Vertical Markets - Banking: Laugh All the Way to the Bank

Most banks have cosy direct relationships with vendors to supply their systems, but Guy Clapperton insists that there are opportunities for dealers prepared to work at it

The problem is the bloody thing never works. You put your little card in, OK. You key in your number, OK, and the machine spits your little card out again, saying, sorry, not working. So you go to find another machine and lookee here, it?s started raining. So you put your little card in and it says sorry mate, you haven?t got enough money, which is daft because you know perfectly well you paid in three grand only last week.

These are the systems major suppliers sell to the banks, often in the comforting veil of a ?direct-sales-only? policy. And there are other systems, too, that they won?t admit to. The attachment to the staff?s chairs that send a couple of hundred volts through their bodies if they are found to have said anything useful, or if more than two of them are found to be manning the desks during the lunch-hour. The telepathic circuit attached to your credit card that makes you feel incredibly guilty when someone telephones for authorisation, even when you?ve paid over the odds and are in credit. Oh yes.

Unfortunately, PC Dealer could only track down the vendors of some of the more prosaic products as we went to press. Even so, there?s a lot to choose from. Current bank requirements include security, flexibility and a front-end to the service. Within months, if Murdoch and the other digital TV merchants have their way, there will be a load more as internet banking starts to take off.

Then there?s the back office stuff, the middleware and above all a huge database off which the whole thing will hang. The database itself can take a number of forms; Lotus Notes is not unusual in these contexts, neither are Sybase or Oracle.

Data warehousing is an important emerging technology since clients are slowly twigging that all the data in the world is useless if it can?t be accessed, and real-time transactions have become desirable because of the telephone banking services ? online banking is really only a refinement of those.

It is not an installation for small, nor probably for medium-sized, dealers. Linking all the data and making it accessible is a major task and it is dubious whether anyone but the largest systems houses can take it on.

This is why a number of banks prefer to deal direct with the vendor, and why a number of vendors prefer to work that way. David Tolub, VP of marketing for Israel-based Nice Systems, sells telephony integration and voice/fax products into a number of sectors including banking and goes through distribution but admits that the customers in banking tend to be a conservative lot. ?It has to be a distributor already known in the industry,? he says. ?It helps if they already have a good relationship with a customer.?

This is not, though, the reason for Hyperion backing away from the indirect channel, at least as far as its banking applications are concerned. Product marketing manager Kay Wesley says the chief guiding force for the company is that in banking, the supplier has to know the client?s business so well. ?There is more of a requirement to analyse ? you do product analyses, you analyse the effects of inflation, you analyse the effects of a number of possible interest rates,? she says.

Given this intensive data processing on the part of the third party, there appears to be remarkably little reason to shift the business into an indirect paradigm, and indeed it starts to look unlikely that a reseller would want to become that tied to an individual customer.

So much for the present. The future is more interesting, but there can be no clear answer as to how the sector is going to go as yet. Rob Doel, head of Sybase?s financial, banking and insurance unit, is involved in selling customer facing services to Nat West among others, and believes the shape of sales in the medium term will be dictated by the success or otherwise of thin client computing.

Doel thinks the future will go to mixed environments, even if a model of online banking gets adopted universally. Mobile use will mean that not everyone will have an access point to hand all the time, and this in turn will mean they want intelligence and possibly the banking application resident on disk. Security is already pretty much a given requirement on a system, but the banking environment and applications will make it even more so.

There will be a place for resellers, although Sybase treats most banks as being suitable only for the direct sales approach. ?It involves so much project management,? he says, particularly with regard to Nat West?s online service, with which Sybase is currently involved. ?It?s really a systems integrator?s role, if anything.?

Roy McElwee, Sybase partner marketing manager, says using a third party can be a success if it?s the right choice of partner ? for salesforce automation a database firm is often well-advised to take on someone already specialising in that field. ?It?s for the customer to decide on which sort of sale they want.?

One company already selling the hardware for the thin client solution is Dot Matrix, which is touting its box as a banking system to hang off versions of Nat West?s service for the moment, but which will doubtless sell it as a cheap network computer in the future.

The user front-end to an online service is important, and the price of the unit itself will be subsumed into the subscription cost of the online service when it rolls out later this year. The company is looking for 50 resellers, but it is difficult to see how a disparate group of dealers will be able to sell into a single bank entity.

Dot Matrix managing director Martin Gilbert maintains that his devices have been built with the development of a revenue stream in mind, but he also concedes that its success will depend on the success of smartcards with actual value attached. This is real crystal ball stuff, and resellers will need to think long and hard before getting involved.

It?s only a side point, but banking in the UK is one of the few areas that does not, for the moment, appear to be raving about the potential of the internet. Doel, for one, is much more excited by extranets ? closed systems that don?t have links to the Net itself. Again, concern for security is everything in banking.

Gilbert is far happier talking about the internet. It is interesting to note that hardly a day goes by without some new initiative that will make trading across the Net totally secure this time, honest. As PC Dealer went to press one such announcement came from a team comprising Microsoft, Verifone and Hewlett Packard. There will be others, and until they can be rationalised and unified the users are likely to remain sceptical, which will hold Net banking back.

So far, so dandy. The banks are a conservative lot, unlikely to let a new reseller in, so if you?re not already there you don?t stand much of a chance. If you do you need to be of a certain size to offer anything really worthwhile, and you need a knowledge of the field that, in the best catch-22 style, you are unlikely to have unless you already work in it. But there is an added complication.

The banks already have IT systems. It?s actually worse than that. Consultant Dennis Keeling often despairs of the department-by-department manner in which these installations have grown, and worse still, the departments are still of the mentality that says ?this does our task better than your single overall solution and we are sticking with it?.

As Keeling points out, an existing system may well perform an individual task with more elan than something that binds everything else together, but if it won?t talk to the rest, it is of limited use. The bank managements? objectives are clear enough ? they want to extract information easily, but what they don?t always appreciate is that there are internal politics to overcome in achieving this.

Some resellers may not be totally put off at this stage, so it?s probably worth bringing in the idea that a number of mergers have happened recently, so that not only are the internal departments of the individual banks are at loggerheads, but their new ?friends? would also happily see them lose their job and their IT skill set.

So we get back to the fundamental question of what a dealer?s job is. If it is to act as a fulfilment house then fine, it should be possible to fulfil office automation in the banking sector, make the minor mar- gin available and wend your way elsewhere.

But the real money is to be made in business process engineering, including cajoling the individual departments to surrender their little proprietary empires and link it in with an overall strategy. Only then, after the muscles of a full-fledged systems integrator have been flexed, will the IT system deliver the business benefits of which it should be capable.

So if that is the sort of business that interests you, it could be worthwhile investigating. But whatever you do, don?t go in without a flak jacket.

The end of the century

It cannot be said enough times that the possible emergence of the euro in 1999, combined with the impending year 2000 crisis will hit the banking sector as hard as anyone else. The year 2000 scenario should be well known to most resellers by now, and if not, good luck in your next job. But the EMU scenario is less well-rehearsed.

The European Monetary Institute says that assuming most currencies join EMU in 1999, there will be a two-year transition during which countries will run their own money alongside the euro. But there is a snag ? all countries outside the system will be translating their money into euros rather than their own currency.

Put another way, if you want to trade with the US that will be OK after 1999 if we?re in the EMU, but there will be no dollar-to-sterling

exchange rate. Instead there will be a dollar-to-euro then a euro-to-sterling exchange. A handful of software vendors are starting to take this into account, but the vast majority of banking and accounting systems cannot cope with a two-phased transaction like this automatically. Resellers which have no intention of going into the banking sector might care to take note of this when talking to accounting software houses.

1999 is 19 months away.