What Banks Need To Know About Vendor M&As
Less Demand for Specialists?
Jost Hoppermann (pictured to the right), VP, Banking Applications & Architecture, Forrester Research
Forrester’s most recent global banking platform survey revealed that banking platform market growth has accelerated and top vendors were significantly more successful than average -- laying the groundwork for market fragmentation thus driving M&A. Some vendors also use acquisitions to strengthen their solution portfolio or to enhance their functional capabilities. Finally, more flexible global solutions reduce the need for specialized local vendors -- many of them becoming niche vendors from a global perspective.
Acquisitions have been a growth driver for Fiserv for the last years -- and Fiserv will likely continue to apply this growth strategy. Even the total deal size of close to $900 million is not unusual. This is about the same range of what Oracle has paid for former i-flex Solutions years ago. The question here is whether Oracle or Fiserv made the better deal.
[Open Solutions] DNA customers will be better off: They will have access to a broader solution portfolio, and many were concerned about Open Solutions’ high debt level. However, the big question is how long Fiserv is willing and able to support and maintain multiple heterogeneous core banking solutions -- and which solution would be the first candidate for rationalization.
Banks can never be 100% sure they will not end up with an end-of-life solution because some banking solution providers acquire others to eliminate competitors. However, banks can manage this risk by looking for strong market footprints, sound financial status, compelling product roadmaps and strategy -- and also visible competitive weaknesses.
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