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Bank Systems & Technology: The Blog

« March 2006 | Main | May 2006 »

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.

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