Magazine article American Banker

Technology: Web Firm's Collapse: How Banks Sidestep Risk

Magazine article American Banker

Technology: Web Firm's Collapse: How Banks Sidestep Risk

Article excerpt

In these days of dot-com collapses, a bank's most vulnerable outsourcing relationship can be the one it has with its Web provider.

Several banks found this out firsthand when Pilot Network Services Inc., an Alameda, Calif., Web hosting provider, closed up shop with little warning in May.

One Pilot customer, Chevy Chase Bank in McLean, Va., was given just a day's notice of the Web firm's closing. The result: Customers of the $11 billion-asset thrift were unable to do online transactions for more than two weeks, until Chevy Chase found another provider. During the hiatus all of its online customers were directed to a 24-hour customer service phone number.

However, other Pilot customers had some advance warning and were able to change providers with little disruption to their Web sites.

Silicon Valley Bank in Santa Clara, Calif., got word of Pilot's financial trouble from a lower-level bank employee, who heard rumors about it roughly three weeks before Pilot shut down. The $4.8 billion- asset bank, which had used Pilot for two years to post content on its Web site, decided to bring the service in-house after it heard about Pilot's money problems.

Erwin Martinez, Silicon Valley's chief information officer, said it had already planned on bringing this area of Web hosting in-house; Pilot's woes just forced it to act a bit more quickly, he said. "I think we were in better shape than most organizations," Mr. Martinez said. "It really went without issue."

Fremont Bank in California changed Web hosting providers before Pilot closed up shop. …

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