Magazine article American Banker

Analysts See Bisys Playing Down Outsourcing

Magazine article American Banker

Analysts See Bisys Playing Down Outsourcing

Article excerpt

The recent departures of two Bisys Group Inc. customers have industry experts wondering about the future of the company's bank outsourcing business.

Bisys, based in Little Falls, N.J., ranks among the top five providers of core processing services to banks. Its executives maintain they have no plan to sell or scale back that business.

But several banks, including two of Bisys' largest thrift industry customers -Roosevelt Bank in Chesterfield, Mo., and Roosevelt Savings Bank in Garden City, N.Y. (not affiliated) - said they have left the outsourcer in recent months.

The defections are noteworthy mainly for the reasons behind them. The thrifts said Bisys does not support core processing services the way it once did, and they questioned the company's long-term commitment.

Analysts said the concerns are valid, given that Bisys has become increasingly focused on investment-product distribution and administration services. Next year these services are expected to account for 65% of Bisys' $310 million in revenues, analysts said.

Bisys executives vigorously denied any shift in strategic focus and said they are fully committed to core outsourcing.

"We've had the best sales year ever, and we have the strongest prospects in the pipeline we've ever had," said Bisys chairman Lynn J. Mangum.

"All the people in the company who have been working full time" in outsourcing "are still working full time," he said.

Speculation about Bisys' longer-term intentions have intensified as analysts are expecting a consolidation in the outsourcing business, and they view Bisys as ripe for takeover.

"Until now, no one's market share has changed dramatically," said Carl Faulkner, managing director at M One Inc., a consulting firm in Phoenix. "But core processing is a bad business to be in right now. It's going through the same consolidation pressures that the banking industry is seeing."

Also fueling the speculation are statements from former customers.

Bisys' "focus seemed to be switching heavily toward mutual funds," said Robert Engleman, president of $600 million-asset Avondale Federal in Chicago, which signed with FIS Inc. …

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