when I said three years, she politely declined. I sent my check in early that year, I was so embarrassed. Here’s a non-profit that has more wisdom than most banks.

By Art Gillis

The next time a large bank loses customer data, it ought to come up with an excuse that the public can relate to. So far, the news reports have focused on four large banks. Those banks spend $11.6 billion a year on technology. A good padlock at Home Depot costs less than $4.00. Buy it in China or India and it’s a buck. Do the math. But if the loss occurs during the transport of data, there may even be a free solution to that problem. Thomas L. Friedman tells us the cable to India is so large, and still under-used, that I believe it could become an online data storage device. Banks could then leave the data at the bottom of the sea for free. And if a whale gets it, so what! They’re busy enough just staying alive, and probably wouldn’t have much of an appetite for consumer data.
Are data security custodians so bogged down with intellectual crime that they are overlooking the obvious “I forgot to lock it” crimes?
It’s 2006. Do you know where your data are?

By Art Gillis

I enjoy looking at my opinions about the bank tech arena, a year or so after I went public with them. Here’s a list (in caps) that I delivered in 2005 at a seminar for bank tech companies, followed by a 2006 update (in lowercase).

1. MAJOR CHANGES SHOULD OCCUR IN THE VENDOR COMMUNITY. EVERY ONE OF THESE COMPANIES IS SWEATING THE FUTURE.

That was true in 2005, but some vendors reacted nicely and are now well positioned to handle change. Here’s the single most important ingredient for a bank tech vendor - the ability to implement new ideas.

2. BANKS WILL INCREASE THEIR SPENDING IN 2006, AFTER A COUPLE OF YEARS OF WEAK SPENDING.

It happened. Spending is up by about 9% in 2006 from the previous year.

3. NOTHING WILL BE BUSINESS AS USUAL.

So true. Look at Fidelity National Information Services, Jack Henry and Metavante. They threw away the template. Fiserv threw away only one piece of the template and brought in a CEO from the outside. Was that enough?

4. ALL THE WINNERS OF THE PAST WON’T BE THE WINNERS OF THE FUTURE.

Ask Fiserv. Fidelity is neck and neck with Fiserv after only four years for what Fiserv took
21 years to accomplish.

5. AFTER 20 YEARS OF “FIXING” TECHNOLOGY, THERE MAY NOT BE ANY
MORE BROKEN PARTS. THAT’S BAD FOR VENDORS. IT’S LIKE MICROSOFT LOOKING FOR AN ENCORE TO A PC OPERATING SYSTEM.

That might be OK. It’s not about what’s broken anymore. It’s about what isn’t performing up to par. Technology is not your father’s Oldsmobile anymore. It’s about zero to 60 in real time. And don’t ask how we do bank processing. Ask why we do it the way we do.

6. EVERYONE’S ASKING WHAT THE NEW SILVER BULLET IS IN BANKING.
THE ANSWER MAY BE GET OUT THE SILVER POLISH AND RUB THE OLD BULLETS.

Here’s an example. Cash management has been around for decades, but, today, cash management is a hot item because the tools for deployment are hotter. It’s like going to a library to do research vs. googling in your pajamas.

7. THE TRADE PRESS IS SENDING OUT SOME FALSE MESSAGES, SUCH AS:

LARGE BANKS WILL SWITCH TO NEW CORE SYSTEMS
CRM IS THE MAJOR PRIORITY FOR NEW SYSTEMS
SMALL ONE-PRODUCT COMPANIES ARE MAKING GREAT HEADWAY

Don’t believe everything you read. Large banks are deeply rooted in their '60s technology and can’t convert. CRM is like teenage sex, just a lot of chat room noise. And single-product companies are looking for acquirers because they can’t sell the same thing over and over again.

8. IN PAST YEARS, VENDORS RESPONDED TO RFPs BECAUSE IT WAS A SELLERS’ MARKET. NOW VENDORS ARE GOING TO NEED REAL SALESPEOPLE WHO WILL IDENTIFY WEAKNESSES AT BANKS AND SELL THEM BETTER SOLUTIONS.

By Art Gillis

Here I go again, as if I was still a freshman in college. My attendance twice a month at the Institute of Management Consultants meetings is what I consider required duty. With 32 years as an independent consultant and three years at Booz, Allen & Hamilton, wouldn’t that mean I should know everything by now? What would my clients think if they knew I was still in training? And last night I got a C+. Should I put that in my c.v.? Let me explain.

Our speaker was a seasoned professional consultant, and well respected by both clients and peers. The man presented a very clear picture of what clients deserve from the high priced know-it-alls that have earned almost as many jokes as lawyers. Selfishly, I was keeping track of how I performed as he went through the list. In a world of fairy tales, I’d be writing this story only if I did everything the “professor” offered. In the real world, however, I would not have earned the gold star on my forehead. Gold stars ended when Miss Kane stuck them on me in kindergarten, and I hoped it would stay on at least until I got home for mom to see it. As a freshman, I soaked up everything. As a consultant, I tend to say “Wait a minute.” Here’s how I “failed” and here’s how I am “succeeding.”

1. There’s an expectation that good consultants should be creative. “Outside the box” is the current euphemism. I work in the bank technology industry. I used to offer solutions to bankers that always included a “wild card,” which was my way of saying do something different. In over 300 assignments there wasn’t a banker who chose the wild card, even though it had lots of appeal, especially during the cocktail hour. If I were a creative consultant, I’d be at the corner of Walnut Hill and North Central in Dallas, holding my cap out for two bits or a buck. Instead, my financial consultant calls to tell me I should be taking funds out of my SEP plan and playing more golf.

2. Dealing with client antagonists. Conventional wisdom says, be sweet and get them to see what they’re doing wrong. My approach is, “You’re on a highway to hell, and I don’t want to be there with you.” That gets their attention quickly and things happen.

3. Don’t rush to judgment is another standard rule. In my world, if I’m not delivering answers on the second day of a five month project, the client CFO is checking to see if I cashed the retainer fee. A real consultant doesn’t have to borrow the client’s watch to tell him what time it is. He’s taking names and kicking butts right from the get-go.

4. Get the client involved so they feel part of the solution. Like hell! Why did they hire a consultant. Good institutions are not run by the inmates.

5. Focus on the solution, not the problem is another canned wisdom. When did a homeowner hire a plumber to talk about shiny new faucets? “I’m in three feet of water, get over here now,” is what he’s likely to command. If a consultant doesn’t really understand the problem, he’s likely to do what Bushy did. Let’s go to war!

Please be careful ladies and gentlemen. Listen to good lessons with a screen that works for you. Act on what passes through your screen. You are still a key element of the equation.

By Art Gillis

1. Digital Insight 112%
2. Online Resources Corp. 58%
3. Open Solutions Inc. 54%
4. ACI Worldwide 39%
5. CheckFree 37%

This is the only game I play in the 400+ pages of my annual research report, Automation in Banking - 2006. Because there are 24 public companies profiled out of 108 bank tech vendors, I like to show the performance of those companies in terms of the price of their stock. The period is tax day 2005 to tax day 2006. Even though there are 24 public companies, only 15 really influence the price of the stock. Here’s what I mean. Harland Financial Solutions is a bank tech company, but John Harland is a check printer. So even though JH stock went up 42%, it’s hard to make a case that HFS was the reason. To carry this example further, it’s probably even harder to figure out why a check printer should generate higher returns for its stockholders in what is rapidly becoming an electronic payments world. But as I said, that’s why this is a game.

By Art Gillis

OK, folks, I’m not your mother, gardener, doctor or your conscience. It’s just that spring is a great time to wake up and enjoy your life more. “Waking up” means you have to do tasks you hate to perform. And “enjoying your life more” means you’ll be glad you did it. For me, the tough one is spring cleaning at the office, but I do it because I get a huge return for my effort. I must say it a dozen times. “Damn, so this is where I put it.” Here’s one example. Years ago, I created a scorecard so bankers could test their own systems. On the left side of the matrix I listed the most popular deficiencies I have uncovered during my consulting assignments. Because I don’t harp on the petty ones, my list has only 46 items on it. Then I provide four grades for assessment - great, not bad, weak, and N/A. Yes, in the real world, some banks don’t do car loans, or mortgages, or Internet banking, so N/A is appropriate. And I don’t want people to get bogged down with digital assessments because this is a friendly test of reasonableness. “Is our cash management system a 78 or a 76?” It’s not worth arguing about it -- “weak” is a good enough detector. At the end of this exercise, it’s the “weak” column that spooks me. Too many check marks means it’s time for repairs. And summer is usually the best time to do conversions, unless you’re in the vacation regions.

By Art Gillis

If it rained every Saturday, I’d be a rich genius. So please understand, folks, I’m not a workaholic, and I love outdoor recreation. But when I work on rainy Saturdays, all kinds of good things happen. I hope you’ll catch a mild touch of this disease. Saturday’s work should consist of these kinds of activities:
1. Fix what you broke last week.
2. Establish a structure that will eliminate future breaks.
3. Create something.
4. Push back and criticize yourself.
5. Send a thank-you note to people you overlooked.

1. To fix last week, start with your old mail. Look at all those e-mails you didn’t have time to answer and do something about them. For those e-mails you answered in a rage, trump them with a milder version that says something like, “I was in a bad mood.” Everyone will love you for being just like them.

2. Establishing a structure starts with setting up a triage. Some things are critical and you have to stop what you’re doing to address the intrusion in real-time. For me, it’s a call from my bride of 44 years telling me to pick up a Belgian endive on my way home from work. Some things can wait a little while, but you need to resolve them before you go home. Some things can go into the circular file. The patient died and there’s not a damn thing you can do about it. If you have anything in your in basket at the end of the day, then you failed at structure building.

3. Creating something is not for everyone, but you can still do something. Look at Bill Gates. He created one thing and just milked it dry. He also created several things that died on the vine. Here’s my score. In 1974 I had one single raison d’etre - to help community banks with their technology. Today I have 16 products and services that produce revenue for my consulting practice. Doing the math, one sees that I created a new product every two years. Donald Trump would have fired me for that performance. Booz Allen & Hamilton (my former employer) would have honored me since there hadn’t been a new idea there for decades.

4. Pushing back means removing yourself from the process and looking at things with a purely objective microscope. Are you on the right track? Are you doing the right things for your client? Could someone else do your job better? Condi Rice is taking cheap shots at Donald Rumsfeld. That’s not the point. Why wasn’t Rummy taking cheap shots at himself?

5. I haven’t counted them, but I reorder thank-you notes by the hundreds. So many people have done good deeds on my behalf, that I want to tell them in my own words how much I appreciate them. You’d have to ask a shrink why I use physical cards, an envelope and a stamp. All I can tell you is I need to do it that way. In 1983, I sent a thank you note to Art Buchwald. He sent back a letter dated June 14, 1983. When I read it today, I realized he had practiced the five elements of Saturday’s work in that one brief letter.

By Art Gillis

I have to confess, folks, that I don’t understand DNA. But when I read news accounts about a prisoner who was released as a result of DNA analysis, I feel good. If DNA is a science that means we are all unique individuals, then it supports my philosophy of “Don’t fight it, come clean.” Last month, I celebrated the 32nd anniversary of my consulting practice. I did it alone. There was no champagne. Telemarketers didn’t send canned messages of congratulations. And I never mentioned it to my wife because it scared her half to death when I told her I was leaving the bank. The celebration just meant that I knew my DNA and acted in compliance of it. Lots of rewards and no regrets.

Last night I was invited to speak to a new group of entrepreneurs who established new businesses, all related to different forms of technology. I talked about my practice, but I warned them not to copy my strategy because it was customized just for me. Do what works for you. When I got home that night, I couldn’t stop thinking of nine people I had just met -- all strangers, all unique, all had different skills, all had a mission. Why can’t I get to sleep, I wondered. And then it hit me. Part of my practice is to tell investment analysts what I know about companies that are listed on the NYSE and NASDAQ. My clients are prepared to invest heavily. What haunts me is that a paltry investment in nine people I just met could produce a value that could return a 30% ROI with ease. Put individuals together in a structured business environment, and you’ve got a company that will succeed in the flat world we now live in.

By Art Gillis

Business trips to Boston always meant taking time out to visit my mother. After all the family gossip was exchanged, it got down to two things. “Are you eating enough?” and “That was a good job you had at the bank, and we were all proud of you, but now, I don’t know. The ladies at the Philoptohos ask me about you and I don’t know how to explain what you do.” After listening to my mother, I realized why so many Jewish kids went to medical school. Their mothers could say, “My son the doctor,” and everyone understood. “My son, the consultant,” just doesn’t click. But the ladies don’t just ask, they offer opinions. “He could have opened a restaurant with you in the kitchen showing everyone how to prepare your fabulous meals. You know you’re the best cook in Somerville. Right now I’d give anything for your kokinisto arni and those little pastry triangles filled with feta.” That’s when I saw my opening. “Ma, picture you in the kitchen of a restaurant showing the staff how to cook and how to create masterpieces of culinary delight, so the customers out front will return for more. In a way, that’s what I do for banks. I show them how to use great technology to keep their customers happy.” I think she got it.

Today, the tech industry needs some homespun critics who will ask, “But what do you do all day?” We need to understand better what people do and what they expect us to do. In the old days, I used to say, “I see a lot of stuff that comes over the transom.” Now it comes on my screen, but it’s no better than the physical stuff. Here’s how I rank the deficiencies of most communications:

1. The physical presentation is awkward. Example: Today it was so tiny that it was unreadable and it was frozen so I couldn’t enlarge it.

2. The message begins on second base, just to use a little baseball vernacular. It’s as if someone took away the batter’s box, home plate and first base. Can’t we start at the beginning?

3. People write for their benefit. They don’t write for the reader. You know what you’re saying, but do we know?

4. There’s too much to digest. Short and sweet is an expression I have heard all my life. It fits even today in our world of massive information.

5. I gave up on the idea of “take your time.” Everyone’s moving too fast and they’re losing what I call “the essence of appreciating the value.”

This message contains 468 words. I wish I coulda given it to you in ten words.

By Art Gillis

In March 1989 I wrote a piece called “The Bank Automation Arena as I See It.” The reaction was strong enough to motivate me to keep doing it - my way. But this time I needed someone to pay the freight. Here’s an accounting - date, title, sponsor:

June 1989 #2 "My Mythical System for a Community Bank," ADP Banking Information Services Division (later BISYS, now Open Solutions)

September 1989 #3 "Systems Integration in a Banking Environment," Broadway & Seymour, now Jack Henry & Associates, Inc.

July 1990 #4 "Why Bankers Are Losing the Cream of the Crop," Citicorp Information Resources, now Fiserv

October 1990, "How To Work," Systematics, Inc., then Alltel Information Services, now Fidelity National Information Services

July 1991, "Who Said Choose the Software First," ACCESS Banking Systems, now Jack Henry & Associates, Inc.

October 1991, "A Cessna Citation, Three Successful Banks, and Dimension Software," The Kirchman Corporation, now Metavante

July 1992, "Why Do Small Banks Make More Money Than Big Banks?" Peerless Systems, Inc., now Jack Henry & Associates, Inc.

December 1992, "A Gourmet Recipe for Great Customer Service," M&I Data Services, name change only to Metavante

November 1995, "Outsourcing Revisited Six Years Later, Or Is It 36 Years Later?" IBM, still IBM

January 1999, "Every High School Graduate Doesn’t Have to Go to College," Jack Henry & Associates, Inc.

Draw your own conclusions. Here’s mine. “Old bank tech companies never die, they just get acquired.”

By Art Gillis

It means two things to me. The net worth of Bill Gates and the amount of money it takes for 17,823 U.S.-based financial institutions to drive their technology for one year (2005). And this is why I keep harping on tech vendors to raise their sights on the big guys. Large banks spend 73.6% of the money. Mid-tier banks spend 16.8%. And the little guys spend 9.6%. In a recent presentation by the president of a large systems integration company, the man kept referring to a message of advice to his audience - “Follow the sun.” I may be wrong, but I took that to mean what another guy kept yelling to Jerry Maguire - “Show me the money.”

Art Gillis
3/31/06

Does anyone fall for these offers? Am I too skeptical? Do I really have relatives in Nigeria who bequeathed large sums of money to me? Is it possible that some day we’ll see a more ethical Internet? The answer is YES, if we can count on history to repeat itself.

My first PC was an amazingly powerful device - from purchase to use. Here’s how it happened: I drove my “father’s” Oldsmobile station wagon a half block from my office to a Computerland store. The sweet young sales lady gave me a 30-minute demonstration. I carried out four boxes and gently placed them in the Olds' cargo area. The total bill was $5,632. I took the boxes upstairs to my office and connected the components. I didn’t have a screwdriver so I used a dime to tighten the connectors. I created a WordPerfect document. I produced a VisiCalc spreadsheet. I checked out dBase. All that in about three hours, and I never broke the shrinkwrap. I then said, “Wow.” That was a word I never used in my 22 years, at the time, as a mainframe bigot. The long and short of it is that my PC experiences have always been pleasant even though I’d never make it today with that 1980s PC. So I’ll wait out the Internet. Some day, all the garbage will go away and we’ll have just the clean stuff.

By Art Gillis

I am currently in the process of interviewing bankers about their experiences with their tech vendors. The reason is simple. Today, smart bankers buy their technology and, therefore, vendors are a critical piece of their performance equation. So as the vendors go, so goes the performance of technology in the banks. I’m delighted to report that customers are singing the virtues of their vendors these days. And they’re doing it far better than the marketing departments of their vendors, who are still using buzz words from the eighties and ads that look like cigarette ads from the fifties. Example: “More doctors smoke Camels than any other cigarette.” Fast forward 50 years and you’ve got, “The perfect storm is forming.” One’s as bad as the other.

But listen to their customers talk, and you want to run out and buy whatever the vendor has. So here’s a cost-saving plan. Stop the stupid marketing, but use the savings to pay a nominal fee to your customers to tell it like it is. Prospects will love it, your CFO will welcome it, and your marketing department might just wake up to the fact that we now live in a world where honestagoodness stories carry more meaning than slogans, buzz words and hype.

By Art Gillis

The trend has been consistent for at least the past five years. On average, there have been 2.7% fewer banks each year. The decline would have been larger if it wasn’t for the de novos that entered in high growth states such as Texas and Florida (I haven’t been to Iowa since 9/27/1993). During the past five years, an average of 140 de novos per year were established. About fifteen years ago, prominent industry pundits were predicting there would be 2,000 banks in the U.S. So much for prominent predictions. As of 12/31/05, there were 17,823 banks, s&ls and credit unions in the U.S. Tech vendors should be happy about that many financial institutions, but what’s missing, in my opinion, are two things. U.S. tech vendors don’t sell enough business to 1) large banks and 2) high-growth areas off North America. Small U.S. banks may have just reached a point where in-place technology is good enough to get the job done, and they’ll take a breather from tech spending. That’s not good news for any tech vendor.
(Highline Data, Austin, TX, and Callahan & Associates, Washington, feed me the bank stats.)

By Art Gillis

It’s nice to be in a city (Dallas) that is populated by big technology companies - EDS, ACS, Perot Systems and even a branch of CSC. One reason is we can get prominent
execs to speak at the Institute of Management Consultants meetings conveniently. They can sleep in their own bed that night. So when I heard a most stimulating and informative presentation from one such president, I couldn’t help sending a follow-up e-mail. Too many of my esteemed colleagues had corralled the poor guy after the meeting so I waited to do my thing my way. Here is a copy of my e-mail:

Thank you for your informative presentation last Monday evening. After 32 years as an IT consultant, I have been asked why I go out of my way (even to adjust client schedules) to attend two meetings a month at IMC. The next one who asks will hear about you. If I did an ROI, I’d be in huge debt to IMC far beyond the 20 bucks I spent. I don’t even charge it to my company. It’s totally personal. I understand the economic issues and benefits of cheap labor, especially if I’m the buyer. However, I have never heard anyone talk about the awakening of highly capable Indian citizens to the injustices of slave-like wages. I expect one day a modern-day Mahatma Gandhi will appear and lead his people to a world of fast cars, seaside condos, Georgio Armani suits, and even women with less than Hindu virtues. How long will cheap labor last, where that labor far exceeds the competencies of other cultures? I’m counting months, not years. If the world is flat, and business is global, and location is virtually next door, and we’re all following one sun (to use your road map guidance), then it seems inconsistent to me that certain nationalities will not have equal rights to all the goodies.

By Art Gillis

It was about a year ago that I read a vendor’s press release about their ability to generate higher profit margins than any other competitor. Any student of P&L 101 could make a fair analysis of the cause and effect. Keep prices high and cut costs to the bone. And even though deserved from an accountant’s point of view, the press release was a stronger demonstration of boldness than Rod Tidwell screaming at Jerry Maguire - “Show me the money.” The only people I heard from after the release were a handful of customers who complained about the high cost of doing business with the vendor, and their inability to deliver new solutions to their banks. They came back months later as they were searching for a new core vendor.

For tech vendors, my advice, although not requested, is be careful of the proverbial double-edged sword. And know who you’re working for. It’s a very tough job for vendors to satisfy everyone and still perform. But the good guys do it. This year, none of the prime core vendors will impress anyone with the price increases of their stocks, and I think that’s a good sign. For bankers, the right advice starts with, “Avoid press releases, conference chatter and peer group gossip. Do your own analysis the way you would review a loan.”

By Art Gillis

There are now 37 companies in the bank tech business that provide core applications solutions.
Twenty of the solutions are for outsource services. Seventeen are for in-house solutions. Eleven companies provide both modes, and it didn’t take a genius to figure out why. Sixty-four percent of all financial institutions use the in-house mode. Thirty-six percent outsource. That’s the way it is and that’s why smart vendors chose not to fight reality. But only 30 percent of the 37 companies offer both modes. Even though it makes business sense to increase the size of any market, the one-mode vendors are hell bent on sticking with what they were established as. Here’s another fact about how this industry has changed. In 1987 there were 113 suppliers of core applications services and only four percent of them were dual mode.

By Art Gillis

I still can’t get Spring Break off my mind, even though I am hard at work now. But I can justify the diversion because of the lessons I keep learning no matter where I am. I spent a lot of time on the beaches of South Florida last week, and after my swimming-for-joy in the blue/green water of the Atlantic, it was a good time to see what was going on. By the way, my wife and I sneaked away because I had a perfect window. If I knew it was Spring Break though, I would have waited. I hate young people because I’m old now. But watching the touch football contests taught me lots of lessons. Here’s one. Two vs. Two. They looked like ordinary 20-year-olds, except for one kid. Whenever his “team” had the ball, he would map out a play on the palm of his hand for the “rest of the team.” My initial reaction was, “Cut the crap willya, as if a play will make a difference among a 2-guy team in the sand.” If it were me, I would have left it at “go long” or “go short” or “cut to the surf” or “cut to those chicks watching us.” After about 20 plays, I ate a little crow. The kid’s plays scored about 18 times. If I were a corporate recruiter, I would have hired the kid to report for work the day after graduation. He had a plan, he took it seriously, and it worked. And he made sure the rest of his “team” got the credit. The joy he demonstrated after each score was better than watching my Red Sox win the World Series.

Have a plan, no matter how modest it might be, and don’t worry if the Harvard Business School wouldn’t approve. You’ll love the direction it sends you in and the success it can produce.

By Art Gillis

I don’t like surveys because respondents generally answer according to expectations, ego and "how fast can I get rid of this task?" In other words, survey responses are a collection of lies. But in this world of change, I decided I had to conform, so I did my first-ever survey. What influenced me most was that I knew the population. They were bankers who had sent me money for some reason and I thought for that reason they would be truthful. Five hundred and fifty something bankers were in this population, and indeed they answered as if no one was listening. Besides providing quantitative answers to a form, there were a few free-form questions for bankers to answer in short narrative structure. I selected popular keywords in their responses as if I were a Google, and I’m presenting them here. Draw your own conclusions.

In describing their culture or what makes them successful, these are the most frequently used words:
compete with the big banks, use the latest technology, provide personal service, part of the local community, excellent customer service

What they don’t like about technology:
not enough integration, too complex, too much change, unreliable, weak vendor support, password constraints, slow, insufficient training

What they liked about technology:
reliability, lots if information, friendly, efficient

Things they don’t like about their tech