The banking industry needs groupware application packages.

LOTUS NOTES IS ONE OF the most successful -- and interesting -- software products of the last few years. Since its introduction in 1990, sales of Lotus Notes have increased tenfold.

Notes' generic software category is "groupware," software that allows members of a group to communicate and share information. Groupware functionality does not have to be stand-alone, like Notes. It can be embedded in other software, as well.

Although some very large professional organizations, such as Price Waterhouse and Andersen Consulting, have made major investments in Notes, only a handful of large banks have currently made commitments to Notes. Nevertheless, Lotus predicts that about one million licenses will be in place by the end of 1994.

By its nature, Notes works best for organizations with many employees and a geographically dispersed base. Chase Manhattan Corp. is one of these leaders and it is instructive to observe what they have done.

Chase has made it a priority to adopt Notes in those departments where it would do the most good. The corporate finance department was the first to use Notes. Then, usage was expanded to Infoserv, Chase's corporate services area. Today, interest in Notes is spreading beyond these key wholesale businesses into many other areas of the bank, including retail. Chase has about 7,500 users currently.

Lotus Notes is a "development environment," meaning it is software that allows you to create different applications, but by itself it does nothing. Rather, it needs applications running on top of it. Of course, these applications are much easier to build than traditional mainframe applications. For example, Chase, after only two or three years, has about 150 to 200 applications in operation and has several hundred more in the process of development. In years to come, it is entirely conceivable that Chase (and other banks) will each run thousands of groupware applications.

The issue is: what kind of applications are needed in banking and, most important, where will they come from?

Lotus Notes applications can be divided into three broad categories:

* Internal usage by systems personnel, including developing and testing of new applications.

* Broadcast information to employees, such as general information, internal newsletters, human resources notices, library, research, news, etc.

* Line of business/functional area.

The first two categories are essential but don't directly affect the delivery of a banking service or product.

It is this third category that most affects the business of banking.

Within this category, the most prevalent type of application is for client management purposes, generally for a specific business unit. Other common applications include credit and project-based discussion data bases.

To make Notes work, Chase has adopted a series of policies including:

* Chase builds all of its Lotus Notes applications itself.

* Notes programming is done by systems people, not users. All of Chase's Notes applications have a similar look and feel, are professionally written, and are adequately documented.

* All future "soft information" that is automated on a client-server platform is to utilize the Lotus Notes environment.

These policies have already worked for Chase. It is probable that the other money-centers with major Notes commitments, such as J.P. Morgan, Bankers Trust New York Corp., and Citicorp, will have similar policies. These banks have the capability to implement policies like these, and, most importantly, have the internal skills and resources to build the applications.

Yet, most of the industry, including regionals and community banks, does not have the required resources. Very few banks have the technology skills, management commitment to building technological infrastructure, and business justification of a Chase. How, then, can the rest of the industry obtain access to Lotus Notes applications at an affordable price?

The answer is vendor-provided packaged applications that run on Lotus Notes.

These packages should be approximately 70% finished and 30% tailorable. They should also be targeted at the highest priority functional needs in banking, such as wholesale client management. And, they should be developed and sold by technology companies who already have an industry presence.

The packages may be part of existing application packages or may be stand-alone packages.

For example, one application package, "LS/2," from a Bankers Trust/IBM joint venture, comes with some Lotus Notes functionality built in. Other vendors include limited groupware functionality in their products, but not Notes itself. For example, AFS has introduced Task Management System, a groupware front-end commercial loan origination and review system. Micro Resources Inc. includes groupware-based client management capabilities in the OASIS module of its CRISP product.

Yet these examples are small compared to the size of the opportunity. We estimate about 400,000 bank employees work in high-priority lines of business and could theoretically be turned into Notes users. These include:

* Wholesale businesses: global banking; corporate lending and finance; institutional and corporate trust; master trust and custody; trading; leasing; project finance; cash management.

* Retail businesses: private banking; personal trust.

Other banking businesses represent a lower priority opportunity. Consumer loans and deposits is the industry's biggest business, but most retail employees have clerical type jobs and usually deal with highly structured coded data, for which Notes is not designed. Giving every bank employee a groupware-based front end on their personal computer is possible but highly unlikely.

Within the high priority lines of business, the most appealing function is client management. Significant productivity and effectiveness benefits are possible through the use of these packages.

Client management extends over the life of the relationship and subsumes individual functions like sales tracking, proposal preparation, credit, calling programs, regulatory review, pricing, restructuring, workout, syndication, correspondence files, and more. Access to public data about clients as well as "filters" to find the needed data and signal the user are other important features.

Each business unit usually handles its own client management. The gas and oil lending unit will have different personnel and needs than the funds transfer department, even when the two departments share the same multinational company as a client. (And, of course, no two business units in the same bank will have exactly the same client base.) Chase has attacked this problem by building a standard client management application template within Notes, which is then replicated for each individual client management application.

This is the philosophy that potential vendors should adopt. There are probably several hundred potential sales, within the United States alone, of a banking-based wholesale client management application that runs on Lotus Notes. Each sale might average between 200 and 1,500 users. The total revenue potential is likely to be in the tens of millions.

Yet, no such product exists today. In some other industries, vendors have begun to create and sell Notes applications. Few regional banks today have made the kind of commitment to Lotus Notes that Chase has, and the reason is the unavailability of tailored, banking-specific packaged applications.

The bottom line is that this industry need is as yet unfulfilled. Given the industry trend toward disaggregation and toward automation of soft information, this opportunity seems like a natural. The vendors who explore it will find a ready audience among the regional banks.

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER