Magazine article American Banker

40% of New Core Systems Were Outsourced Last Year

Magazine article American Banker

40% of New Core Systems Were Outsourced Last Year

Article excerpt

Continuing a trend, 40% of the U.S. banks and thrifts that bought core processing systems last year hired outside companies to run them, a survey said.

Three hundred forty banks and thrifts signed outsourcing contracts for the newly bought systems, according to Computer Based Solutions Inc., which compiled the statistics.

And overall, 39% of all banks and thrifts were outsourcing their processing last year, the Dallas-based company said.

"Things move nicely, incrementally, but not exponentially" in the outsourcing market, said M. Arthur Gillis, the president of Computer Based Solutions.

The major systems providers continue to expand the outsourcing portion of their businesses. Last year they bulked up by pursuing new markets such as Internet banking and start-up institutions.

Fiserv Inc. topped the charts for new outsourcing sales in 1998, with 125 new contracts for core bank application processing. Alltel Information Services and M&I Data Services Inc. both had 15 new contracts in 1998, according to Mr. Gillis' own estimates.

The other big outsourcing company, Electronic Data Systems Inc.'s financial industry group, did not respond to Computer Based Solutions' annual outsourcing survey this year. Mr. Gillis said the company's numbers would not affect the survey's total of outsourcing agreements, since EDS is focusing on very large banks, which do not typically outsource core data processing. EDS officials did not reveal how many bank core processing agreements the division had signed.

Providing processing for Internet banking ventures is proving to be fertile ground for the outsourcers.

M&I Data has about 200 customers using its services to support Internetand PC-based banking, said Daniel R. Shannon, vice president and chief marketing officer for the Milwaukee-based subsidiary of Marshall & Ilsley Corp. …

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