CIOs, repeat after me: “Whew – at least it wasn’t Oracle!” After months of threats or promises, depending on your perspective, Open Solutions finally found a buyer. Fiserv will buy Open Solutions for $55 million in cash and an assumption of slightly under $1 billion in debt. That’s some juicy news, my fellow Bank Tech Geeks. Monster news! I’ll let the bright financial minds on Wall Street comment on the sales price and terms, but it seems in the reasonable range to me.
More important to Cornerstone is how our client base will be affected by the transaction. Open Solutions’ DNA core fills a cavernous gap in Fiserv’s credit union core quiver, and some of Open’s ancillaries could be a great fit for credit unions and banks as well.
While Fiserv has huge opportunity to kick ass and take names with the Open Solutions product set, it will need to come out loud and strong with a message to the marketplace. While exceptions exist, much of Open Solutions Inc.’s market momentum problems of late can be tied directly to its financial situation and its faltering product and client support. Fiserv will pretty well solve the financial concerns in the market, and it would be very tempting for Fiserv to focus only on those well-publicized financial issues. That would be a huge mistake.
For Fiserv to milk this transaction for all it is worth, it will have to VERY QUICKLY show the market how it will DELIVER on solving the Open Solutions service and support problems. Fiserv, you’re going to have to walk the walk when it comes to deep commitment to supporting the Open Solutions product set, and convince some existing and former Open Solutions clients with long memories that you have a credible plan to get there. Open Solutions clients have had Vision coming out of their ears for many years, and quite frankly, they are sick of all the vision with no meat on their plates. Please don’t underestimate the importance of the support side and delivering on promises when it would be so easy to focus on the “We fixed the financial condition” issue.
Fiserv knows that it is inheriting some very talented developers and business analysts from the Open Solutions organization, so we expect many of those employees to be retained. That, combined with a talented Fiserv sales force (many of whom used to sell Open Solutions products, by the way) and a solid product set from Open Solutions, tees up a wildly great opportunity for Fiserv. Fiserv can check the product arrogance that we saw too often during the Open Solutions sales process at the door (leave the executive limo at the airport!) and tell a compelling story especially to credit union core prospects. The obvious opportunity isn’t as strong for bank core prospects or ancillary product prospects, but Fiserv should surely be able to turn around some of the market momentum issues there, too.
Here is GonzoBanker’s take on the various bank and credit union stakeholders in the Fiserv/Open Solutions transaction:
Fiserv Acumen – Ever since Cornerstone started getting nudge-nudge, wink-winked to death that the eventual buyer could be Fiserv, we thought it would be the death knell for Fiserv’s maligned Acumen core product for large credit unions. I think we’re going to be right on that front. Our contacts at Fiserv say that eventually the DNA core with some pieces of the Acumen product will be the go-forward solution for larger credit unions. It’s too early to know for sure, but Fiserv mentioned workflow and the relationship management/presentation layer as the pieces of Acumen that may be paired for a “best of” core product between Acumen and DNA. For the record, these “best of” products never seem to work out as planned, but we do think the go-forward product will be DNA with just enough of a taste of Acumen for Fiserv to be able to say it’s a combined DNA/Acumen product.
Importantly and tellingly, Fiserv tells us that Acumen as a standalone product is not going to be sold anymore, including to prospects with which Acumen is now engaged in the sales cycle. For credit unions that have either implemented or are in the process of implementing Acumen, this is going to be mixed news. My guess is that the credit unions that have completed the Acumen implementation are going to be highly pissed. Many of those in process of installing Acumen are pretty unsatisfied with the many delays that have hit Acumen implementations, so they may be relieved to have an exit strategy suddenly emerge. It’ll be a coin flip on how many of these credit unions just move to DNA and how many decide to look outside of Fiserv for their next core solution. Most of the credit unions that decided to move to Acumen also reviewed DNA (and rejected it) during their system searches, so I suspect that Fiserv is going to have to work very hard and throw in major concession to keep their Acumen signees from jumping ship or reviewing the market again.
DataSafe/XP/Other Fiserv CU cores – This gets touchy, and Fiserv was not able to comment on these products yet. But given how DNA can scale down to below $500 million in assets without any problem, my strong feeling is that over time the many CUs on Fiserv’s multitude of credit union platforms will eventually move to DNA. I’m not suggesting – even a little bit – sunsetting or any kind of radical, forced conversion for just about anyone, but my strong hunch is that Fiserv’s efforts will be to move a lot of its existing XP2, DataSafe, CUBE, etc. clients to DNA. Fiserv will have an important new challenge in conversion capacity and knowledge transfer: if it can eventually create the capacity for a DNA conversion every weekend, it will still take 10 to 20 years to get the bulk of remaining credit unions over to a single platform. The upshot is that Fiserv has the opportunity to pour every dollar of development and support savings from legacy platforms into ensuring wicked cool enhancements and heavy product support resources.
Open Solutions TotalPlus Clients – I don’t think these banks are going to be affected much now or in the long term. TotalPlus isn’t being actively marketed by Open Solutions, and that won’t change at Fiserv. With the resounding opportunity for Fiserv/DNA in the credit union market, our sense is that TotalPlus will be a back burner issue for now. TotalPlus users will continue to be supported for the foreseeable future by Fiserv, and over time they’ll be migrated to DNA. That’s pretty much the same situation TotalPlus users now find themselves in at Open Solutions.
Fiserv Bank Core Clients – Fiserv mentioned that its go-forward product set will be business as usual (Signature, Premier, Cleartouch and Precision) with the addition of DNA. The DNA real time core product really does not have enough market momentum to be much of a significant factor in the Fiserv/Open combination when it comes to banking cores. Fiserv will continue its preference to submit only a single Fiserv solution to prospects, so the Fiserv/Open Solutions combination in effect takes one solution off the list of potentials for clients reviewing the market. Unlike the huge potential for credit unions, the deal is fairly ho-hum when it comes to core systems for banks. If anything, look for the possibility for Cleartouch users to migrate to DNA over time, but even that is more likely to be a trickle, not a waterfall.
Loan Origination – The Cornerstone Brain Trust has had a lot of conversations about what Fiserv will do with loan origination after the Open Solutions acquisition. On one hand is Open Solutions’ Velocity product with many implementations but some frustration in its client base around development and support. And Fiserv has its emerging COPS product to solve some of the trouble it has had in the LOS world. Our Fiserv contacts said they don’t see a lot of client overlap between COPS and Velocity, adding that COPS is being designed for larger FIs than what we see typically in the Velocity client base. That sounds OK, but my gut says over time either Velocity or COPS will go away in favor of a Velocity/COPS “best of” product. It’s just too hard to assess how well COPS implementations are going in the Fiserv world to ascertain how the two applications will reconcile.
Weiland – We see a lot of opportunity for success in Fiserv selling Open Solutions’ Weiland account analysis product into the Fiserv core base. Many Fiserv core clients already use Weiland for account analysis, and the core-based account analysis systems at Fiserv aren’t getting any younger or prettier.
Raddon – Raddon has a loyal customer base especially in the credit union market, but the rumblings in Raddon’s client base lately (after Open Solutions acquired Raddon) have been about key people leaving Raddon and an overly aggressive sales focus from the consultants who have remained. Fiserv should be able to pretty quickly stop any perceived brain drain at Raddon, maybe even spend some money to hire back key players who left, and let the consultants concentrate on doling out great advice. Once that happens, the cross sales should return naturally without alienating loyal customers.
Fiserv has a shot to make the Open Solutions acquisition a massive success, especially in the credit union core market. To do that, Fiserv will have to be hyper-focused on delivering what Open Solutions was never able to deliver. Fiserv must drastically improve product and client support of all Open Solutions products and, maybe just as importantly, deliver a crisp, concise plan to the market on how it will make that happen. Fiserv will have to show that its focus will be on delivering and executing. Open Solutions clients and prospects alike are (at best) bored with Vision and all of the arrogance and ancillary BS that comes with dealing with visionaries. They want stable, well supported products more than anything right now. The line is drawn in the sand. Time to deliver, Fiserv. We (and our clients) wish you good luck!
Call in the Pros
Whether shopping, selecting, converting or negotiating, now’s the time to enlist the expert assistance of a seasoned partner to help manage your vendor relationships.
As a result of more than 200 core and ancillary system selection and contract negotiation engagements, Cornerstone Advisors has developed a proven methodology to help banks and credit unions choose solutions that closely match their strategic technology vision.