Event

On 14 January 2013, Fiserv, a provider of financial services technologies headquartered in Brookfield, Wisconsin, announced that it acquired Open Solutions — a Glastonbury, Connecticut-based provider of collaborative enterprise core account processing technology — for $55 million and the assumption of $950 million in debt. The transaction brings Fiserv Open Solution technologies including the DNA core processing system, which is widely used by credit unions and banks.

Analysis

Fiserv has acknowledged in briefings with Gartner analysts that a compelling reason for acquiring Open Solutions is the need to resolve ongoing immaturity in its recently introduced Acumen core processing system for credit unions. A secondary reason is the desire to extend Fiserv's international market penetration with DNA.

We believe Fiserv will withdraw the Acumen core banking system from the market and discontinue current migrations, positioning Open Solutions' DNA as its strategic core system for credit unions. The Acumen and Open Solutions technologies will also need to be rationalized. Fiserv has stated that the Acumen front end is superior to DNA's, and that it will be integrated with DNA, likely along with its online and mobile components. Though the acquisition is not focused on retail delivery, DNA's architecture should enable Fiserv's ambition to integrate its own online and mobile banking components within its stated two-year timeline.

This fundamental shift presents Fiserv with strong cross-selling opportunities in the Open Solutions customer base, and should encourage adoption of DNA by prospective customers that may have been concerned about Open Solutions' financial viability. However, if Fiserv moves forward with this strategy, it will also raise concerns for the credit unions actively implementing or using Acumen or under contract to do so.

Beyond the typical assimilation activities tied to acquisition efforts, there are differences in the two companies' approaches to the market that need to be reconciled. One is international systems integration: Fiserv primarily uses its own personnel for this purpose, while Open Solutions has generally relied on partners.

Although DNA resolves Fiserv's directional strategy for the credit union segment, it raises questions about its broader core systems strategy. Gartner believes that Fiserv's approach — essentially maintaining a stable of core systems — is less profitable and less viable than driving economies of scale with a platform/database/operating system-neutral core system as many of its competitors have done.

Enterprises currently deploying Acumen:

• Conduct an inventory of costs associated with restarting program efforts with DNA as the core solution. Leverage these costs in renegotiating Fiserv agreements, insisting on a zero-cost core license transfer.

Enterprises using Open Solutions or its partners for retail delivery:

• Expect future technology road maps to focus on migration to Fiserv's breadth of offerings. Delay decisions about retail delivery systems — from any provider — taking into account migration costs and total cost of ownership.
• Ensure that any installed or planned personal financial management solutions can be integrated with DNA.

Enterprises that have contracted for, but not yet deployed, DNA:

• Review Fiserv's offerings for potential alternative components, and renegotiate agreements.

Some documents may not be available as part of your current Gartner subscription.

• "The Pathway to Core Banking Program Success" — Core banking migration is inevitable, and Gartner's life cycle guidance can reduce its significant risks. By Don Free
• "Learn Lessons From U.S. Mobile Banking: Focus on Active Functionality for Revenue Generation" — Banks must focus on mobile functionality to turn mobile banking from a cost center to a revenue generator. By Stessa Cohen