Magazine article American Banker

Software Companies Going in for Outsourcing

Magazine article American Banker

Software Companies Going in for Outsourcing

Article excerpt

Outsourcing, overcapacity and mergers have delivered a triple whammy to companies that supply software to banks. For bankeres, it means the channels they once used to buy software are sure to change.

"I wouldn't want to try this again today," said Jerry Weiner, referring to the software business he started in 1892. Mr. Weiner is president of Interactive Planning Systems, Atlanta, a developer of microcomputer-based accounting software.

Clearly, opportunities for companies selling software to the banking industry are not what they were in the overheated 1980s. With banking battered by everything from scandal to recession to overcapacity - and the downsizing that followed - software companies find themselves competing for less business on a significantly smaller playing field.

Disappearing Customers

The software business also is marketing its wares to a customer based that has embraced outsourcing, which means that many banks are just as likely to farm out their data processing as to buy applications software.

"There are going to be fewer and fewer software clients as time goes on," said Ralph Reichard, corporate senior vice president and general manager of Newtrend, Orlando.

Mike Montgomery, an executive vice president at Systematics Inc., Little Rock, Ark., took a somewhat contrary view, however. "I don't believe outsourcing slowed the software business down," he said. "The software business has matured and, to be honest, there was a lot of applications software sold in the past six to eight years."

Given these arid economic conditions, with no increase in selling opportunities on the horizon, vendors have had to scramble to remain viable. Outsourcing has been an answer embraced by vendors from International Business Machines Corp. on down.

"Our senior management saw what was happening and began to establish a service bureau network about four years ago," said Mr. …

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