BankAmerica Corp. is close to purchasing software from Premier Systems Inc., five years after a previous megaproject with the vendor ended in ruins.
Bank officials said a contract with Premier for a $30 million securities processing system has not yet been signed, but they added that Premier is the only outside supplier under consideration.
$80 Million Mistake
The talks mark a turnabout from the late 1980s, when BankAmerica and Premier worked on a massive trust software project that turned sour. When the software did not perform as promised, the project was canceled. That cost BankAmerica a reported $80 million and led to the firing of two senior executives.
Observers familiar with that project said the blame lay both with the complexity of the software and with poor project management at the bank.
Because of that experience, some executives at BankAmerica opposed contracting again with Premier, according to consultants familiar with the project.
BankAmerica is also considering building a system in-house, said Lee Harbert, senior vice president of global securities services at the San Francisco-based company.
The new Premier system could let the bank pursue business in the highly competitive global custody market, an off-shoot of the trust business. As global custodian, a bank safekeeps and supplies portfolio information on foreign-issued assets for institutional investors.
The Premier system would run BankAmerica's global custody operations, based in London, and the former Security Pacific Corp. operations, based in New York. They have a combined $25 billion of assets under custody.
Trust industry observers said it is unlikely that BankAmerica would choose to build a system in-house, because the cost could run much higher than Premier's $30 million price tag.
Not for Everyone
Only the largest trust and custody banks, such as State Street Boston Corp., have been able to justify full in-house development of applications software.
Despite the BankAmerica fiasco, Premier, based in Wayne, Pa., rebounded after rewriting its software to operate on computers from Digital Equipment Corp. The earlier version ran on Prime Computers Inc. machines. That company has since left the hardware business.
Fourteen banks, including Chemical Banking Corp., have purchased the software running on Digital computers.
Some bankers have concerns about whether Premier can handle high volumes of data. But they also say that all software packages for global custody have limitations, and very few have the ability to do the complex calculations for accounting in multiple currencies.
The Top Pick
"No one can touch Premier's multicurrency accounting," said Thomas Abraham, a New York-based trust consultant. "It's their claim to fame, and also their Achilles' heel." The large data bases and complexity can slow the system's performance, he said.
Whatever technology route it chooses, BankAmerica will discontinue using software from Zurich-based Watkins & Associates that runs on hardware from International Business Machines Corp.
BankAmerica has used the Watkins software since 1985. The bank had begun to look for new software before its merger with Security Pacific in 1992.
BankAmerica hopes to begin installing new software in the first quarter of next year, officials said.
