I am really not interested in the financial aspects as much as I am how this plays out in the vertical market. I saw where the New Core Systems (NCS) folks get 31% or something like that of the new company, but who holds the rest and how integrated will they stay into the parent bank? Are they going to the equity markets with the new company? Shareholders of the bank will not be shareholders of the data center? If so, they need to worry. It is an enormously capital intensive effort to bring a system to market and keep it there. The payoff is huge so they do keep coming! Ask John Slater what can go wrong.

I don’t even have to ask to know that the myriad small banks serviced get a generic Fiserv product and they are happy since a debit card product seems exotic to them. (Remember our 6 MM USD example)The parent bank, the BIG bank, gets all the attention and all sorts of custom code and is the beneficiary of almost all the effort. When business pressure (from another BIG bank) forces a show down to treat the former boss as just another bank at the end of the wire, then what? It won’t be pretty. You CANNOT customize a system for market. It will no longer be their play grouund and they will be told no. Ah, I am sure we will all remember this day when that starts.

A friend who knows this space better than most told me NCS is a group that built an imaging system and sold it, and made some 45 MM or there about. Having watched the core providers get the big bucks for years they decided “How hard can it be?” Fast forward some 6 or 7 years (!) later from what I am told (is this correct?) and NCS had no installs and no revenue and took the short money to stay alive. Compare to some other recent entrants: Phoenix International had gone public (PHXX) by the 7 year point and was installing as fast as they could, Open Solutions (OPEN) at 7 years had many, many installed customers and was doing huge revenue. Read the OSI web site (Phoenix is now Harland) and it shows the company starting in 1992, with their first bank (Simsbury Bank in CT) going live in 1995, and this included the entire design/development time frame. So NCS(RDSI)is easily far behind the curve and it speaks volumes about the product. It is either designed very poorly, does not convert well or is still missing a great deal. I was told NCS had a good sized bank that was “trying to convert” somewhere (it is confidential it seems) but I see no press release. Was it a failure? If so, worry some more. The people at the data center, God love them, had no idea what they were talking about when they started spouting off about new technology. Using .Net does not make a stable, salable product.