1st Chicago Installing Client/Server Reporting System

First National Bank of Chicago is revamping its financial reporting operations through a seven-year technology services agreement with Computer Sciences Corp.

Under the agreement, Computer Sciences, an El Segundo, Calif.-based outsourcing and systems integration company, will install and support a client/server system called R/3, to be used for financial reporting processes such as customer profitability, accounts payable/receivable, and purchasing.

About 80 bank employees who currently support applications development and maintenance projects have been offered positions at Computer Sciences, where they will assist reengineering efforts.

Neither party would disclose the value of the contract.

First National Bank of Chicago, the main subsidiary of $75 billion-asset First Chicago Corp., will be the first commercial bank in North America to install R/3. The system was developed by SAP AG, a leading software vendor based in Walldorf, Germany, that markets its products through resellers.

SAP's systems, which come in mainframe and client/server versions, are predominantly used in manufacturing environments. In addition, at least 14% of European banks with over $5 billion in assets use SAP software for general ledger applications, according to Tower Group, a Wellesley, Mass.- based research firm.

SAP is now targeting the U.S. financial services market, along with other industries, with its client/server software.

The timing may be right, since many large U.S. banks are looking to replace antiquated general ledger systems, said Patricia McGinnis, a technology analyst with Tower.

"General ledger systems are among the oldest applications still running in banks. Twenty years is not unusual," she said.

Ms. McGinnis said that most financial reporting operations are driven by separately running systems that do not communicate with each other.

This makes it difficult for a bank to get consistent views of information, she said. "A division manager, for example, might have to pull three or four different reports that provide three or four different answers to an inquiry, and this information can't necessarily be reconciled."

In contrast, SAP's systems are known for being highly integrated, allowing information to be pulled from a central data base.

Ms. McGinnis said that the company is well positioned to penetrate the U.S. market with a system of this kind, because "the range of currently installed solutions available to major U.S. banks has been judged to be inadequate."

Established vendors such as Computer Associates International Inc., and the software subsidiary of Dun & Bradstreet Corp. are scrambling to meet the demands of a market that is increasingly migrating to client/server technology, she said.

These vendors are facing increasing competition from newer entrants, among them SAP, PeopleSoft Inc., Hyperion Software Corp., and Walker Interactive Systems.

As a result, "there is significant turmoil in the general ledger market," said Ms. McGinnis.

While SAP appears to have a good chance at cracking the U.S. banking market, Ms. McGinnis was quick to point out that the company's success will largely depend on how well the system operates at First Chicago. Other large banks will be watching the project closely, she said.

At First Chicago, R/3 is replacing a number of separate systems that are running general ledger applications.

W. Eric Harris, senior vice president at the bank, said the new system is expected to move information faster, reduce paper and expenses, and improve data integrity, since information will only have to be captured once and not disbursed on multiple systems.

The R/3 software runs on a number of computing systems, including International Business Machines Corp. platforms and Windows NT.

The bank originally intended to have R/3 in place by the end of 1996, but First Chicago's pending merger with NBD Bancorp may affect that timetable, said Mr. Harris.

The bank hasn't decided whether to use the SAP system in the NBD banks, he said.

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