By Art Gillis

Twenty years ago, there were 113 companies (in-house and outsource modes) offering core apps services to banks and thrifts. Today, there are 29. In 2006, there was only one transaction among core companies. RDSI (a bank-owned processor with 70 customers) acquired Diverse Computer Marketers Inc. (30 customers). So it now appears the well is dry in terms of pickings by the popular acquirers. But I believe there’s still a little play left for those who want to toss out the old models and try new approaches. Here’s how I see the future landscape. And I haven’t had anything stronger to drink than apple juice.

The top six players (Fiserv, Fidelity, Metavante, Jack Henry, Open Solutions and Harland Financial Solutions):
I’ve been saying it for the past four years, so eventually my prediction will come true. Two of these companies will merge. The possibilities are anything but obvious. Open, with its new source of abundant private equity funds, could acquire Metavante, Jack Henry and Harland FS to put itself in the cherished #3 position of the Big Three. Or Metavante could finally go public the easy way by acquiring Jack Henry. Fiserv and Fidelity won’t be players in this field. Mind you, these six companies could survive on their own, but I can’t imagine Wall Street looking the other way and leaving these companies to manage their affairs just for pure business success. Something’s got to happen here.

Of the 23 remaining companies:
5 (representing 386 customers) are reasonable candidates for acquisition if they don’t get too greedy.
7 are locked out as acquirees by their own ownership, culture or desire for independence.
8 just don’t have the appeal that a typical acquirer looks for.
3 are buyers.

If you’re wondering why I haven’t included Fiserv and Fidelity in the acquisition game now, it’s just because I have been talking about core companies and banking. I believe these two companies will be looking for opportunities in other vertical industries that still have some connection with words such as “payments,” “financial,” “market stimulation,” “health, wealth & welfare,” and “anything analytical.” If these predictions don’t excite you, how about a reverse direction with visits from Gates and Ellison, looking for ways to get vertical. Or finally, with Accenture, ACS, BearingPoint, CSC, EDS, H-P, IBM Global Services, Perot Systems, SAIC and Unisys looking for much needed growth, anything’s possible for two $4 billion-a-year plums.

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